Are Solar Panels Really Worth It
A payback period is the amount of time it takes to earn back your initial investment. Solar panels can help you save enough money on energy bills over time to offset the upfront costs. How much you save per month depends on the size of your solar system, your home’s energy consumption and other factors.
Calculating the payback period will be unique to your circumstances due to the variability of the upfront costs, as well as the difference in energy costs based on your location. But here are some guidelines to help you estimate when you will break even.
Cash Vs Loan Vs Lease Comparison For Solar
A cash purchase is right for you if:
- Youre looking to maximize your savings from solar
- You have enough tax liability to take advantage of the solar investment tax credit
- Or you have the funds available to pay for a solar panel system upfront.
A solar loan is right for you if:
- You dont want to shell out the amount of cash required to pay for a solar panel system upfront
- But you still want the most savings on your electricity bills as possible
- And you would like to be eligible for all incentives and rebates.
A solar lease/PPA is right for you if:
- You would prefer someone else to monitor and maintain the system
- You arent eligible for tax incentives
- Or youd just like to reduce and/or lock-in your monthly electricity bill.
Q: Are Solar Panels Really Free Or Is Free Solar A Scam
If youve been researching solar panel system, youve probably heard at least one company advertise free solar panels or seen ads that start with “U.S. Government Pays Middle Class Families to Go Solar” or “New Jersey will pay you to install solar” — These ads are typically lead capture scams to sell your information to solar leasing companies!
Here’s the deal: There is no such thing as a free lunch . Free solar panels are not actually free you will pay for the electricity that they produce, usually under a 20 to 25 year solar lease or power purchase agreement .
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So Are Solar Panels Worth It For You
For the majority of U.S. homeowners, solar panels are a great long-term investment that can add boatloads of value to their home. In fact, depending on where you live, solar systems provide a better and more stable return on investment than the S& P 500 – with the added bonus of powering your home with clean energy.
When assessing whether solar panels are worth it for your home, first consider your location and your monthly utility bill. You’ll also want to focus on easing upfront costs and speeding up your return on investment through incentives and credits.
In the world of solar panels, remember that cheaper isnt always better – and finding a balance between value and quality when committing to a solar installer is the key to a smooth, hassle-free experience for many years.
Local solar companies are the best option when it comes to transitioning to clean solar power and lowering your energy costs. Check out our list of the top solar companies in your area to find a vetted, reputable solar installer near you.
Why Leasing Isn’t A Bright Idea
The steep up-front costs for a residential solar system can make a leasing companys sales pitch sound pretty appealing: Pay little or nothing and save hundreds of dollars per year on average. Leasing can also look seductively simple compared with buying: Theres no need to shop separately for an installer and financing you just sign on the dotted line. So its not surprising that 72 percent of the people who installed residential solar systems in 2014 did so through leasing or another type of third-party arrangement. But the reality is not quite so sunny.
Your Savings Will Be ModestPeople who lease their solar systems save far less than those who buy them outright or with a loan . Many leases contain an escalator clause that can further reduce savings by increasing payments 3 percent per year. So if youre paying 12 cents per kilowatt-hour in year one, with a 3 percent escalator, youll be paying 18.2 cents in year 15. That means that if the cost of energy doesnt rise as quickly as the contracted lease payments increase, your savings could evaporate.
You Lose Control of Your RoofLeasing companies want to maximize their profit, so theres a chance you could wind up with more panels than you want and that they could be installed in highly visible placessuch as facing the streetwithout any regard to appearance. To avoid that, check the final system design and placement before signing the lease. It could be different from the initial mock-up.
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Incentives Increase Your Rewards
Today is a good day to go solar. There are many state and local incentives that sweeten the pot for investing in a home solar system. Visit the Database of State Incentives for Renewables & Efficiency for comprehensive information on solar financial incentives.
Incentives reduce your overall solar installation, and accelerate the rate of return on your investment. The federal solar tax credit gives you a dollar-for-dollar reduction against your federal income tax. Currently, the residential federal solar tax credit gives you a dollar-for-dollar reduction against your federal income tax equal to 26% of the final cost of solar energy systems you install on your home. This benefit exists through December 31, 2022. In 2023 the residential tax credit will step down step down to 22%. In 2024, the tax credit for residential solar ends.
These reduced initial costs available now, plus your lower electric bills from a home solar installation, make going solar today a wise decision.
You Might Get Billed Just For Having Solar
In addition to the common basic service charge, some utilities and states have policies that are actively hostile toward solar. For example, Alabama Power has a âCapacity Reservation Chargeâ that charges customers $5 per month for every kilowatt of a solar photovoltaic system that is connected to the grid. If you have a typical 6 kilowatt system, you would end up paying a substantial $30 a month to Alabama Power, regardless of how much grid electricity you use or how much solar electricity you send into the grid.
Utilities companies claim that this charge is necessary to ensure that solar customers pay their fair share of grid maintenance. However, the reality is that the electric grid requires modernization for the 21st century, and distributed solar can play an important role in improving the resilience of the grid.
In reality, many utility companies use this charge as a way of discouraging people from going solar. When households go solar, utilities lose profits, so many companies in the US have been trying to enact similar anti-solar policies.
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Your Households Energy Consumption
How much electricity does your household consume on a regular basis? What are your power necessary equipment and personal habits? Do you conserve energy by hang drying your clothes? Or, do you prefer warm, fluffy towels straight from the dryer?
Obviously, your energy consumption is critical in calculating your electricity bill. According to the U.S. Energy Information Administration, the U.S. average monthly household electricity consumption is 897 kilowatt hours.
So, before investing in a home solar system, clarify your households energy consumption. Ensure your home solar installation can generate your electricity requirements. Some households only wish to cover a percentage of their energy consumption. However, many in the solar market want to cover it all and envision negative meter readings.
Home solar systems are variable. Yet, a home solar installation that covers 100% of your energy consumption needs is the straightest route to lower electric bills.
The Best Way To Reduce How Much You Pay For Electricity Is To Use As Much Of Your Own Energy As Possible
If you own your solar system, the electricity you get from it is free. Thats why it makes sense to use as much of your own electricity as possible. Plan to do things that use a lot of power, such as doing laundry, during the day. Home batteries also help you use more of your own power because they charge from your solar during the day.
If you live in California, home batteries make a lot of sense because you pay high rates for electricity from 4 PM to 9 PM. All three of the states largest utilities charge their highest rate during the 4 PM to 9 PM period. Running your home on power from your batteries during those hours helps you avoid paying those peak evening rates.
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The Time To Go Solar Is Now
Forget financial uncertainties from electric bills. Home energy is yours to control. Join the thousands of Americans harnessing our suns abundance and enjoying energy independence.
You can change the way you power your life. Now is the time to follow your aspirations for lower electric bills, increased peace of mind, and a smaller carbon footprint.
At Sunrun, we know there is a better way and were creating it today. When you want to talk about solar for your home, our team is ready. See if you qualify today.
National Grid Electricity Bill After Solar
Matt of West Bridgewater, MA on the other hand is a National Grid utility customer. His bill looks a bit different, but the same concepts still apply. His solar PV system is 11.2kW and his average monthly bill before going solar was $300. His system was turned on 12/14/16.
Matt’s home with solar panels installed.
National Grids bill doesnt have as many pretty colors, but it shows you what you need to know. Very important to point out that as a solar customer, your National Grid bill will show **COGEN** next to your name/address. Make sure this is showing.
When Matt sent me his bill, I was confused at the current charges vs. total delivery services as I thought they would be the same. I asked National Grid about this and they said there is an issue with the top portion current charges showing double the amount of total delivery services.
Those two numbers should be the same. If they were the same, calculations would make sense. Balance forward + total delivery services = credit balance. National Grid is working on a fix to this issue.
Just like Iras Eversource bill, Matt has the monthly customer charge plus his net metering credit for his total negative delivery service charge.
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Compare Your Financing Options On Energysage
The easiest way to compare the pros and cons of different financing options is to drop your address into the free-to-use EnergySage Solar Calculator: we run the numbers for you to see how much you can save with a cash purchase, solar loan, and a lease/PPA . To see these differences in action, sign up for a free account on EnergySage to receive custom solar quotes from local solar companies with different financing options included.
EnergySage is the nation’s online solar marketplace: when you sign up for a free account, we connect you with solar companies in your area, who compete for your business with custom solar quotes tailored to fit your needs. Over 10 million people come to EnergySage each year to learn about, shop for and invest in solar. .
Enter your zip code to see solar quotes near you
How Should It Work
Solar energy works by providing you with clean energy that comes free from the sun. Depending on where you live and your energy usage, you may cut your electric bill drastically or remove it all together. If you are leasing your solar system or paying off a loan, your solar panel payment will usually fill the place of your utility bill. Once you pay off your loan or buy your system outright you will essentially be getting energy for free.
When it comes to payment, those who are using solar energy will still get a monthly utility bill. This will show how much energy you produced versus how much energy you used for the month. If you produced more energy than you used, your bill will show a credit for your electricity. This can be applied toward later months when you use more energy than you produce. Credits last for up to 12 months, meaning a credit from January could be applied in January of the following year.
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Will Solar Ever Eliminate My Electric Bill
Most solar installations will reduce your bill but wont eliminate it entirely. However, if your system is installed under optimal conditions, you could receive a negative bill from your utility company, meaning you are a net seller of energy. This might be applied to your next bill or can be paid to you directly. Your utility will likely still charge you a minimum fee each month to account for their own losses that come from scheduled energy production that goes unused.
Solar panels are a considerable investment and take several years to break even, which means they might not be a wise choice if youre planning to move within the next few years. However, if you do decide to install a solar system, Zillow reports that homeowners can typically expect one to raise their home value by about 4.1%. Homeowners typically recoup close to the cost of materials and installation if they sell, but not more. However, under ideal conditions, a solar installation can yield returns equal to its cost, several times over, making it a worthwhile long-term investment.
Can A House Run On Solar Power Alone
Practically, it is not often possible. This is because solar only works when the sun is shining – which means when it is cloudy or nighttime, they do not generate electricity. There are some battery solutions to provide power during these times, but they still tend to be quite expensive. Most homes with solar panels still rely on the grid from time to time.
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What Do Solar Panels Cost And Are They Worth It
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The rising cost of electricity from traditional sources makes solar installation seem like a no-brainer for many homeowners.
But the true cost of solar panels, and whether they’ll help you save money, depends on a few key factors. On average, installation and the system together can run between $15,000 and $25,000, according to the Center for Sustainable Energy.
Location largely affects electricity rates. The national average is about 13 cents per kilowatt-hour, according to year-to-date 2021 data from the U.S. Energy Information Administration.
Before you make the leap, learn how your electric bill, location and incentives can impact your wallet over time. Here are six steps to take to determine whether youll save more than you spend on solar panels.
» MORE: Find ways to save with NerdWallet
What Net Metering Looks Like On An Electric Bill
First and foremost, net metering is a solar incentive system that allows you to store energy in the electric grid. As your solar panels soak up the sun, they often produce more energy than you need. That extra energy is sent to the grid in exchange for credits. Then, during the night or other times when your solar panels arent producing as much energy, you pull energy from the grid and use those credits to offset those energy costs.
When you have net metering, your utility company gives you a credit for the electricity that you send back into the grid. This means that during some months you’ll show a negative electricity usage on your bill. Having a negative usage listed beside net metering on your bill translates to your solar panels generating more electricity that your house used. This can be common in the springtime, when the sun is shining but you likely arent yet running your air conditioners or central cooling system.
When you generate more electricity that you use, you get a credit on your electricity usagesometimes listed as New Cumulative Creditand this credit is carried forward to your next bill.
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Contact Your Local Solar Contractor For More Information
If youre having trouble understanding what to expect from your utility bills after solar panels, contact a local solar contractor. Here at Sandbar Solar, our team specializes in solar installation and is here to help you learn the ins and outs of your new residential system.
After more than 14 successful years, Sandbar Solar maintains its position as the most established solar company in Santa Cruz. Thanks to our experience in the industry, weve got the knowledge and background to help you understand why your energy bill might seem higher than it should be, and identify the proactive steps you can take to get the savings you deserve.
Contact us today to learn more.
About the Author
Scott is the founder of Sandbar Solar & Electric. With a Bachelors Degree in Economics from UC San Diego, Scott has an NABCEP certification, and has lectured on and taught many high-tech construction practices and solar PV technical concepts to education institutions, including Stanford University and state-recognized electrician apprenticeship programs. Scott enjoys sharing his knowledge of the evolving renewable energy space and making a difference in his community.
