Does Solar Save Me Money?
More than 500,000 new residential solar panel systems were put on roofs last year, according to the Solar Energy Industries Association. Despite greater uncertainty in the economy and solar industry in 2022, solar panels are almost certain to pay off in the long run. Panels purchased from a reputable solar installer and optimized for greatest energy production will save more money over time. And there are even solar options for renters.
Residential solar installation costs vary because of their size, local incentives and local costs, but one average cost of installation is about $20,000, according to the Wood Mackenzie energy analysts. (Wood Mackenzie uses an average installation size of 8 kilowatts and an average of $2.99 per watt. Many residential solar systems will be smaller.) Tax breaks and financing options can make going solar more affordable.
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. First, you need to estimate how much your initial investment will be. Along with the system costs, you should include potential installation costs and other fees as part of setting up your service. Check cost estimates in your area and go from there.
Homeowners can receive a one-time tax credit of 30% off the purchase price of a solar system. If the initial solar panel investment typically costs around $20,000 in your area, the tax credit would net you $5,200 when you next file taxes.
What's more, some utilities offer incentives and rebates for installing solar power. Check with your local energy supplier to see if they offer any incentives.
This estimate assumes you will get all of your power from solar. While some homes will be able to get 100% of their electricity from solar, or even sell some surplus energy back to the grid, others will still have an electric bill to supplement usage. This will vary widely from home to home, depending on how many solar panels are installed, normal energy consumption and more. Get more tools to calculate your home's potential savings here.
Now you have a sense of how much energy you'll save, login to your electric utility company account and calculate an average of your last several electricity bills. Go back at least six months, if possible, to account for seasonal temperature changes and other fluctuations in cost. Let's assume you get 100% of your usage from the panels and currently pay an average of $125 per month in electricity bills, or $1,500 per year. Now you have the information you need to estimate the payback period for solar panels.