Every year, more and more people install solar panels on their property to reduce their carbon footprint. In addition to being eco-friendly and offering independence from the power grid, switching to solar lowers your electricity bills.
But how much do solar panels save per month? Here’s what you need to know.
How Much Do You Really Save with Solar?
Bear in mind that the amount you’ll save with a solar energy system varies according to your situation. Factors like the system size, installation cost, federal and state incentives, location, and energy consumption roughly determine overall savings.
Your upfront savings start with the federal solar tax credit. Under this program, those who install a solar photovoltaic system at their primary or secondary residence before the end of 2022 can receive tax credits equivalent to 26% of installation costs. If you spend $20,000 for the panels, you’ll get $5,200 in tax breaks to ease the financial burden of switching to solar.
In addition to federal tax credits, some states also offer incentives, including rebates and net metering policies. Check with your local government to see availability and requirements.
Electric Bill Savings
If you’re like most people who pay monthly utility bills, you probably want to know how much solar panels save per month on electricity. If you install a solar panel system to meet all your energy requirements, the answer is easy: you’ll save the total amount you pay for electricity each month.
You’ll also save more in the long run if you live somewhere with high energy rates, an abundant amount of sunlight, or both. But even if you don’t live in such an area, you’re likely to save a lot still.
Bear in mind that solar saving estimates will depend on the system’s production and lifespan. Highly efficient PV cells can produce more power, allowing you to reduce your dependence on the grid further. And if your system is good for at least 20 years, your cost savings will be much higher as well.
How Long Does It Take Solar Panels to Pay for Themselves?
Solar panels last long enough for you to recover your investment in them.
The payback period for going solar is different for every household. It varies according to the following factors:
- Total system cost
- Amount of your federal tax credit
- Annual cost savings
It’s important to point out that the tax credit reduces your liability, but it does not result in a refund. You’ll be able to take full advantage of your credit if you owe the federal government at least that much in taxes for the year.
If you’re able to take advantage of the reduced tax liability, a basic formula looks like this:
Payback Period = (Total System Cost – Federal Tax Credit) / Annual Cost Savings
A solar panel system costing $20,000 might only cost the equivalent of $14,800 after taking full advantage of federal tax credits. If your estimated cost savings is $1,500 per year, it will pay for itself in just under ten years.
Sometimes, calculating the payback period isn’t always straightforward. The time frame can be shorter or longer because of cost savings, which depend on the power produced by the system, state incentives, and the electricity rate increase.
In states with net metering policies like Kentucky and California, switching to solar yields higher cost savings that effectively shorten the payback period. In these states, homes with solar panels can receive credits on their electricity bills based on the excess power sent to the utility grid.
How Much Does It Cost to Install Solar Panels?
The average cost of installing solar panels at home ranges from $15,000 to $25,000, but this can vary based on your home, production capacity, and PV cell type. Although the federal tax credit makes installation more affordable for many families, going solar still requires a sizable investment.
When choosing an installer, keep in mind that rates are usually between $2.60 and $3.35 per watt. However, be wary of solar companies that offer insanely low rates—they’re likely cutting corners in the wrong places.
Are Solar Panels Worth the Cost?
Absolutely! Even though the average solar power installation price amounts to thousands of dollars, going solar is an investment that delivers long-term returns through cost savings and years of free energy.
Since the average lifespan of a solar photovoltaic system is 25 to 40 years, you’ll still have at least 15 years of cost savings, assuming a payback period of ten years.
Going solar also protects you against rising electricity rates—even if energy costs increase, its impact on your finances won’t be as much as when you were fully reliant on the grid.