Installing solar panels can be expensive, making some people question, ‘do solar panels actually save money?’ In the long run, or perhaps even in the short term, solar panels are expected to recoup their investment and provide financial savings. Moreover, they are eco-friendly. When evaluating the financial benefits and savings from solar panels, it’s important to take into account tax rebates and other incentives. So, what’s the financial return on solar panels? Continue reading to discover more.
How much money is saved on average by using solar panels?
You might have come across the amazing advantages of solar panels from your neighbors, friends, or the internet. However, the primary reason people often talk about is the reduction in their monthly electricity expenses. So, how much can a typical family save by having solar panels installed at their home? To figure out the average savings for a homeowner after installing solar panels, we first need to know the total electricity usage of a typical home.
On average, a home in the U.S. consumes about 10,694 kWh of electricity annually, which translates to around 877 kWh each month. Assuming the national average electricity rate of $0.13 per kWh, multiplying this by 10,694 kWh reveals that a household could save up to $1,390.22 annually on their energy bills by having a properly sized solar panel system. This amounts to over $115 in savings each month.
How long does it take to see savings on energy bills with solar panels?
Once your solar panels are up and running, you might start seeing reductions in your upcoming energy bill. However, it could take several years to recover the money you initially spent. Using the average figures we mentioned earlier, and assuming a family saves $1,390.22 annually on their energy bills, you can divide the total cost of the initial investment by $1,390.22 to determine how many years it will take to break even. Once you’ve recouped your initial investment, any savings thereafter will be profit, minus any expenses related to maintenance or repairs to the solar panel system.
Looking at the average expenses for a 6-kilowatt solar panel system, which is $2.76 per watt as of July 2021, the average price for such a system is about $16,650. After applying the federal solar tax credit, the actual cost drops to around $12,254. If your area offers state and local tax rebates for solar panel installations, the cost could be even lower. By dividing the total cost of $12,254 by the annual savings of $1,390.22, you can calculate that it will take approximately 9 years to fully recover your investment.
This is a reason to consider staying in your home for a while if you’re planning to install solar panels. Otherwise, you’ll have to cover the remaining costs when you sell, which could extend the time it takes to sell your home, depending on your location and the demand for solar in your area.
What affects cost savings with solar panels?
The primary element influencing the amount of money saved with solar panels is the scale of the system. The bigger the system, the greater the savings. Eventually, a big enough system can generate enough power to fully supply a house with extra energy. At this stage, the extra energy can be returned to the utility company. While bigger systems offer greater savings, it’s important to note that they also come with a higher initial expense.
How much does it cost to install solar panels?
In 2021, the typical expense for setting up a solar panel system was approximately $12,000 following the federal solar tax rebate. Installations with fewer solar panels could be as little as $5,000, while bigger installations featuring the latest solar panels could reach $40,000 or more.
What are the advantages of solar panels?
There are many advantages that solar panels offer. Advantages include reducing a monthly electricity bill, low maintenance costs, and the benefits to the environment that solar can provide as a renewable energy source. These are all reasons that can persuade someone to install solar panels on their home. Here is a closer look at these advantages in more detail5:
- Reduction and/or elimination of electricity bill: Depending on how much of your energy needs can be met by the newly installed solar system, you could dramatically reduce or eliminate your monthly electricity bill. If you happen to generate more electricity than you use, you may be able to sell the surplus energy back to the power company in some regions.
- Low maintenance costs: Maintenance on solar panels is highly minimal. Cleaning the solar panels a few times a year and replacing the inverter every 5 to 10 years are the only maintenance requirements. Additionally, many solar panel manufacturers offer 20 to 25-year warranties.
- Environmental benefits: Solar panels can provide all the energy you need for your home without using power generated from burning fossil fuels like coal, oil, and natural gas. Utilizing solar energy can reduce your carbon footprint and help slow the harmful effects of climate change and global warming.
Which states save the most money with solar panels?
Installing solar panels on your property is an effective method to reduce your monthly electricity expenses and save money. The more electricity your household consumes on average, and the larger your solar panel system, the more financial benefits you’ll enjoy over time. In certain areas, you might even generate more solar energy than you need, allowing you to sell the surplus to the utility company for a modest profit.
To estimate the monthly savings from solar panels, start by reviewing your electricity bill to determine your average monthly energy usage. Then, multiply this figure by your utility company’s average electricity rate. You can also look at your annual electricity expenses. On average, a U.S. household consumes about 10,649 kWh annually, with a national average electricity rate of $0.1331 per kWh, resulting in an annual electricity bill of approximately $1,417. These calculations are based on national averages for electricity rates per kWh and energy consumption.
However, in some regions and states, electricity costs are significantly higher than the national average. In these areas, especially if the climate is suitable, solar panels can lead to even greater savings annually, allowing homeowners to recoup their investment more quickly.
For instance, in Hawaii, as of December 2021, the average electricity rate per kWh was about $0.3276. If a household in Hawaii used around 10,649 kWh of electricity in 2021, their annual electricity bill would amount to $3,488.61. Given that a 6-kilowatt solar system costs around $11,837 after applying the federal solar tax credit, and assuming the household saves over $3,488 annually on electricity, the solar system would be fully paid off in approximately 3.5 years. In states with lower electricity costs, solar panels still offer long-term savings, though the return on investment might take a bit longer to achieve.
What are alternatives to solar panels?
There are numerous options for solar energy available today. From solar-powered lights and sun tunnels to solar shingles, ovens, air conditioning systems, and water heaters, there are many ways to incorporate solar into your home without the need for a full array of solar panels.
If you’re not convinced that solar panels are the right fit for you, think about making the switch to Inspire Clean Energy. You’ll enjoy the advantages of clean, renewable energy without the hassle of installation, upkeep, or the wait for your solar investment to return.
Head over to our website and fill out the form with your address and/or ZIP Code to get started. If Inspire Clean Energy offers plans in your area, you can move forward with connecting your utility and start experiencing reliable and consistent monthly energy bills.
