Do solar panels really save you money?
With so many trendy investment opportunities available in today’s day and age, it’s easy to be skeptical of new products that boast promises of “saving you tons of money.” Solar panels are no different – saving money through reducing your electric bill is one of the main appeals and selling points for solar as a product and home upgrade. The simple answer to the question “do solar panels really save you money?” is yes. That being said, how much you’ll save depends on a number of factors. Direct hours of daily sunlight and size and angle of roof are both important, but local electricity rates play the biggest role in determining how much solar can save you.
How much do solar panels save on electric bills?
The first step to understanding how much solar can save you is to calculate how much you are currently spending on electricity every year. For example, the average annual electricity use required for a U.S. household is 11,000 kilowatt-hours (kWh). Multiply that by the national average electricity rate as of September 2016 ($0.1287 per kWh) and you’ll find that the typical American family is spending over $1,400 a year on electricity alone.
Then, you have to consider the volatile nature of electricity prices and determine what utility rates will be in years to come. When you compare the cost of utility electricity with home solar, you should keep in mind that you can expect electricity rates to increase annually. Over the past decade, national electricity costs have increased at a rate of 2.2% per year. Utility rate inflation is an added incentive for solar: when you generate your own energy with a rooftop PV system, you’re taking control of energy costs so that you are no longer victim to variable utility rates.
Because of the nature of solar as an up-front investment, the only costs associated with a solar system will be the cost of your installation and any added electricity costs in the event that your panels do not completely offset 100% of your electricity use. Whether or not your system will completely offset your electricity needs is primarily determined by how accurately you size your PV system – you can calculate how many solar panels you’ll need to secure that percentage.
To provide a snapshot for typical bill savings from a solar installation, the following table offers state-by-state data for 20-year savings estimates with solar. The data incorporates a number of assumptions:
- System size: 5 kilowatts (the national average)
- Electricity demand: 11,000 kilowatt-hours per year (the national average)
- Utility rate inflation: 2.2%
- Percent needs met by solar panels: 84% (EnergySage marketplace average)
- Electricity rate: State average as of September 2016 (according to EIA)
- Ownership of the solar panels is assumed
|Average price (5 kW solar system)||Average electricity rate per state ($/kWh)||20-year savings|
How much can solar panels reduce your carbon footprint?
Financial returns are a major incentive for going solar, but money isn’t the only thing that solar panels save. When you install solar, you’re also improving the environment and reducing greenhouse gas emissions. That’s why the question “How much can solar panels save?” can be answered two ways: how much money solar can save and how much CO2 it can save (avoid being emitted into the atmosphere).
The Environmental Protection Agency provides a formula to help you calculate how various green practices result in carbon emissions reductions. The below table converts solar energy production into greenhouse gas offsets using the metric converters 7.03 × 10-4 metric tons CO2 / kilowatt-hour of energy produced and the national average for solar panel production ratio, 1.42 kilowatt-hours / watt of power.
A good comparison point to use when thinking about carbon emissions is that a typical vehicle emits 4.7 metric tons of carbon dioxide every year. When you take into consideration that the national system size average in the U.S. is 5 kW (5,000 watts), it’s easy to think about a solar panel system as something that can typically offset the emissions produced by one fossil fuel automobile in a year. In addition to significant bill savings, a solar system comes with the satisfaction of “taking a car off the road,” so to speak.
|System size (kW)||Annual Solar Energy Production (kWh)||Carbon Emission Reductions per year (metric tons)|
Solar panels can create big savings
Ultimately, regardless of whether you’re looking at finances or carbon emissions, a solar panel system will generate big savings for homeowners. As the first data table illustrates, 20-year electricity savings from solar can be significant, ranging from the low end of $7k to upwards of $30k. The deciding factor will primarily be the cost of electricity, which varies significantly depending on where you live. Nonetheless, a good rule of thumb is if you live in a state with middle- to upper-level utility rates, solar will be a risk-free investment with major returns. On the emissions side, as panel system size increases, so do the CO2 reductions in the surrounding environment, making solar an eco-conscious investment. If you’re looking for customized estimates not only around potential solar savings but also around the cost of a solar panel system, try our Solar Calculator. If you’re ready to start looking at quotes from pre-screened solar contractors in your area, check out the EnergySage Solar Marketplace.