Did you know that about a decade ago, the cost of solar was 223% higher than coal? However, it has since fallen dramatically, dropping by an average of 15% each year. As a result, solar panel installations have become more affordable for property owners.
So if you’re looking to lower or offset your home’s energy bills, now’s an excellent time to switch to solar. After all, solar panel savings can amount to thousands of dollars.
Plus, some experts project energy costs to increase this 2023. By going solar, you can avoid such hefty price hikes.
But how much do solar panels save, anyway? How long will it take for you to see energy savings?
We’ll address all those questions in the guide below, so read on.
How Much Can Solar Save You?
The exact figures depend on your home’s energy consumption.
To give you an idea, we’ll use the 2021 average U.S. household consumption of 10,632 kilowatt-hours (kWh). This figure is for 12 months, so divide it by 12 to get a monthly average of 886 kWh.
You can also divide 10,632 kWh by 365 (days) to get a rough daily average of 29.12 kWh. Then, multiply 29.12 kWh by the kWh price charged by your electricity provider.
For example, let’s use the forecasted average price of $0.1524/kWh this 2023. In this case, your (rounded off) electricity consumption could cost about $4.50 daily or around $135 a month. That sums up to approximately $1,620 for the entire year.
If you install enough solar panels to cover your energy usage, you can save $4.50 daily, $135 a month, or $1,620 a year.
How Soon Can You See Your Savings?
After installing your solar panels, you should see savings on your next home energy bill. However, these savings differ from your return on investment (ROI).
Your ROI will only start once your initial savings have paid off the cost of your system.
What Other Factors Impact Solar Panel Savings?
Your solar power system’s size and efficiency influence your potential savings. How sunny it is in your area and whether you own or lease the panels also play significant roles. If you qualify for solar incentives, you can expect even more savings.
System Efficiency and Size
Most panels available today are 15% to 20% efficient. The higher their efficiency rating, the greater their conversion or output.
Therefore, higher-efficiency panels convert more sunlight into usable electricity. That translates to more savings since you’d purchase less energy from the grid. Or, they may be powerful enough to offset most, if not all, your grid-provided electricity.
The highest-efficiency panels you can get today are the monocrystalline (mono) kind. Polycrystalline (poly) panels are a step lower; they are less efficient but cost less.
With mono panels’ high output rate, you may need fewer to generate enough energy to cover your needs. For instance, you may only need 15 mono panels, but if you go with poly, you may need over 20.
Whether you get mono or poly panels, though, contaminants may affect their efficiency. These include dirt, debris, and grime accumulation on the panels’ surfaces. The guide linked over here covers this topic in more detail.
Amount of Sunlight That Your Panels Get
Solar panels generate the most energy during peak sun hours when the sun’s intensity reaches 1,000 W/m² or higher.
In many states, the average is four peak sun hours. However, if you’re in Arizona or Nevada, lucky you, as you can get up to 7 or more.
Your panels will still produce energy outside those hours as long as sunlight hits them. However, they would do so at a lower capacity.
Solar Incentives
Governments, solar companies, and utilities offer many incentives to encourage solar energy use. One of the biggest is the federal solar tax credit, which gives a 30% tax credit through 2032. After that, it drops to 26% in 2033, then 22% in 2034.
The federal solar tax credit reduces the federal income taxes you’d otherwise owe. The amount of reduction depends on your eligible solar installation expenses. So if your eligible costs total $18,000, you can claim a federal tax credit of $5,400.
Be aware that the federal tax credit only applies to first-ownership systems. So to be eligible, you either have to buy new panels outright or finance their purchase. Leasing them disqualifies you; instead, it’s the lessor who qualifies.
Several states also offer tax credits on state income taxes. Arizona, Hawaii, New Mexico, and New York are some examples.
Many solar companies and utility providers also offer solar rebates. These programs provide cash back on purchased equipment and installation costs. They can range from 5% to 20% or even more.
Net metering is another incentive that can help increase your solar panel savings. It credits you for any excess energy your solar panels send to the grid. The credits can then further reduce your home energy bill, hence, more savings on your part.
Owned vs. Loaned vs. Leased Panels
Buying solar panels outright will cost you more upfront, but it can be cheaper in the long run than a loan or a lease. With a solar loan, you have to pay interest charges. With a lease, you pay the lessor (the system owner) extra fees for letting you use their equipment.
How much you pay for your solar panel system also dictates how soon you can expect your ROI to start.
For example, suppose your system costs $15,000 after incentives. However, it’s so robust that it produces enough energy to cover your yearly utility bills of $1,620. In this scenario, your solar panel savings will pay off your system’s cost within 9.25 years.
After that, all your other yearly savings can go into your pockets.
Best of all, quality solar energy systems have a high-efficiency lifespan of 25 to 30 years. That means they can keep saving you loads for the next 16 to 21 years. And they can still save you some money even after they start losing efficiency.
Save Money and the Planet With Solar Energy
The sooner you go solar, the sooner you can start reaping thousands of dollars in solar panel savings. Best of all, you can do your part in saving the planet by reducing your carbon footprint. All that should be enough reason to switch to this clean and renewable energy source ASAP.
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