Those of us that sell residential solar are very familiar with the fact that installing solar can save a homeowner tens of thousands of dollars. And, in some cases, can start saving the homeowner money from the very first month. However, it is hard for consumers to understand how purchasing a solar system that costs $20,000 to $60,000, and even more, can save them money. It’s not a very difficult concept to understand once it is explained. Yet it’s very different than any other purchase consumers make. So, let’s get into it. How do solar panels save money?
Key Points to Know About Solar
- There is no downpayment required to go solar. The first payment is due about 45 days after the solar system is installed. That means that the free energy from the sun is already offsetting the amount of energy the home usually gets from the electric company, therefore reducing the electric bill. In some cases, the solar payment plus the lower electric bill is less than what the homeowner normally pays the electric company each month. In other words, they start saving immediately on their monthly electric cost.
- Homeowners, when paying cash or financing their system, are eligible for a federal tax credit equal to 30% of the price of the system. This is a dollar-for-dollar credit based on their tax liability. If they do not have the tax liability in the first year they recuperate the rest in subsequent years.
- There is a potential increase in property value with no increase in property tax due to the higher value. Zillow’s study on solar installations shows a notable impact on home resale values, with solar-equipped homes selling for an average of 4.1% more than those without solar. For the typical home, this increase equates to over $9,000, adding significant value for sellers. States like New Jersey see particularly high premiums—up to 9.9%—while other states such as Pennsylvania and North Carolina also experience a notable bump in home value of approximately 4-5% when solar is installed. This premium varies by location, underscoring the increasing buyer preference for energy-efficient, eco-friendly homes.
- Homeowners that install solar drastically reduce their exposure to electric rate increases. Homeowners reduce the amount of energy they purchase from the utility company by 60% and up to 100%. This allows them to be far less affected by the electricity rate hikes that we’ve seen in recent years. This is perhaps the biggest factor to share when a homeowner asks, “how do solar panels save money?”
How Are Solar Systems Designed?
Solar systems are designed based on several factors and variables that are listed below.
- Household annual energy consumption
- Rates charged by the electric company
- Utility company reimbursement rates for excess energy produced by a solar system
- Size, tilt, and pitch of the various roof planes of the home
- Shading from trees and other obstructions
Solar Systems Only Produce Energy During the Day
That may seem like an obvious statement to make. But it’s important to keep this point in mind when trying to understand how solar panels save money. A properly sized solar system will produce more energy during the day than the house needs or uses. So, the key is understanding how the excess energy produced by the system is used. This excess energy can offset the energy purchased from the electric company at night. Or it can be used to power the home at night by storing it in a battery. This drastically reduces and can even eliminate the need to purchase any power from the utility company at night.
One to One Net Metering
Net Metering is a term to describe the process of sending excess energy produced by a solar system out to the electric grid. When doing so, the electric company now has control of the energy and can sell it. The homeowner receives credits on their bill at the kilowatt hour (kWh) rate normally charged to a homeowner.
Example- ABC Utility Company charges .15/kWh to their customers. One of their customers has a solar system that sends an average of 25 kWh of electricity out to the grid each day. ABC Utility company will give that homeowner 25 credits at .15 each. These credits will offset the amount of energy used by the home at night when the solar system is not producing. Assuming that the home uses 25 kWh’s of energy at night, the credits will offset the nightly usage resulting in nothing owed to the electric company.
Real Example of Savings from Solar - One to One Net Metering
All we need in order to provide a homeowner with a system design and proposal specifically for their home and their familiy's energy usage, is a copy of a recent electric bill
The Export Rate
Also known as the Buy Back Rate, or Feed-in Rate, the Export Rate is less than the retail electricity rate and is often closer to the wholesale rate (what the utility company pays to purchase electricity). This rate can range from a few cents per kWh up to about 10 cents. Some in the industry use the term ‘Net Metering’ to describe this way of reimbursing homeowners for excess energy produced by their solar system sent out to the grid. This can be confusing to consumers because it sounds like the ‘One to One Net Metering’ described above. However, when a reimbursement rate for excess energy production is less than the retail rate, solar systems must be designed differently to benefit the homeowner.
Example- XYZ Utility Company charges .15/kWh to their customers. One of their customers has a solar system that produces an average of 25 kWh of excess energy each day. However, XYZ Utility Company will only pay .04/kWh for that energy unlike the .15/kWh or retail rate ABC Utility Company will pay as described above.
In the case where a utility company reimburses a lower rate/kWh to the homeowner for excess energy sent to the grid (Export Rate), there is a better use of that energy. Instead of sending this energy to the grid, it is far better to store it in a battery. Then when the sun goes down and the solar system is no longer producing energy, the battery will power the home through much if not all through the night. In this situation the homeowner needs to buy very little if not zero energy from the utility company at night.
This Homeowner sent us a PDF of their utility bill from their online account
How Do Solar Panels Save Money? Now You Know the Answer
If you want to see if going solar can put you in a situation to save tens of thousands of dollars with no down payment, give us a call. We’ll show you a system design and proposal. This is completely free. There is no obligation. And there is absolutely no pressure. We are here to educate and allow you make an informed decision for you and your family.
*Because of the variables mentioned above, not every homeowner will see the immediate savings as shown in the previous examples. However, nearly all will have significant long-term savings and increased property value making solar a great investment in their home and for their future.
