Are you planning to get a solar panel system for your house or office? Do you know about the expenses and payback period? Have you researched well about how much do solar panels save on electricity bills? Other than basic knowledge about solar panel working and solar panel systems you should also know about other related things. Like how many savings you can actually make after investing your money in a solar panel system. Come find out about whether is solar system cheaper than electricity and is it really worth it?
Do Solar Panels Really Save Money?
Long answer short, yes, solar panels really save money. But it is not just that you set up the panels and savings begin. There are a number of factors affecting the production and supply of solar energy from solar panels. Roof size and angle, direct sunlight hours, and size and output of your solar panels are some of the crucial deciding factors in how much you can save. I agree that the initial installation costs of solar panels are expensive, but in the long run, they are like long-term investments.
How Much Do Solar Panels Save On Electricity Bills?
After learning the answer to do solar panels really save money let us move ahead to know how much. Solar panels help you reduce your carbon footprint, but it also helps you save money in the long run. An efficient solar panel system typically can save around $20,000 to $97,000. With regular innovation in technologies, you will find several options for the system. To determine how much you can save on electricity bills by installing solar panels, you need to first calculate how much you spend on energy per year. You’ll also need to consider the rates of utility companies in the near future and the percentage of power that needs to be met by solar panels.
1. Spending on Energy Bills Every Year
Suppose the average annual power consumed for a United States household is 10,632 kilowatt-hours (kWh). And supposedly prevailing national electricity rates are $0.15 per kWh as mentioned in Energy Information Administration (EIA) data 2022. So, an average U.S. family is spending around $1,600 per year on electricity bills.
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2. Utility Rate Inflation
Electricity prices are volatile in nature. To calculate your savings with solar panels you need to determine what will be the rates of utility companies. Electricity rates increase yearly, so in terms of comparison between solar and utility, the latter will be high. So, if a family was spending around $1,600 on power bills yearly, then in upcoming years it is probably going to rise. But with a solar panel system, you can use electricity from the mainline during low-cost hours. And during peak cost hours you can switch the load to a solar panel system.
Since grid and hybrid systems are backed by batteries you will get a constant power supply during power outages without having to actually pay for them monthly as you are generating power for your household requirements.
3. Solar Offset Percentage
To learn about how much do solar panels save on electricity bills, it is important to understand solar offset. It is an estimated percentage of electricity required by a household that will be produced by the solar system. It will give you an idea of how much your monthly electricity bill will be after you install the solar panel system. Many people prefer 100% offset, but it depends on your preference and the power needs of the house.
Usually, your savings begin after you install a solar panel system and begin generating clean energy for your household electricity needs. Solar panels come with a minimum of 15 to 19 years of warranty, but some are backed with a 25-year warranty too. Typically, your solar panel system would last for more than 25 years. It means that with a solar panel system, you get yourself a long-time saving scheme.
4. Solar System Efficiency
Solar panels with high-efficiency ratings tend to generate more power to meet household requirements. With an efficient solar panel system, you can generate a good amount of solar power which in turn can reduce your electricity bill. Yes, obviously your electricity requirements will be sufficiently met by solar panel systems during the day. You will not be using any electricity units from your local provider. This means you are saving that sum of money which you generally use in terms of electric units.
If you have a hybrid solar system, then you can switch to a solar power system during the night also because it is backed with battery storage.
Is Solar System Cheaper than Electricity?
After learning about how much do solar panels save on electricity bills, get to know is solar system cheaper or not? The cost of a solar panel system depends on different factors and with installation, it surely is more expensive than your electricity bills. Considering it to be a one-time investment and its payback quality, you will feel it was way cheaper than the electricity bills you have been paying for all these years. Solar panel systems comprise solar panels, inverters, batteries (if you are getting a hybrid or off-grid system), wiring, protection devices, and mounts & racks. All this increases the upfront and initial installation costs of the solar system.
Also, for solar power system installation, the government provides tax incentives and rebates to the owner. Well in the sense your installation costs will be reduced further. For example, you are buying a 10-kilowatt solar panel system at $29,500 but with a 30% tax incentive deduction it will cost you only $20,650. Several states are also providing local incentive plans that can further reduce the upfront cost of solar systems and increase your return on investment (ROI). I guess you got the answer to whether the solar system is cheaper than electricity.
Note: The tax incentive percentage mentioned here is estimated and not the actual unit. The percentage of tax incentives and rebates varies from country to country and utility suppliers also.
How Much Electricity Bill Can Be Reduced By Solar Panels?
The electricity bill is calculated by the number of units you consume during the month. Each electric unit costs a certain amount. With a solar power system, you will be substituting the electric unit consumption from a local utility provider with electricity supplied by your solar panels. Since you will be using less power from the utility provider, your electricity bill will decrease accordingly. With solar power systems, you will be installing a net (Power) meter that works on a net metering technique through which the Power Company keeps a record of the energy used and produced by solar-powered houses.
Excess power fed into the grid is received by the Power Company, which in turn converts it into credits. These can be either used for getting clean power from the utility provider or can be added to your electricity bill to further reduce the amount of bill, but power supplied per credit is limited to some watts. Understanding where surplus power goes is as important as knowing how much do solar panels save on electricity bills.
Note: Credit values differ on the basis of location, utility provider, and rules prevailing in the region.
Do Solar Panels Give You Free Electricity?
If talking about the charge that we need to pay to utility providers for electricity that is supplied and used by us, then in that terms electricity provided from solar panels is free. Yes, you can consider it free because we are not paying for it at the month’s end plus there are no peak charge hours when electricity rates increase.
With solar panels, you are harnessing solar energy which is free for all. The only cost required to get solar energy is to set up an optimal solar panel system with the right components to meet the power needs of your household. After that, you can relax and count your savings every month on the electricity bills.
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What Happens to Excess Electricity From Solar Panels?
After getting the answer to do solar panels give you free electricity, let us find out where does extra electricity goes. Excess electricity from solar panels is either fed into the grid, stored in a battery or is it wasted. But what happens with your solar panel energy depends on the type of solar panel system you have.
There are basically three types of solar systems namely, grid-tied, off-grid, and hybrid.
1. Grid-Tied System
An on-grid or grid-tied system is connected to the local utility grid supply at your house along with being connected with solar panels. During the day if you are powering the house with solar energy but still there is surplus production. This excess electricity is transferred to the utility grid and gets converted into credits. At times when there is insufficient power generation by panels, use these credits to get clean energy from your utility provider at no cost.
A power meter keeps a record of all incoming and outgoing power into the grid and with this data, your monthly electricity bill is generated. Also, the amount of energy fed into the grid left unused is adjusted in the bill, which further decreases your monthly electricity bill. How much do solar panels save on electricity bills? As for an on-grid system, you can save good amounts on your power bill.
Note: Credit once used becomes invalid, and you cannot use it to get power a second time.
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2. Off-Grid
Also known as standalone solar power system, it is completely dependent on solar panels for electricity supply. A house with an off-grid solar panel does not have any electricity supply from local utility providers. This solar power system is backed with a solar battery of the required wattage as per the energy requirements of the household. So, if you have an off-grid solar panel system you are completely free from any electricity bills for now and many more years to come. Solar panels generate power that is supplied to your house and excess energy charges the battery.
But one thing I need to mention is that with this system you will save thousands on yearly electricity bills, but this system is an expensive choice. Since the entire system is backed with batteries, you need to choose an adequately efficient battery that can store more electricity to power your house during the night. And to cater to the energy requirements on cloudy days when there may not be optimum energy production by the system. After the solar battery is fully charged surplus energy produced by solar panels will be wasted as there is no place to store them and your household electricity requirement is met.
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3. Hybrid System
It is a mix of both on-grid and off-grid systems because a hybrid solar system is connected to the grid and is also backed by a battery. This system will give you a constant power supply, and you do not have to worry about your electricity bills either. The power meter will keep a record of all incoming and outgoing solar power into the grid. The solar inverter switches back and forth between the connection depending on the situation.
If your solar panel production is not optimum your house will get power from the utility grid, but it can be in exchange for credits. In case credits are exhausted, the electricity you use from the utility supply will be charged. You need to pay only for that at the month’s end. Also, at night or during high electricity rates, you can switch the system on battery backup to save further.
After getting the answer to how much do solar panels save on electricity bills. Now you also know what happens to excess electricity from solar panels. With an on-grid system, it is fed into the grid, and with the hybrid system it is fed into the grid and the battery is charged for backup. But with off-grid systems, it is wasted if there is more power generation than is consumed.
Also See: Do You Still Have an Electric Bill With Solar Panels?
Is Solar Worth It If My Bill is Low?
Talking about the worth then I would say yes the solar system is worth it in many ways. It not only reduces your electricity bill, but it is also helping you and the environment as a whole by reducing the harmful emissions caused by burning fossil fuels for your energy supply. In this way, your share of the carbon footprint is reduced to a large extent.
Also, if you are living in an area with high electricity rates but suitable solar efficiency then it is obviously worth it. So, the answer to is solar worth it if my bill is low is yes. Who would like to spend hundreds on electricity bills when you can save thousands in the long run? If you are concerned about the investment required even after-tax rebate reduction, it is also resolved because some companies offer you installment options. Yes, you can get your solar panel system financed with either a personal loan, home improvement installment loan, or a specific solar loan. Also, you can get it financed with a home equity loan, a refinanced mortgage, or a line of credit.
Note: We do not recommend taking any particular loan. The information provided above is for reference purposes. Also, different countries and solar system providers have different finance schemes.
So, how much do solar panels save on electricity bills? The answer to this depends on the amount of energy required by the house, electricity rates, and the efficiency of solar panels in your solar system. The efficiency of solar panels is an important determinant of how much electricity bill can be reduced by solar panels. Well, now you know that solar panels are expensive but a good investment considering long-term savings on electricity bills.
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