Saving money by installing solar panels
You may pay up to around $18,000 upfront for a 6-kilowatt solar panel solar install. But it’s likely you will save between $20,000 to up to $40,000 on energy costs over a 25 year period.
The average energy bill running $1400 a year per family in the United States.
So even if a family only saves half their bill on electricity by installing solar panels, the roughly $17,000 they spend on a solar installation, including current credits will virtually pay for itself.
Here are some of the essential details you need to know about solar panels:
Do Solar Panels save on electricity bills?
The answer is of course, yes. However, it’s not really a matter of a yes or no question. In order to calculate approximately how much money you will save, you need to understand the Mathematics of solar power.
Without a complete examination of solar, with all the various factors such as where you live, how much electricity costs you per kilowatt of electricity, how much your solar panels and installation will cost, how much electricity and how much your solar panels can generate, it’s all theoretical rather than practical.
The mathematics of solar power are fairly complex until you break everything down into smaller parts.
The first thing you need to know is how much it costs for electricity on the grid where you live.
According to the U.S Energy Information Center the overall average of electricity in the United States is 12.85 cents per killowatt.
However, energy costs vary greatly from state to state.
Hawaii has the highest energy costs in the country at 33.37 cents per kilowatt. California, Alaska, Connecticut, Rhode Island, and Massachusets all pay over 20 cents per killowatt.
At least 9 other states pay more than the average U.S. resident. However, a few states such as Washington, North Dakota, Idaho, and Louisiana have the lowest residential rates per kilowatt, all at under 10cents per kilowatt.
Why are the costs per kilowatt important?
Because the object of solar-powered electricity is to replace as much if not all of the electricity you are using from your local power company.
Therefore, the higher the cost of electricity in your locality, the more money you will save.
Factoring in how much your solar panels will generate
You might think that it would be relatively easy to calculate the amount of electricity generated by solar panels, with the more sunshine the better.
Sadly, that’s not true because solar panels actually lose efficiency because the temperature gets too hot. Sometimes as much as 10 percent.
Thus, a cloudy location like San Franciso may do almost as well as a location such as a perpetually sunny location such as Tucson or Las Vegas.
A 6-kilowatt solar power room may produce as low as 570 kilowatts of electricity per month to as much as 800 kilowatts. And by the way, the average family uses about 900 kilowatts per month.
Factoring in costs of the panels and installation
The average installation price is around $14,000 to $17,000 before tax credits. But some states, such as North Dakota, Wyoming, Alaska, and South Dakota, it’s extremely hard to even find a solar provider.
Even at a sky-high average of $27,000 per home in Hawaii, you’d think that at 33 cents a kilowatt of grid electricity that at least a quarter of Hawaiin homes would be served by solar, but alas, only around 10 percent actually do.
Solar Panel Tax credits
The U.S. Federal Government provides a tax credit on solar energy, known as the investment tax credit.
The Investment Tax Credit started in 2006 and was originally intended to expire in 2007. However, it proved so popular that Congress extended it, and it is now scheduled to last until the end of 2021.
The Investment Tax credit currently allows you to deduct 26 percent of the cost of your solar power unit off of your taxes. In 2021, the last year for the program, individuals will be able to subtract 21 percent.
Finally, some states such as California, Arizona, Massachusetts, Hawaii, or more offer state Tax rebates, or at least minimize the increased value of your home by installing a solar unit.
Some states even offer cash rebates for installing solar power.
In addition, many local power companies are required by the State to produce a certain percentage of solar power. Local power companies will offer you the opportunity to pair up with them and sell them a percentage of your unused electricity, sometimes at a substantial premium to meet their state-required quota.
So how much can you really save on electrical bills from your power company?
First, having a solar-powered unit does not mean you are free from the electric company nor do you necessarily want to be.
Without an electrical connection to the local power company you would have to hook up your house with expensive batteries. On the other hand, having your local hook-up enables you to have electricity whenever you wish.
Secondly, many homeowners install solar-powered units but then they actually use more electricity overall. particularly during the hours from 4 pm onwards.
And they will often pay higher rates for the extra peak-demand energy they use. As a consequence, they don’t maximize their independence from the local power company.
However, even if you have a large 10-watt solar power system and produce more than you use, you will still get a bill from the electric company. This is because the electric company charges you both taxes and a service charge.
Calculating How Much Solar Panels Will Save You
To calculate how much do solar panels save, it’s necessary to do the solar math.
Assuming you have a 6-watt solar system, you might typically generate between 6500 and
9,000 kill0watts per year depending upon where you live.
If you generate 650 kilowatts per year, that’s around 540 kilowatts per month. If your local energy cost is around 17 cents per kilowatt, (around the cost for electricity in New York, according to the U.S Energy Administration,) that’s about $91 per month.
If you generate 800 kilowatts per month in California, that’s roughly $160 per month in a cheaper bill based on 20 cents per kilowatt.
Of course, if you install your solar panel in a house in Washington or Idaho, your reduction will be quite a bit less as electricity is notably cheaper there and you will save roughly $50 to $70 per month.
As this is a lower savings cost, you may decide it’s not worth the overall cost of purchasing an installed solar system that may not pay itself off for.
How long do solar panels last?
A dirty little secret of the solar industry is that there is such a thing as solar degradation.
The average solar panel degrades at a rate of .08 percent. This means that brand new your panels will produce 100 percent of the available electricity from the sun. By year two, they will produce 99.2 percent. By year 10 they will be down to around 92 percent, and by year 25 they will be down to around 82.5.
What can you do about this? Either one of two things. Either buy more expensive panels or get an installer that comes out once a year to inspect your panels.
Insist on panels that have a 10 to 12-year warranty, and replace any that become defective.
Meanwhile, you will need to pay from the inspector to come out yearly, and while he is up there, expect to pay him to clean your panels to be sure they are performing at peak level.
Do Solar Panels raise your home’s value
It makes sense for many people to install solar panels in their houses. Within a few years, they can virtually pay for the installation, and overall, save themselves a lot of money, particularly if they plan to live in the home for several years.
That being said, don’t just rush into it. Call several installers and get serious quotes. Without calling an installer, you don’t even know if your roof is appropriate for solar panels.
Also, ask about financing if you don’t have the ability to pay for it.
That said, timing is important too. First, if you are building a house, why not include a solar roofing system from the get-go and roll the costs of the solar roofing into the total cost of the building.
Also, remember the 26 percent Federal tax incentives expire next year, so don’t wait too long.
In most cases, it makes plenty of sense, because the price of electricity rarely goes down.