The answer is YES. Solar panels really do save you money.
Are there outliers that exist where an unethical solar company sold you bad equipment with a shoddy installation that caused you to spend more than you saved? Of course there are. It’s almost equivalent to asking the question, do cars drive? Of course they do, unless you got sold a broken car. Solar panels really do save you money and that is true no matter which way you go solar whether that’s paying for it outright, financing it, PPA or leasing it.
How Exactly Does Solar Save Money?
To answer this question depends on how you are acquiring your solar. All options will save you money but how and when you save depends on how you go solar.
Let’s look at each solar option:
Cash (purchase outright)
With a cash option, the typical questions that homeowners will ask or have in the back of their mind is what is the break even point? And what is my return on my investment?
The answer to these questions depend on what the cost of your electricity is and how much electricity you use. Let’s look at a typical scenario:
- Annual electric usage = 10,000 kWh
- Monthly AVERAGE electric bill = $150/mo
- Total amount spent on electric bills in One Year = $1,800
- 25-Panel Solar System production = 10,000 kWh
- Total cost of 25-Panel Solar System = $25,000+/- After tax credit
- Years of solar system useful life = 30
- Amount of money spent on electric bills in 30 years at a 4.5% annual electric rate increase = $114,000
- Therefore, you’ve saved approximately $80,000+ over the course of 30 years
- Breakeven point = 11 years without state incentive, with state incentive = 7 years
- ROI without state incentive = 7.2%, with state incentive = 12%
Those are some pretty enticing numbers and this is very typical for a home here in New Jersey and New York.
Savings are also quite clear. But you see, the homeowner in this example had to pay $25,000 out of pocket but will eventually save over $100,000. So there are savings but not quite immediate. There are other ways to go solar that can give you the immediate savings that you may desire but the long term savings won’t be as much. Let’s explore.
Finance
With today’s (2024) solar financing options, if a homeowner meets certain credit requirements, they don’t spend any money down and the solar interest rates range from 4% to 10%. Let’s look at a 10% interest rate example.
- Annual electric usage = 10,000 kWh
- Monthly AVERAGE electric bill = $150/mo
- Total amount spent on electric bills in One Year = $1,800
- 25-Panel Solar System production = 10,000 kWh
- Total cost of 25-Panel Solar System = $25,000+/- After tax credit
- Monthly payment on 25-Panel Solar System with 10% APR after all incentives = $160/mo
- Amount of money spent on electric bills in 30 years at a 4.5% annual electric rate increase = $114,000
- Therefore, you’ve saved approximately $65,000+ over the course of 25 years (warranty period)
- Break even point = 1.5 years
You may be asking yourself, where are the savings if my solar payment is $10 higher than my current electric bill?
Well you may be paying $10 more per month but that’ll only last for 2 years or so. Because in 2 years time, your current electric bill from your utility provider will be more than $160 per month with the current rate of inflation. So basically you’re not spending really any new money out of pocket except for a measly $10 a month for the next year or so for a brand new $40,000 solar system.
If you really think about it. You’re only coming out of pocket $240 for a $40,000 solar system. If you make payments for 25 years at a locked in rate of $165 per month, that would be about $50,000. Which is about $65,000 less than what you would have paid the utility company if you did not go solar. Are the savings clear?
Lease / PPA
- Annual electric usage = 10,000 kWh
- Monthly AVERAGE electric bill = $150/mo
- Total amount spent on electric bills in One Year = $1,800
- 25-Panel Solar System production = 10,000 kWh
- Current electric rate = $0.20/kWh
- PPA / Lease kWh rate = $0.15/kWh
- Monthly payment on 25-Panel Solar System with 2.9% escalator = $125/mo
- Amount of money spent on electric bills in 30 years at a 4.5% annual electric rate increase = $114,000
- Total amount of money spent on the lease or PPA contract over 25 year term with 2.9% escalator = $53,000
- Therefore, you’ve saved approximately $60,000+ over the course of 25 years (warranty period)
- Break even point = N/A
As you can see, the monthly savings with this option are immediate. There are less overall (long term) savings than with the other solar options but this option allows you to save the most money right away which is attractive to many people.
To learn more about a solar PPA (power purchase agreement), you can visit our guide on Solar PPA’s here.
Common Misconceptions About Solar Savings
The truth is, aside from paying cash for solar and a few extra dollars for a financed system, you can absolutely go solar without spending any new money.
There really isn’t any other way to slice it. The money that you are putting towards your solar system is money that you have to spend anyway in order to electrify your home. It is money you are already spending.
You might as well put that money towards energy that you own, put some money back in your pockets and not give it all to the utility company which at the end of the day is a monopoly. Your utility provider is your electric landlord and they can raise rates on you. So it doesn’t make much sense to be subjected and exposed to that when you can make it yourself and pay less and eventually never have to pay for power again.
I hope this sheds some light on exactly how you’re able to save money whichever way you go solar.
Some are immediate savings, and some are more long term.
When Would Solar Not Save Money?
As long as you are using a reputable installer / provider with excellent reviews on Google that uses premium solar components, the solar system will save you money.
Just like any industry, there are going to be companies that do not act with best intentions or have ethical business practices. The only thing I can say is Google, Google, Google. You cannot really hide on the internet.
If you follow these few guidelines, you’ll be a happy solar homeowner that is saving money. Because even if the solar system stops working, a highly reputable solar company will fix the problem getting you back on track to savings.
CURIOUS ABOUT SOLAR?
It’s a lot simpler than you think!