How Much Can Solar Reduce My Energy Bills?

You can determine how much a solar panel system will reduce your energy bills, but you’ll need to know some important factors, including how large the photovoltaic (PV) system will be, how much electricity your home consumes, and whether the system will get enough direct sunlight to be a worthwhile investment for you.

The cost to install a residential solar system varies from about $10,000 to $30,000, after taking advantage of rebates and incentive programs offered at the federal, state and local levels. The return of investment for an average system is often less than 10 years.

However, because of the differing availabilities of local rebate programs, system costs vary widely from state to state and city to city.

To get pricing on a solar system in your area, click here.

In general, solar systems last about 25 years. Once the installation cost of a PV system has been recouped, solar electricity is virtually free for the remainder of the system’s life, with little or no maintenance costs.

These averages do not take into account the Solar Renewable Energy Certificates (SRECs) that can dramatically cut down the payback period of a residential PV system. For every megawatt of solar electricity a residential PV system generates, homeowners are awarded one SREC.

SRECs serve as a financial instrument that can be sold to utilities on an open market to help utilities meet mandates to invest in renewable energy. SREC prices vary from state to state, and range from $200 to $700 each. The average solar homeowner can generate about three to five SRECs each year, earning cash from the utility.

States establish their own programs for SRECs. In some states, utilities enter into agreements with customers to purchase SRECs at a set price. Other states allow utilities to use net metering to purchase the excess energy produced by residential PV systems that flows back into the grid.

Utilities that use net metering may also use time-of-use billing, which can provide additional opportunities for homeowners to earn money through their PV systems. In time-of-use billing, conventional electricity costs more during peak demand periods, the time of the day when solar energy systems are most efficient.

By using solar energy during peak periods, and conventional energy during off-peak hours, homeowners can cut their energy bills even further.

The U.S. Department of Energy states that the average 1- to 5-kilowatt system is generally sufficient to meet the energy needs of most residential homes. That statement may be a bit optimistic. Homeowners used an average of 908 kilowatt-hours per month in 2009, according to the U.S. Energy Information Administration. An average system generally meets about 45 percent of the typical home’s electrical needs.

Some homeowners can actually save more over time by installing a larger system. As the variables in calculating expected solar savings depends so much upon the particular location of a home, and so much upon individual state policies, a solar energy quote or inspection is the best way to determine potential savings.

Click here to get an estimate from a contractor in your area.

Posted on October 19th in Solar Information by Brittany.