Homeowners who are considering solar often want to be sure that making the switch to green energy will actually be cheaper than continuing to buy electricity from the utility company. The short answer is: yes! Switching to renewable solar energy is definitely cheaper than continuing to buy electricity from the utility company for the rest of your life. To understand why, you have to look at solar as a long-term investment. The initial price tag of a solar installation might sound scary, but when you consider all of the other long-term costs that installing solar panels on your home will prevent you from paying, you can start to see the big picture.
Currently, every homeowner who is tied to the power grid pays a monthly energy bill. Historically, the cost of power from the utility company is only going to increase. While electricity costs do fluctuate by the year, month, or season, the overall curve of the cost of electricity is always going to trend upward. Additionally, as renewable energy continues to become more widespread, the costs continue to decrease, leading to more widespread use, and therefore lessening the demand for energy that emits greenhouse gases (like coal-powered electricity) and further increasing the costs of non-renewable energy.
What switching to solar allows you to do is remove the middleman—the utility company—and create your own clean power plant, directly from your home. When you go solar, you stop relying on the utility company, because you now control your own power supply. Instead of having an ever-increasing power bill that you’ll pay in perpetuity, you have your own energy-producing system that will be paid off in the next 5-10 years.
Breaking Down the Costs of Utility Bills vs. Solar Panels
The average electricity bill in Oregon is $100 a month, and on average, utility costs increase by 2-4% annually. In fact, Oregon has seen a 40% increase in electricity prices over the last 10 years! An average price for a solar panel installation, on the other hand, is about $15,000 in Oregon. To get the big-picture understanding of long-term costs, let’s look at how much you might spend over 25 years with the utility company vs. with your solar panels.
What you’ll spend with the utility company over 25 years:
Conservative estimate of utility increases:
$100 x mo x 2% annual increase
= $38,436 spent over 25 years
More realistic estimate of utility increases:
$100 x mo x 4% annual increase
= $49,975 spent over 25 years
What you’ll spend on solar panels over 25 years:
$15,000 initial cost
Financed with a 2% interest 10-year loan:
Payments of $138 for 10 years
Then, we need to factor in the incentives that reduce this cost:
Federal ITC tax credit: 26% of total installation = $3,900
Energy Trust of Oregon Incentive: $0.30/watt on a 4,000 watt system =$1,200
These incentives reduce total price by $5,100, so your total cost is…
= $11,482 (Note: You’ll spend this over 10 years and have no payments for the following 15 years.)
So for an average homeowner in Oregon, if you install solar panels, you’ll spend $12,802 over 25 years, in contrast with spending $38,436 -$49,975 if you continue to rely on the utility company. So at minimum, you’ll save over $25,000, and you could save more like $35,000!
Many people are scared away by the initial installation costs of solar panels, but with the available incentives from the federal government and low-interest financing, those payments end up costing homeowners much less than never-ending utility payments do. When you don’t go solar, your utility bill will always be something you have to pay, and it’s going to increase exponentially forever. In contrast, solar allows you to pay a fixed price for your home energy needs, which you’ll eventually pay off!
Solar is an incredible investment for homeowners, especially in 2021 and 2022. Currently, the federal government offers a 26% tax credit for those who switch to solar in 2021 and 2022. This credit, called the Federal Solar Investment Tax Credit, or ITC for short, is a dollar-for-dollar rebate – so, at the end of the year, when you file your taxes, 26% of the cost of your solar installation will be deducted from your total tax burden! This is true even for those who are financing their solar systems, although this credit does not apply to those who lease their solar systems.
However, in 2023, this incentive will be reduced to 22%, and in 2024, this incentive goes away entirely! The federal tax credit for solar installations is literally free money. If you’re considering solar panels for your home, 2021 and 2022 are the best times to do it, while this incentive is still on the table for homeowners. If you wait to install solar panels, you’ll miss out on this huge tax credit and you’ll pay close to full price for your solar install.
Other Benefits of Solar
The benefits of solar energy don’t end with cost-savings. When you install solar panels, you’ll increase the overall value of your home by an average of about 3%. If you eventually sell your house, you’ll actually make money on your smart investment in renewable energy. For an example, an Oregon home worth $500,000, with solar panels will be worth about $15,000 more, for a total value of $515,000.
Additionally, if you’re concerned about the climate, switching to solar energy is also one of the most impactful choices you can make as an individual. One of the highlights of going solar is that it benefits you while also benefiting the environment—while you save money, you also reduce your emissions. When you install solar panels, your home’s carbon footprint will be reduced by about 80%, and if you install a solar PV system of 5kw—which is relatively small—you eliminate almost 300,000 pounds of carbon dioxide emissions! By reducing your own household’s reliance on fossil fuels, you play a part in reducing the overall demand for natural gases. This has an important big-picture impact, because with every homeowner who switches to solar, the macroeconomic demand shifts further from coal-burning energy and closer to green energy.
Does Your Home Qualify?
Another big question for homeowners who are considering solar energy is whether or not their home will qualify for solar energy. This is an important consideration. Whether or not your home is a good contender for solar energy will depend on several factors, including the size of your roof, the type of material your roof is composed of, the pitch of your roof, its orientation to the sun, and the amount of shade your roof receives. To find out where your roof falls on the solar spectrum, we recommend getting a full solar audit. When you get an audit, your solar installer will analyze all factors of your roof and provide an estimate for the best solar install for your unique situation. At Smart Solar Energy Co., we offer our home solar audits for free, and we can complete your audit either in-person or virtually!
What if My Solar System is Small?
Sometimes, if your roof can’t accommodate a large solar system, your solar install will be composed of solar panels that produce slightly less energy than you actually consume. Since you’ll still be tied to the power grid, you won’t ever run out of energy. However, you will still be buying energy from the utility company. Now, the natural assumption to make upon hearing this news is that buying energy from the power company will complicate the cost-savings model we provided above. But the good news is that there are incentives in place to get around this.
The incentive that prevents you from wasting money with the utility company when you go solar is called Net Energy Metering. When you switch to solar with solar system that is grid-tied, most states require utility companies to track of the energy your solar panels produce, in addition to the energy your home consumes from the grid. When you install solar panels, there are going to be times when your panels produce more power than your home is using, like during summer’s long sunny days. With net energy metering, that extra power gets sent back into the utility grid. In contrast, there will also be times when your home uses the power grid’s energy because your solar panels are producing less energy than you need, like at night or during the shorter, darker days of winter.
With net energy metering, utility companies track energy as it moves both ways, between your home and the grid. Then, at the end of each month, the utility company will subtract the total amount of energy that your solar panels fed into the grid from the total amount of energy your home used from the grid, and this will drastically reduce your monthly power bill. Your extra power credits will be rolled over monthly. For most power companies, every kilowatt hour (kWh) that your solar panels produce is credited equivalent to the actual retail market value of a kWh. Essentially, net energy metering allows you to “bank” all of the extra energy your solar panels produce in the summer and then use it all winter long—so you’ll never be spending very much with the utility company.
Whether it’s with the goal of cost-savings, self-reliance, or a reduced carbon footprint in mind, some homeowners still end up feeling a little dismayed when they find out that their homes aren’t capable of producing 100% of the energy they consume. However, we like to try and reframe this mindset. Let’s use an example: imagine that you had a well on your property that produced the freshest, cleanest water in the world, all for free—but it only provided about 80% of the water you needed on a regular basis. For the other 20% of you water, you had to buy it from the store or the water company, like everyone else. Your well would still be worth it, right? The vast majority of your water would still be coming from the best source in the world, and you’d be generating it at no cost! That’s what solar energy is like, for homeowners whose systems won’t be producing 100% of their energy needs (which is very common).
If you’re considering solar to save money, start with a free audit to find out whether your home qualifies, and how much energy you’ll be able to produce!