How Much Can Solar Panels Save?

Homeowners everywhere are starting to discover the financial possibilities that solar power can offer. Initially there are questions about costs. These eventually turn into questions about savings, such as – how much money can solar panels save?

This article is a continuation of a series of posts about the financial aspects of residential solar power.

Let’s delve into the true monetary value of solar power now.

It is understandable that the initial reaction to the cost of a solar panel system is not always positive. The average person does not make multi-thousand dollar-sized purchases that often. This, of course, is the wrong way to look at solar power. It’s not a purchase. It’s an investment that can save the average homeowner many thousands of dollars over years of electricity usage.

So how much can solar panels save? Let’s take a look at an example that can be considered very typical for an average American homeowner over 25 years.

Assumptions –

Monthly electricity usage – 900 kilowatt hours
Energy usage over 25 years – 270,000 kilowatt hours
Utility energy rate – 13 cents/kilowatt hour
Solar power rate – 8 cents/kilowatt hour

Without Solar
Cost over 25 years – 270,000 kwhs * 13 cents/kwh = $35,100.

With Solar
Cost over 25 years – 243,000 kwhs * 8 cents/kWh = $19,440
Remaining utility costs – 27,000 kwhs * 13 cents/kWh = $3,510

In this example, and in the typical solar panel installation, systems are sized to offset no more than about 90 percent of conventional electricity usage. So total savings are approximately $12,000 over 25 years.

Go to the cost of solar page to learn why solar only costs $0.08/kWh.

The preceding example is actually on the conservative side. Solar power savings will in fact be much greater as utilities continue to raise rates as they have historically done over the past few decades. The chart below, from the U.S. Energy Information Administration, shows residential electric rate increases over the past 5 decades.
residential electric rate increases over the past 5 decades
The chart shows that retail residential electricity prices have gone from just over 2 cents per kilowatt hour in the early 1960s to 12 cents per kilowatt hour as of 2010. Many Americans across the country now pay much more than 12 cents per kilowatt hour for their electricity.

It would be speculative to guess how much retail electricity rates will increase in the coming years, but there is every reason to believe that they are going up. Increasingly expensive extraction of fossil fuels and environmental regulatory pressures will keep upward pressure on conventional energy prices.

Homeowners are always looking for information on how to save on electricity. Increasingly, solar power will become one of the best ways to save on electricity. It’s simply the next best thing to consider after looking into taking home energy efficiency measures.

In the coming years, more and more people will look to solar power for a great way to save money on electricity.

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