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How much money can you save with solar panels?

Solar panels can be a big investment if you need to renewably power your whole home. Of course, since you’re generating your own power, you stand to cut down on your electrical bill. Figuring out whether one cancels out the other is a bit of a challenge, so we’re going to run through the factors you need to consider when doing the math. The complicated part of all of this is that the specific numbers will vary depending on where you live, and what the prices are like at any given time.

Upfront cost

Calculating the cost of your solar panels will vary by installer, but you’re looking at an average of $20,000 for a 10kW system. Be sure to get quotes from multiple local companies before taking the plunge. It’s worth exploring the financing options available for solar panels if the upfront cost is too steep. If you need to take out a loan for your solar panel install, it’s possible to find them at subsidized interest rates.

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There are some installers that will even put the solar panels on your roof for free, provided you buy all of the power generated from them. Under this power-purchasing agreement you might just be swapping out one electrical utility provider for another, but at least you won’t have to worry about maintenance since the panels are owned by the installer. Odds are you’ll get better rates, too.

Alternatively, there are solar leases, where you effectively just rent your solar panels, but you get to keep all the power they generate. Again, you won’t own the panels, which means that the installer will get to claim the tax rebates.

Tax rebates

In addition to reducing the cost of the panels themselves, it’s possible to earn a reduction in your payable taxes by installing solar panels. At the federal level, cngress is providing a tax break of 26% of the cost of any solar array installed in 2022. That tax credit is going down to 22% in 2023. You aren’t just writing off the cost of the panels, either. This can include installation labor fees, mounting equipment, wiring updates, and solar batteries. Make sure to save your receipts in order to benefit from this, and check out your state tax incentives as well. These can often make your solar panels tax-exempt when calculating sales tax or property value.

Rebates, SRECs, PBIs

Though the aforementioned federal investment tax credit is the biggest rebate you’ll get for a solar installation, there are a handful of other incidental repayments that can sweeten the deal. Straight-up cash rebates and grants can knock down the price of an install, but they can be hard to come by since they’re specific to certain regions and utility providers.

Some states offer solar renewable energy certificates to those putting solar power into the grid. These SRECs are, in turn, worth cash to utilities that need to go net-zero due to legislation, but have to make up a carbon deficit. They can do that by investing in your clean energy.

Performance-based incentives, or PBIs, are similar, but solar producers are paid directly for the energy itself. Agreements like this ensure that solar panels aren’t only getting installed, but that they’re being maintained for optimum efficiency. If you’re building out a particularly large solar array, PBIs can be quite lucrative.

LG Solar Panels installed on roof can power a home.

Net metering

One way of speeding up the payback on your solar panels is by selling excess energy back to the grid via net metering. This doesn’t create an actual cash payout unless you’re somewhere with a feed-in tariff scheme, but rather applies a credit to your electrical bills. This way, if you don’t use a lot of your power over the summer and generate a significant surplus, you can earn a billing credit that carries over into the fall or winter, provided the utility allows rollover of your credit. This would reduce your electrical costs during the cloudier months when your solar panels aren’t able to capture as much power. Net metering is quite popular across the U.S., so odds are good that you’ll be able to tap into this resource.

Utility fees for solar hookups

Unfortunately, you may still get dinged for demand charges from a utility. These are fees imposed just to keep you connected to the grid, regardless of whether you use power from it at all. Many building codes require a backup in case a solar system fails. Other utilities argue that having fewer people on the grid increases rates across the board since they can’t sell at high enough of a scale. Additional fees help the make up that difference so electrical rates for all customers can stay lower, in theory.

The legitimacy of those arguments is open to debate, but many solar power evangelists see these as cynical means of pushing back on the solar trend that’s threatening the bottom line of entrenched energy utilities shackled to dirty power.

Existing costs

Now that you’ve got a sense of the incentives available to take the sting out of the up-ront cost and how ongoing operation can be kind to your wallet, it’s just a matter of looking at your existing energy usage and seeing how it all stacks up.

Overall, solar panels can save you enough to negate your entire electrical bill, given you have enough panels. Over time, these savings mean your solar panels can basically pay for themselves. That might take five or 10 years, but in general, solar panels are a safe and smart investment. Check out this solar calculator to figure out how much money you can save at your address with all of the latest rebates and incentives applied.

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