• With the recent explosion of solar power in the US, hundreds of thousands of homeowners have decided to make the switch to solar panels for powering their homes. One of the primary motivators for this switch is the financial savings that solar power can bring. 

    Another  benefit is that going solar is great for the environment and our nation as a whole; it lowers our energy consumption, and as a result, makes us less dependent on fossil fuels.  

    So, when considering the personal benefit of solar power outside the environmental impact, one has to ask: how can solar power save me money?

  • The Federal Solar Tax Credit

    The first and most immediate savings from solar power is from the 30% Federal Solar Tax Credit.  The federal solar tax credit, also known as the solar investment tax credit (ITC), allows homeowners to deduct 30 percent of their solar installation cost from their federal taxes. The federal solar tax credit can be applied to both residential and commercial installations.

    The Federal Solar Tax Credit was originally enacted with the Energy Policy Act of 2005 and was set to expire in 2007. It was extended several times, and then finally in 2015, a spending bill in Congress extended the Tax Credit through 2021. The plan is to slowly phase out the amount of credit a homeowner can receive. It will phase out as follows:

    2018: 30%

    2019: 30%

    2020: 26%

    2021: 22%

    2022: 0% for residential and 10% for commercial

    -Only commercial systems will be applicable for the tax credit, and it will only be 10% of the overall system cost unless Congress extends it again.

    The great thing about the Federal Solar Tax Credit is that if your tax liability is not large enough in a tax year, it can be rolled over to the next year as long as the tax credit is available. It is also a great benefit for business owners who may owe a lot on their taxes. So, as result of the installation, the government is paying for 30% of your solar power cost savings.  

  • Low or No Electric Bill

    The main financial benefit of solar, and the most obvious reason that people make the switch to solar panels, is that it provides homes with solar power so that they use less electricity from the utility company. By replacing the electricity from the utility at a high price with the cheaper power from solar panels, homeowners can greatly reduce or completely eliminate their electric bill. Even on cloudy days, solar panels will produce power.

    By switching to solar, the savings are determined by a number of factors. The first and most important factor is how much electricity is being used, and how much the electricity typically costs in each area. A typical American household spends around $1,430 a year on electricity, and that's based on the national average. In San Diego, where electricity is 37.63% more expensive than the national average, the opportunity for savings with solar is  more substantial. It’s also important to consider that electricity rates will continue to increase every year. For example, SDGE wants to raise electric rates 11% in 2019 and that’s on top of the 10.9% increase in 2017. So as time goes on, and electricity rates inevitably increase, solar savings will compound.  

    The second factor in determining the savings with solar is how the system is paid for. Paying cash for the solar installation up-front allows the savings to start immediately, and homeowners can typically recoup their investment in around 5-7 years. While most customers cannot afford the upfront payment, many choose this option as it prevents them from having to pay interest on a financed system.

    However, a majority of customers finance their systems. Through a loan, homeowners can pay a fixed monthly payment that is substantially less than their electric bill. In this case, fixed monthly payments are being applied towards owning the solar system, and payments won't increase like they would with an electric bill. When the system is paid off, there will no longer be payments for the solar panels and the yearly utility bill will be minimal.

    Leasing is another great financing option. It’s best for customers who cannot utilize the federal tax credit. Many business owners, real estate investors, and retirees don’t have a tax appetite, so the tax credit is not a benefit. The best thing about a lease is that the utility bill is literally swapped for a monthly lease payment. Where the utility cost will increase, the best lease programs have fixed monthly payments, so homeowners don’t have to worry about utility rate increases either.  


  • How Net Metering Works

    Net Energy Metering (NEM) is a billing process that allows solar homeowners to build up credits with the power company whenever their panels make more power than the house can use. In the middle of the day, for example, solar panels produce excess power when the sun is overhead so the homeowner gets credits. At night, when the solar panels aren’t working, the homeowner uses the credits built up during the day.

    Similarly, days are longer in the summertime so solar panels produce about twice as much power then, compared to the winter. “Net metering” means solar homeowners pay the “net difference” on their power bills – just once a year, at the annual settlement time -- after all their solar credits are applied

    Until recently, charges and credits for residential electricity were based simply on quantity – how much power was used each month. But in the past two years, utility companies were authorized to price their electricity based also on when the power was being used (called time-of-use or “TOU” rates). This fluctuating electricity rate throughout the day and year means that electricity charges -- and also solar credits – tend to be variable as well.

    Fortunately, the highly-trained solar experts at “SunPower by Stellar Solar” are well-versed in all the solar rates being offered by SDG&E and can recommend the rate that will work best for every homeowner. They are also armed with the latest simulation tools that show exactly what the post-solar bill will look like throughout the year and how much savings will quickly accrue.


  • Other Financial Benefits

    Offset Future Energy Expenses

    Many homeowners will install solar if they know their energy consumption is going to increase to offset these future costs. This could be in anticipation of installing a heated pool, adding a new member to their household, building a granny flat, etc. Homeowners will often get more solar than they need installed in the beginning, so when that extra energy is needed they are already set to fully offset it. So if they've been considering a hot tub or heated pool but are worried about the extra energy costs it will bring, going solar is a great way to alleviate that worry, as they will be offsetting it with the power of the Sun.

    Power an Electric Car

    With the recent explosion of electric cars, many homeowners are installing solar to offset the extra energy used to charge the electric car. So, because they are using solar to power their home, and their home to power their car, they are using the solar to actually save money on their gas expenses.  For homeowners who commute, this can lead to some pretty big savings, and at the end of the day, is better for the environment. When getting their solar quote, homeowners should make sure their energy consultant knows they are planning on adding an electric car so they can size the system accordingly.

    Add Value to The Home

    Installing solar can add a ton of value to homes, and can make it more appealing to buyers if the homeowner is planning on selling it at some point. Recently, researchers at the U.S. Department of Energy’s Lawrence Berkley National Laboratory completed the largest study on the effect of solar photovoltaic systems on home values in history. The researchers evaluated around 22,000 home sales, 4,000 of which had PV systems. What they found is that home buyers will pay about $4 per watt of installed PV, which averages out to around a $20,000 value increase per home. 

  • How much can they save?

    So, it’s obvious that solar can save homeowners money in many different ways. While there are many studies on how much the average home can save from going solar, it's pretty hard to create an accurate solar power savings estimator. Ultimately, homeowners can rest assured that going solar, especially in an area like San Diego where electricity is so expensive, is going to save them a ton of money in the long run. 

    At the end of the day, solar is a smart and reliable investment that will undoubtedly save homeowners money as electricity rates inevitably go up. With solar, homeowners no longer have to worry about what the utility is charging, because they will no longer be reliant on them for the majority of their power. Free yourself from the chains of the utility, and take power generation into your own hands.


  • About the Author

    Michael Powers


    Michael is one of the founding partners of Stellar Solar. In 2001, he helped launch The Home Depot’s national solar energy program which is now offering home solar through hundreds of stores in nearly a dozen states. He is a writer and marketing professional with over 30 years’ experience in the fields of energy, market intelligence and leadership training. He currently serves as treasurer and board member of Global Energy Network Institute (GENI), a San Diego-based non-governmental organization that advocates linking renewable energy resources around the world using electricity transmission.