How Much Money Can You Save With Solar Panels?

Posted by Solar Expert on February 24, 2020

This is by far the most common question we get here at DFW Solar Electric. It is a great question, and like all great questions, not so easy to answer.  But read on, and hopefully at the end you'll know enough about the topic to be dangerous.

There are quite a few factors that go into the answer, but usually the most important factors fall into the following five categories:

Category 1 - What Does Your Roof Look Like?

In a perfect world, every residential solar panel installation would occur on a brand new, South-facing pitched roof made from asphalt shingles, and it would have 1,000 square feet of unshaded, uninterrupted space to put the panels on. If only....

The amount of electricity produced by a given solar panel is determined mainly by the direction the panel is facing, the tilt of the panel, shading, and local weather patterns. Since we get lots of sun here in Dallas/Fort Worth, we don't need to worry so much about the weather, so that just leaves the direction of the panel, the tilt, and the shading. The best production comes from unshaded roofs that are facing within 20 degrees of due South (so, an azimuth of 170 to 210 degrees), and have a tilt of 25 degrees or more. But don't get us wrong: West facing roofs and East facing roofs will save money, and so will roofs with a tilt less than 25 degrees - they just won't save as much. Ditto for roofs with small amounts of shading.  

The size of the system is a critical factor in determining how much you can save with solar panels. Assuming the panels are relatively unshaded and facing a favorable direction, the more panels there are, the higher the energy production. Generally, if you have at least 500 square feet of solar-friendly roof space, your savings will be pretty good, and the more square footage you have, the greater the electric bill savings.

One potential saving grace: even if your roof isn't good for solar, if you have some available land, that will work just as well (and in some cases, even better) in terms of energy production.

Category 2 - What Does Your Electric Bill Look Like?

Without overstating the obvious, the larger your electric bill, the more solar panels you can use to offset your bill, and the more you can save with solar panels (roof characteristics permitting, of course).  While there are likely some small monthly fees, your utility bill is mostly determined based on how many kilowatt hours of electricity you use, and the electric rate you are charged for each kilowatt hour. So, how much you can save with solar panels is determined by how many kilowatt hours of electricity that you use (which can be produced by the solar panels instead of purchased from the utility), multiplied by the kilowatt hour rate charged by the utility.  For example, if your solar panels can produce 10,000 kilowatt hours of electricity in a year, and you are charged 12 cents per kilowatt hour by the utility, you would save 10,000 kWh * $0.12 = $1,200 per year.

Category 3 - What Incentives Are Available In Your Area?

Federal income tax incentives are available for everyone who pays Federal income taxes. But be aware, you can only take advantage of the credit if you actually pay income taxes. IRS rules allow homeowners to take a tax credit based on the total cost of the solar installation, net of any utility incentives received. In 2019, the credit was equal to 30% of the total cost, and in 2020 the credit dropped to 26% of the total cost. Absent any change in the law, the credit will drop again in 2021 - to 22% of the total cost. Note that you can't take the credit until the tax year in which the system is completely installed and turned on, regardless of whether you pay your installer for some or all of the system before the end of the tax year.

Some utilities in the Dallas/Fort Worth area provide incentives to customers for installation of solar panel systems. The amounts vary, and are typically only available for short periods of time each year because demand for the programs is high and there are limited budgets - so it is first come, first served. These incentives can be quite large - up to a third of the cost of system in some cases, so make sure you check your utility's website for more information (or call us - we work with all the local utilities and can give you the most recent scoop on the programs).

Category 4 - Are You Paying Cash, or Taking Out a Loan?

This is a pretty important question. If you are paying cash, you will start saving money based on the full production of the solar panels immediately after your system is installed. If you are planning on taking out a loan, you will fairly quickly get the savings from your Federal tax credit (which is equal to 26% or 22% of the system cost, depending on the year installed), which will give you a lot of savings quickly. But after that initial savings, the monthly payments to the lender will likely eat up much or all of the savings for the first few years until the normal inflation from your utility rate increases enough that the electricity savings are greater than the loan payments. Of course, once your loan is paid off, you will be saving quite a bit more. One final point on the savings: whether you are buying the system via cash or loan, don't forget that the system itself will increase the value of your property, so keep in mind that much of the purchase price of the system will come back to you if you sell your home - and you will have saved money on your electricity during the entire time the system was in place.

So How Much Money Can you Save With Solar Panels?

We know that's a lot of information, and somewhat confusing to boot, so we'll summarize as best we can based on our own experiences over the past seven years installing solar panels in the Dallas/Fort Worth area.

Our average residential solar panel installation is 7.5 kilowatts in size (23-25 panels). A system that size with really good roof characteristics will produce about 11,400 kWh's of electricity per year, and a system that size with decent roof characteristics will produce about 10,000 kWh's per year. If we assume an electric rate of $0.12 per kWh, then we would expect an average system to save from $1,200 to $1,368 per year on electric bills.

If you were hoping to save more, don't despair! We've installed plenty of systems that save lots more than that. It all depends on your roof, and in some cases, your land. Call or email us today, and we'll perform a free, no-obligation assessment of your property to see how much you can save by going solar. We are a local solar panel installation company, we have hundreds of solar installations under our belt, and odds are, we have a solar energy solution that is right for you.

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