The Simple Math Behind Saving Big On Solar

The Simple Math Behind Saving Big On Solar

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Solar Payoff: It’s Simpler Than it Seems

Let’s face the facts: we all need electricity.  It’s a necessity that we pay for every month.  The idea here is to pay off your solar system with what you would normally spend on your utility bill.  Month after month and year after year you’re spending money on power with no end in site.  Why not spend that money on a solar system instead with the goal in mind to never pay for power ever again!

You’ve probably heard talking points like payoff period, ROI and many other money-saving terms when it comes to buying solar.  The payoff period is how long it takes to pay off the cost of your solar system with the money you would have spent on your utility bill.  The money you save on your utility bill over X amount of years will play a key role in figuring out your payoff period, so knowing how many years that will take could be the deciding factor for a lot of people looking to convert to solar. Once the payoff period has been reached, every cent saved afterwards is pure ROI – return on investment.

The Basic Formula

To figure out when your solar power system will begin to pay for itself, there are a few things you must consider:

  • Gross cost is the sum of your solar system and additional contractor work.  This includes components like Solar Panels, Racking, Charge Controller, Inverter, Battery Bank, etc. This is the “upfront” price.  (Note: Always talk with a Solar Technician before building your system.  They’ll be able to help you with designing a highly efficient solar system tailored for your location.)  Hiring someone to help with part of the install is totally fine and often recommended when it comes to hooking up some of the electrical components to your house.
  • Tax incentives and rebates can save you money once you have installed your solar power system. These will save you a significant amount on the back-end.  You can cash in on these incentives at the federal, state and local levels.  That’s an opportunity to 3X your savings.  Now, combine that with the HUGE discount you get with a DIY solar system, and watch your path to savings quickly accelerate!
    1. 30% of the cost of your Solar Electric System and installation can be deducted from your federal tax bill.
    2. Selected states have their own additional incentives.
    3. Regional or local districts can also have additional incentives.  Be sure to do a quick Google search to find out.
    4. The DSIRE database shows both state and local incentive programs. Utility providers will have info on their website if they offer an incentive. For example, Google: “PG&E solar incentives,” or whoever your utility company is.
  • Your monthly power usage can be found in your monthly utility power bill. Ideally, you’re going to want to enter that into our solar power cost calculator.   This should help you to figure out what kind of solar power system you’ll need to power your home.   If you don’t have your monthly power usage, you can select the option to use your average monthly utility cost.
  • Average electricity generation: Under Net Metering, power produced by a Grid-Tied PV system is sent into the household load panel, where it powers appliances. Any excess power feeds into the grid, turning the utility meter backwards and applying a credit towards your bill for every kWh generated.  The utility will take a look at your usage, typically once annually, to determine if you over-produced or under-produced. If you under-produced, they send a bill. If you over-produced they offer to roll over credit to next year or pay you for the credit. But they only pay a small amount for extra power — for example, if you buy power at $.12/kWh, they may only pay $.06/kWh.  With Off-Grid Systems the approach is different.  Off-Grid Systems are eliminating the dependence on the utility grid and going completely independent.  Basically, you become your own power plant.  Off-Grid Systems require a Battery Bank to store energy for night time use and when the sun isn’t as efficient. We also recommend a Backup Generator for recharging during long periods of overcast weather and as a backup power source. These are additional costs that you must consider when using an Off-Grid Solar System, and therefore a longer wait until it’s paid off.  Usually, the goal of an Off-Grid system isn’t directly tied to long-term payback.  Normally people go Off-Grid because there is no utility power source close enough to power their home and it’s much cheaper to use solar than to run cables from the grid.
  • Additional Cost:  Before you get your Solar System, you’re going to need to get a solar permit.  Getting a permit is often accompanied by some light weight fees that your local authorities will add on.  But, there’s good news.  We have a free Downloadable Solar Permitting Cheat Sheet that is a great asset for anyone trying to save time with getting their permit.  Time is money, so considered this a way to off-set any permitting fees.

How do you equate an accurate payback timeline so that you can mark on your calendar the day you don’t have to pay for power anymore? Simple! We’ll show you:

Easy Math, Big Savings

Now that we have all the components, we can begin to see how long it will take pay off your solar system investment. let’s run an example:

A typical equation might look something like this: 12,900-4,370 = 7,530 / 1,440 = 5.3 years till solar system is paid and you’ll never pay for power again.

Based on 1,000 kWh per month usage, package #1890914, price of $.12/kWh for power.

Costs

  • Exp: DIY Solar System $11,000
  • Exp: Electrician costs: $1500
  • Exp: Permit Costs $300

Total Expenses: $12,900


Savings

  • Save: 30% Federal tax rebate $3870 (12,900 x 0.30)
  • Save: State and Local Level incentives $1500 (estimated additional state & local incentives)

Total Upfront Savings: $5,370

Annual Utility Savings $1440/yr ($.12 x 1,000 x 12)


Total Expenses (minus) Total Upfront Savings (divided) Yearly Savings = Payoff Period In Years

or based on our example: 12,900-5,370 = 7,530 / 1,440 = 5.3 years

If you’ve ever considered solar, you should grab our free Downloadable Solar Permitting Cheat Sheet.  It can save you hours of time when you’re ready to invest in solar.

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2 Replies to “The Simple Math Behind Saving Big On Solar”

  1. This article is well written, but each state and every electrical utility offers different incentives. These incentives change based on volume of installations. Once these utility programs are filled with customer applications, they are done. I have been selling solar for 6 years now, in 10 different states. I know the process very very well. I can provide real numbers, a design and show all of these incentives based on a customer’s home over the phone. I wish solar was as easy as this article represents. In reality, every home is different, everyone uses electricity differently and everyone has similar yet different end goals. The information out there is vast, but it really comes down to your home and how your roof can work for you.

    1. Absolutely, and since there’s so much information out there, we wanted to provide a jumping off point for how people can begin calculating how much it’s going to cost. It’s one of our most commonly asked question – how much will solar cost me? And there is really no blanket answer for everyone, it depends on a lot of variables. Of course, when folks call us we can help them get that exact information, but a lot of people like to do a little reading first before ringing up their solar company of choice. The more information is out there, the better.

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