Reduce Electricity Expenses
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How Do Solar Panels Cut Your Electric Bill?
We rely on electricity for countless daily tasks, including cooling our homes, cooking meals, and powering electronic devices such as TVs and smartphones. All of this energy consumption can add up quickly. However, you can reduce your electric bill by installing solar panels, which harness the sun's energy to generate electricity. Let's we will discuss how solar panels can help you reduce your utility bills and provide you with the knowledge you need to begin saving on energy costs.
Reducing Your Electric Bill with Solar Panels
When identifying the three primary problems with electric bills, there are several common issues that can arise:
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Lack of Transparency: Electric bills can sometimes be confusing, lacking clear breakdowns of charges or explanations for various fees and costs. This can make it difficult for consumers to understand exactly what they are paying for.
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Variable Costs: Electric bills often vary from month to month due to changes in usage patterns, seasonality, and rate fluctuations. This variability can make budgeting and planning more challenging for consumers.
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High Rates: Depending on the region, some consumers may face high electric rates due to factors such as lack of competition among providers, reliance on expensive energy sources, or excessive fees and taxes.
These issues can contribute to dissatisfaction and uncertainty when it comes to managing electric bills.
Rising Costs of Electric Bills
The cost of grid energy can often be significantly higher than the cost of solar energy. Typically, electricity prices are measured in cents per kilowatt-hour (kWh). In June 2023, the US Bureau of Labor Statistics reported the national average price for electricity as $0.17 per kWh. However, with the 30% federal solar tax credit, the cost of solar energy is much lower. For instance, the average price of electricity generated by solar systems is typically around $0.08 per kWh. This is less than half the national average for grid electricity and a fraction of the price of grid electricity in states like California. In areas with lower electricity prices such as Washington State, solar energy still offers a cost advantage.
Electricity Prices in 2024:
An Overview of Cost Trends and Factors
Can Solar Panels Reduce Your Electricity Costs?
Switching to solar panels offers more than just savings on your electric bill — it can eliminate it altogether.
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Your electric bill hinges on two main factors:
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Your electricity consumption.
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The utility company's charging rate.
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If you're reliant on grid power, reducing the rate is nearly impossible. So, your only option is to minimize your usage, resorting to extreme measures like adjusting the thermostat and peering through your neighbor's window for entertainment.
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However, with solar panels, you can significantly reduce your electric bill by slashing the rate to approximately 8 cents per kWh — a fraction of what you'd pay with traditional utility services in any major US city.
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Consider transitioning to solar as a means of replacing your monthly electricity bill with payments for solar equipment. Here's a comparison over 20 years: paying 8 cents/kWh for solar versus the national average of 16.6 cents/kWh for grid energy."
Comparing Home Solar to Grid Electricity: Which Power Source Reigns Supreme?
In this instance, the grid user invested $41,360 for 20 years of electricity, whereas the solar owner spent $20,484 for the same duration. When considering all factors, opting for solar panels slashed the total electricity expenses by $20,876 over two decades. Moreover, the potential savings could surpass this figure for several reasons:
Firstly, most solar equipment carries a warranty spanning 25 years, with a lifespan often extending far beyond that period. Secondly, installing solar panels typically enhances the value of your property. Lastly, grid electricity rates tend to rise progressively over time, amplifying the cost-effectiveness of solar energy even further.
Grid Electricity Costs: A Growing Concern
In the last 20 years, the price of grid energy has increased 2.79% per year on average, according to the Bureau of Labor Statistics. But in 2022, the average rate increased 12.6% in one year! Grid electricity rates are already higher than solar, and they will continue to increase over time. By taking these rate hikes into account, solar panels can lower your electric bill even further.
In the big picture, utility rate increases are the rule — not the exception to the rule. In fact, the average price of grid electricity has increased in 31 of the last 40 years. That’s a major shock to the system, and the EIA is projecting another above average rate increase of 3.77% from 2022 to 2023.
Here's how paying for solar versus grid electricity looks over 20 years when accounting for 2.79% rate hikes based on the historical average and 5% rate hikes that are more in line with the average rate of inflation. Meanwhile, going solar fixes your electricity costs for the lifetime of the system. So, if you go solar in 2024 at 8 cents per kWh, you’ll still essentially be paying 8 cents per kWh in 2044 when grid energy is over 28 cents per kWh (based on 2.79% increase per year — it could be more!).
Home Solar Power vs. Traditional Grid Electricity Amid Rate Hikes
When factoring in rate hikes, solar owners stand to save significantly in the long term. With a 2.79% annual increase, savings amount to $33,912.50 over 20 years. Meanwhile, with a 5% annual hike, savings escalate to $47,896.39 over the same period.
Predicting grid electricity prices over the next two decades is uncertain, but it's evident that opting for solar proves to be the more economical choice in the long run.
Reasons Behind Electricity Rate Increases
As renewable energy sources like solar power become more integrated into the grid, utility companies grapple with the significant expenses of maintaining and expanding aging infrastructure. Being among the pioneers in electrification, the United States boasts one of the earliest and, consequently, oldest electrical grids. Utility providers invest substantial sums annually to modernize towers, lines, substations, and transformers, perpetuating the upward trend in electricity delivery costs despite the emergence of more cost-effective generation options.
However, homeowners have a potent tool at their disposal to mitigate rising electricity expenses: solar power systems. With negligible ongoing fuel or maintenance expenses—thanks to the abundant and free energy provided by sunlight—solar installations offer an economically viable alternative. Furthermore, by generating electricity directly at the point of consumption, typically within homes, solar systems bypass the need for costly transmission infrastructure. As the burden of grid maintenance expenses continues to mount, the attractiveness of solar energy for consumers grows proportionately, promising increasingly favorable returns on investment.
Unraveling the Unpredictability of Electric Bills
In the preceding section, we employed a controlled approach, showcasing gradual rate hikes to illustrate the evolution of grid electricity costs. However, the real landscape of grid electricity rates is far from stable. Consider this graph depicting year-over-year fluctuations in electricity prices since 2019, sourced from MishTalk.
Can you believe it? Neither can we. It's utter chaos. But let's cut to the chase: the typical American forked out 47.3% more for grid electricity come July 2022 compared to the same month in 2021. Hardly anyone had that on their radar. And as for forecasting where the next blow of utility rate increases will land? Well, it's like shooting darts in the dark. The map below lays out the surge in utility rates spanning from April 2022 to April 2023 across each state, with New Hampshire peaking at 33% and Louisiana seeing a curious -7% dip.
Harness Solar Power with Confidence
With solar, energy costs become highly predictable. Many homeowners can meet 100% of their energy needs with their solar system, resulting in just a $10-20 minimum service charge from the utility for grid maintenance fees, net metering, and other related costs. If the solar system doesn't cover all their needs, they'll have a fluctuating electric bill throughout the year.
Whether purchased outright or financed, there are no recurring costs for the system or power. Instead, homeowners have a fixed monthly payment, offering stability for budgeting monthly expenses.
Going Solar Power to Reduce Your Electricity Bill
A graphic illustrating the benefits of solar panels:
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Reduced electricity costs: Solar panels set electricity prices lower than grid rates (approximately 8 cents per kWh for solar compared to the national average of 16.6 cents per kWh for grid).
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Protection from rising grid electricity costs.
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Increased home value.
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Decreased carbon emissions.
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Stability in electricity costs.