How Much Can I Save by Switching to Solar in 2021?
As solar goes mainstream and the price continues to drop, there is a good chance that you have already thought about switching to solar. There are a few main areas to look into when determining how much money you will save from your solar panel system in 2021.
Things like your estimated energy consumption, the cost of electricity, the type of solar panel system, and its energy production levels, will all influence your savings.
Residential solar panel systems are becoming quite common in many cities and states throughout the country. California, Massachusetts and New York are among the most active states in terms of solar installations and also have several state and local incentives to help minimize the cost for solar projects. On top of these incentives, there is also the 26% federal tax credit that anyone can make use of.
By the end of this post, you will have a clear picture of how much money you can save by switching to solar in 2021.
Electricity Cost And Consumption
To start it off, you should figure out what your average monthly electricity use is and what the average cost for this consumption is.
This can be easily accomplished by looking at a history of your electric bills, but if you do not have access to them at the moment, you can use the national monthly average of 897 kWh. Couple this with the average cost of electricity in 2021 and you have an average monthly bill of $147.5.
With the figure that you come up with, you can now project how much money you would have spent without a solar panel system for future years. Next, let’s look at the cost of a solar panel system.
Cost Of A Solar Panel System
A solar panel system includes several components such as a mounting system, solar inverter, cables, wires, and the solar panel modules themselves. The cost for all of this and the installation of the system varies from state to state, but an easy way to look at these costs is by associating the price to the number of watts (W) installed.
For example, the average price per watt (PPW) in California for a solar panel system is $3.50.
Typical residential solar panel systems that cover all of a household electricity needs are around 5000 watts or 5 kW, so in California, this system may cost you around $17,500. This is before the 26% federal tax credit and any local and state incentives that may available. For some residents in California, they can couple the federal tax credit with a number of other residential solar rebates that are available making the price drop easily below $20,000 and sometimes even below $15,000.
Monthly Savings On Electricity
It is very possible to cover all of your energy needs with a solar panel system of this size. In most cases, the way this works is that any excess solar energy that is produced is fed back into the grid and the owner is awarded energy credits. These credits can be used to redeem the same amount of electricity at a later point in time.
Solar panel owners can save these credits during the summer months and use them during the winter to maximize their annual savings.
With this setup, you can reduce your monthly bill to the absolute minimum, which can be anywhere from $5-$20 depending on your utility company’s minimum payment. This means you will be saving anywhere from 80% to more than 90% of your bill each month.
Your Expected Payback Period
Considering a quality residential solar panel system costs around $15,000 – $20,000 after incentives and rebates, and you will save more than $2000 a year on your electricity bill, the payback period for your solar panel system in 2021 will likely be around 7 to 10 years.
If you want to get an even more accurate projection of your payback period, you should take into account the continuously increasing cost of electricity and other factors, because that will lead to even more savings each month. The real length of time may be even sooner.
Remember, once you’ve reached your PV system’s payback period, you’ll keep on saving for the remainder of its 25+ year lifetime!