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Calculating How Much a Solar System Could Save You

One of the big draws of a solar system, besides the ability to save the environment, is the ability to save money on your electricity bill. However, the savings can vary based on the size of your system and its ability to generate power as well as solar costs in your neighborhood, and some of the savings don’t show up immediately (depending on how you finance your solar panels). It’s important to understand how to calculate savings so you can get the ideal size and know exactly when your break-even point will be.

Step 1: Calculate your total energy usage

The first data point you need to figure out how much you will save is how much energy you are using. You can calculate this by looking at your monthly energy bills over the past year. Look at a full year so you can figure out energy usage on average. It can be different based on the season—for example, you might use a lot of electricity in the summer when you run your AC, and your electric bill would be lower in the winter when you're using a gas furnace.

Look at your kilowatt-hour (kWh) usage on average, and that will give you an idea of how big a solar panel array you need to generate enough energy for your home. Note your highest energy usage in a month to be sure that you get a system that can handle your peak energy usage.

Step 2: Figure out your local cost for electricity

Electricity rates vary by state and even by some local areas, so as you calculate energy costs you will need to know your total rates. Multiply the per-kilowatt-hour cost locally by your total monthly usage to get average energy costs.

Step 3: Calculate your up-front costs or monthly financed costs

If you are paying for the panels, calculate the up-front cost to pay cash for your panels, or if you are financing them through a bank or the solar company, determine your monthly payment on the loan. Be sure to subtract out any federal or state incentives for your panels from the cost.

Step 4: Calculate a payback period

If you are paying up-front for your panels, divide the cost by your monthly energy costs from Step 2 above to determine your payback period in total months. This is how long it will take you to recoup the cost of your solar panels with your monthly energy savings.

For example: If it costs $20,000 for your panels and you get $5,000 in tax incentives, your total cost is $15,000 up front. If you are saving $1,000 a month on your energy bills, it will take you 15 months to recoup the costs. Starting in month 16, you are getting free solar energy.

If you’re leasing the panels, subtract the monthly cost of your loan from your energy savings to get your short-term energy savings. Once you pay off the loan, you get free energy.

For example, if your lease payment is $500/month and you’re saving $1,000 you get $500 in month energy savings for 3 years that you finance your loan. Once you pay off the lease, your energy is free.

Ready to Save?

Contact PRVL Energy today to start saving with a solar array today.