What is annual solar savings?
Annual solar savings is defined as the total amount that a homeowner can save per year in utilities expenses by installing solar panels, as well as any additional savings gained by the Federal Solar Tax Credit and local or state incentives.
- Energy usage varies depending on the home and location, but most homeowners see an average of $1,500 in savings per year
- Total solar savings is highly dependent on your location and cost of utilities
- Federal solar tax credits are set to expire in 2022
Understanding Annual Solar Savings
Annual Solar Savings is defined as the total amount that a homeowner can save per year in cumulative utilities expenses by installing solar panels on their home. This would include the savings gained by reducing utilities payments, selling power back to the grid, and any federal, state, or local tax credits and incentives that may be available.
Currently, the average annual electricity consumption for a residential home is around 10,000 kilowatt-hours per year, which results in an average electrical bill of around $1,500 at the current average electrical rates of $0.13 per kilowatt-hour of usage.
Assuming that a homeowner installs a 6-kilowatt solar power system, which is typical for most homes, annual solar savings can be estimated to be between $800 for residents in Seattle to $2,480 for residents in Los Angeles.
In addition to the direct savings from installing solar panels, many homeowners will also qualify for a 26% federal solar tax credit that will help to further increase the total savings available to a homeowner. At current rates, a 6kW solar system averages around $15,000, which means that the current federal solar tax credit would be worth an additional $4,000 savings in the first year of ownership.
Assuming that the total cost of a new solar system is $11,000 after the federal tax credit, the total first year return on investment amounts to between 7% and 22% depending on where you live.
Solar Energy – Electrical energy generated by the sun and harnessed for use by solar panels.
Solar Renewable Energy Credit – Solar renewable energy credits allow homeowners to sell their excess energy generated back to the utility company for cash compensation.