Can I Really Save Money With Solar?

There are only two types of people interested in switching to solar energy: those who want to save the planet, and those who want to save money.

It's easy to see why environmentalists dig solar. Solar energy produces no water, air, or noise pollution while it generates electricity. It also decreases your carbon footprint, so you contribute less to the greenhouse gases that further global warming. Not to mention the fact that solar is a renewable, free resource that we'll never run out of.

But even though "going green" is trending right now, it may surprise you to learn that 74% of solar adopters admit that they wouldn't have switched to solar if it wasn't for the financial benefits.

That's right. Solar adopters are in it for the discounts.

Luckily, installing a solar energy system on your property can help you accomplish two big goals: saving money on your electricity bill each month and doing your part to clean up the planet and reduce your carbon footprint.

Today we're going to discuss exactly how much money you can save by switching to solar. You'll learn everything you need to know to decide if solar energy is right for you - and your wallet!

But first, let's talk about why solar energy is becoming so attractive to property owners looking to save money:

What Makes Solar Energy So Popular?

Electricity Bills Keep Rising

A study conducted by the Edison Electric Institute revealed that between 2006 - 2006, electricity prices increased 2.5% every single year.

That percentage is higher than inflation, which only increased 1.99% during each of those years.

Why is electricity getting so expensive?

Because fuel sources such as coal and gas are becoming increasingly more expensive to obtain. This trend shows no signs of stopping, either.

According to the U.S. Energy Information Administration (EIA), there are several factors that affect the price of electricity, such as:

• The cost of fuels like coal, natural gas, etc.
• The operating costs of power plants (maintenance, construction, etc.)
• Transmission and distribution costs to keep the power lines, grids, etc. in working order for customers
• Extreme weather conditions create a demand for electricity (i.e. a/c in a heat wave) and can also damage infrastructure (storms and natural disasters)
• Governmental regulations

In 2014, the average price for electricity by group of customers was:

• Residential: 12.50 cents per kWh
• Commercial: 10.75 cents per kWh
• Industrial: 7.01 cents per kWh
• Transportation: 10.27 cents per kWh

Did you notice that the residential electricity rate is much more expensive than the rates for the other sectors?

When the EIA calculated the cost of electricity in every state during March 2016, they discovered that the average cost per kilowatt hour across the nation is12.58 cents.

Is that number higher or lower than the rate you're currently paying?

To see how your home state compares, check out the average electricity costs in cents per kilowatt hour in each region of the U.S.:

• New England (CT, ME, MA, NH, RI, VT): 19.68
• Mid-Atlantic (NY, NJ, PA): 15.43
• East North Central (IL, IN, MI, OH, WI): 12.94
• West North Central (IA, KS, MN, MO, NE, ND, SD): 11.16
• South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV): 11.72
• East South Central (AL, KY, MS, TN): 10.68
• West South Central (AR, LA, OK, TX): 10.68
• Mountain (AZ, CO, ID, MT, NV, NM, UT, WY): 11.30
• Pacific Contiguous (CA, WA, OR): 15.43
• Pacific Noncontiguous (AK, HI): 15.43

According to this breakdown, there are five regions with electricity rates that are higher than the national average and just as many areas where consumers pay less than the national average.

However, just because your state is listed in one of these less-expensive regions doesn't mean your state's electricity rate isn't higher than the national average.

Take Maryland, for example.

Though the South Atlantic region is charged an average of 11.72 cents per kilowatt hour, residents in Maryland pay an average of 14.36 cents per kilowatt hour - a rate 14% higher than the national average and 23% higher than the regional average.

So don't let a relatively low local cost of electricity lull you into thinking you can't save money with solar. You need to do your homework to see exactly what you're paying for.

For a full list of average prices for electricity by state, check this table of state electricity prices compiled by the EIA for more help.

Newer Homes are Bigger and More Costly to Power

While electricity prices keep rising, the size of our homes also keeps ballooning.

According to the Residential Energy Consumption Survey, homes built during and after the 1990s are 27% larger than homes built in previous decades.

The average square footage for homes built in the 1970s and 1980s was less than 1,800 square feet. It jumped to 2,200 square feet in the 1990s, and to 2,465 square feet in the 2000s.

Homes are not only expanding in area, but ceilings are getting higher as well.

52% of homes built in the 2000s have ceilings that are higher than eight-feet tall. This is a huge leap from the small 17% of homes built in the 1970s with tall ceilings.

While visually appealing from a home's design point-of-view, all of this extra ceiling height makes it harder to keep your house warm in the winter and cool in the summer, meaning that your electricity costs will be higher than a homeowner with less attractive, but lower ceilings.

The average home in the U.S. uses about 1 kilowatt per hour. With 720 hours in 30 days, that's 720 kWhs each month.

Unless you want to cram your family into a tiny home, you'll have to pay more for electricity the larger your home is, or the higher your ceilings are.

Think about this: The average home in the U.S. uses about 1 kilowatt per hour. With 720 hours in 30 days, that's 720 kWhs each month.

As we learned, the average price of one kilowatt of electricity is 12.58 cents. So an average electricity bill at this rate would start out around $91 before factoring in local fees and taxes.

Now, this range is entirely dependent on your type of property, the size of your property, your daily electrical activity, and even your zip code as we just learned.

If your state charges on the high end for electricity, like say Hawaii, your base electricity bill will actually be closer to $172 each month - big difference.

Global Warming: Bad for the Environment, Havoc for Your Electricity Bills

Take a look at this map from the National Climatic Data Center:

Image source:NCDC/NOAA

According to this map, every single state in the country has experienced higher than average temperatures since the 20th century (1900 - 1999). Some states saw temperatures rise one to two degrees, but many saw increases in the two to four-degree temperature range.

Four degrees doesn't seem like that much, but statewide average temperatures are rising. This map from the NOAA National Centers for Environmental Information shows that close to half of the states in the country saw their average temperatures getting warmer:

Image source:EIA.gov

These are the effects of global warming.

See, activities such as driving gasoline-based cars and heating your house with oil or gas produces carbon dioxide emissions. These events leave behind a trail of carbon dioxide emissions, which many refer to as your "carbon footprint."

Carbon is a naturally abundant element that's found in our oceans, soil, plants, and even inside animals and humans. Do you remember the carbon cycle from your grade school science class?

Plants and trees pull carbon dioxide out of the air and use it during photosynthesis to create oxygen for us to breathe. This system was working well for Earth until the Industrial Revolution changed everything. Now we cut down more trees and produce more carbon dioxide faster than those few remaining plants can get rid of the all the carbon dioxide in the air.

All of this carbon dioxide produces greenhouse gases, which " trap heat in the atmosphere". The two biggest greenhouse gases are carbon dioxide (about 81% of greenhouse gases) and methane (about 11%).

These greenhouse gases do exactly what they sound like: they create a warm, muggy environment that forces everyone to run their air conditioning on full blast just to stay comfortable.

While some gases remain in the Earth's atmosphere for just a short time, others can hang out there for thousands of years. This means it will be that much more difficult to clean up the air and reduce our hotter temperatures if we continue doing what we're doing.

According to the EPA's Inventory of U.S. Greenhouse Gas Emissions (2014), sources of greenhouse gas emissions came from:

• 30% - Electricity
• 26% - Transportation
• 21% - Industry
• 12% - Commercial and Residential
• 9% - Agriculture

Keep in mind that greenhouse gases are not localized to where you live. When they're created - like from an industrialized factory in super-polluted China - they mix with the air in our atmosphere and travel across the planet.

So countries that release more carbon dioxide into the air affect everyone no matter where they live because the same concentration of carbon dioxide is present in the atmosphere regardless of where you stand on the planet.

This is why climate change is such a growing, global issue that needs to be a priority of our governments and citizens. If we don't stand up to do our part, we'll be left with hotter temperatures, rising electricity costs, and a rapidly dying planet.

So what can you do to avoid these inevitably high electricity bills?

You've probably heard about how solar energy can "reduce your carbon footprint" and help you save money on your electricity bills, but you may not know enough about it or think it's actually within your financial reach to make the switch.

Let's change that.

How Does Solar Energy Really Work?

If you were asked to picture a home utilizing solar energy, you'd probably imagine a house with large, bulky solar panels attached to the roof, right?

Well, your vision is only partially correct.

"Rooftop solar" is the most common type of residential solar energy. It comes from photovoltaics (PV), which are cells that directly convert light to electricity.

These solar cells will start capturing the sun's rays to create electricity for your home to power all your devices, appliances, and other modern conveniences the second they're installed.

Here's how that works:

PV cells contain electrons and semiconductors that become excited when light photons from the sun's rays hit the solar panel's surface.

The PV cells convert the sun's energy to direct current electricity (DC electricity).

Since alternating current electricity (AC electricity) is what we need for power, a device called an inverter is installed to take your solar-generated DC electricity and transform it into AC electricity.

This electricity will then travel along to the electrical panel in your house just like it would come from the power lines. You won't even notice you're using solar energy when you flip on a light switch or throw your clothes in the laundry machine; everything works the same with solar.

[See How Solar Cells Work With This 3D Interactive]

There is one small downside, though.

Chris Doyle of Dividend Solar mentions that typical solar installations only provide around 75% - 90% of a household's power needs. That's because your solar panels only work to capture energy when the sun's out, which rules them out as a night-time source of energy.

The electric company uses your energy to help power other homes on the grid.

When the sun goes down, you'll have to rely on batteries and energy-storing devices, which can be bulky, cumbersome, and expensive if you want to continue using your solar-generated power.

This adds a very unnecessary hassle to your plan to go solar, which is exactly why most solar adopters never leave the electricity grid.

When you're connected to the electric company's power grid - like your home already is - you'll be able to use their electricity in your home when your solar panels are not producing electricity.

This means you'll always have power when it's dark outside or if it's especially overcast. You'll never be without power and you won't need to worry about dealing with or paying for pricey generators or batteries.

Staying connected to the power grid is literally a win-win situation for your home, but about your wallet?

Saving Money With Solar 101: The Basics of Net-Metering

When you're connected to the power grid, all of your excess solar-generated energy that your home doesn't use gets sent back to the power grid, which is owned and operated by your electric company.

The electric company uses your energy to help power other homes on the grid.

In return, the electric company will credit your account for this energy. It's basically like the electric company is paying you for helping them fulfill their energy obligations to their customers. This is a huge advantage during hours of peak energy usage when electricity is in high demand, which is typically between 2 p.m. and 6. p.m.

But guess what?

Those are the same hours your solar energy panels will be working to give you "free" electricity.

You know how you have an electric meter that measures the number of kilowatt hours you use every month?

When you go solar, your meter will work both ways. It will show how much energy you contributed to the power grid and how much electricity you needed from the electric company.

The process is called net-metering because you only pay for your net electricity use. So the electric company will charge you for what you used, but give you a credit for all the energy you created.

This is how solar adopters can eliminate or dramatically decrease their electricity bills every month. They generate more electricity via solar than they buy from the electric company.

Now that you know how solar energy works let's talk about the numbers.

How Much Money Can I Really Save with Solar?

According to one study conducted in 2014, the actual cost of going solar may be a lot lower than you may think.

After you factor in all of the incentives and rebates - plus the money you'll be saving on electricity every month - going solar could be the best return on any investment you ever make for your home.

Let's take a closer look at the numbers from the study:

The True Cost of Solar Energy Installation

The most expensive part of going solar is the initial installation.

Once you decide on a reputable solar energy company, they'll measure your property to determine the correct number of panels you'll need to generate enough electricity to power your home.

You don't have to pay for anything else after your solar panels are installed - unless you choose to pay for monthly monitoring by your solar provider. They'll be able to remotely diagnose your solar panel's efficiency and monitor your output to make sure everything's running smoothly.

However, since solar panels are virtually maintenance-free, you will rarely encounter any issues. They don't have any moving parts that wear out over time like an air conditioner or washing machine, so they're truly set-and-forget equipment.

Here's the best news: You can install a solar energy system for a net cost of under $10,000 in:

• Massachusetts
• New York
• New Jersey
• Maryland
• Washington, D.C.
• Louisiana

Unsurprisingly, states with more solar incentives - such as Massachusetts and New York - tend to have the most affordable solar installations after you consider all the rebates and credits you can apply towards the cost.

Massachusetts, in particular, is striving to make solar power affordable and within reach for all its citizens. The state hopes to generate 20% of their energy from renewable sources by 2022 - which means the incentives to get you on board are at an all-time high.

If you live in solar-friendly states like these, you'll also be pleasantly surprised by how many benefits you'll encounter during installation, such as waived fees, cashback and rebate offers, and even fast-track permits.

The national average net cost of a solar installation is $17,000.

But you can still get an installation for under $15,000 if you live in:

• Maine
• Delaware
• North Carolina
• Minnesota
• Illinois
• Missouri
• Kansas
• Arizona
• California
• Hawaii

And switching to solar costs under $20,000 in these states:

• Vermont
• New Hampshire
• Connecticut
• Rhode Island
• Pennsylvania
• Ohio
• Michigan
• Indiana
• Kentucky
• Virgina
• Georgia
• Iowa
• Nebraska
• Arkansas
• Oregon
• Idaho
• Utah
• Colorado
• New Mexico
• Texas
• Alaska

If you haven't seen your home state listed yet, don't worry. For just under $25,000, you can make the switch to solar in these states:

• West Virginia
• Tennessee
• South Carolina
• Florida
• Alabama
• Mississippi
• Oklahoma
• North Dakota
• Montana
• Washington
• Nevada

Are you surprised that it costs more to go solar in sunny Florida than it does in snowy Minnesota?

An install in Florida comes in under $25,000, but one in Minnesota costs less than $10,000. What's the difference?

Florida has less than 100 solar-friendly policies and rebates whereas Minnesota has nearly 150. Florida's doing well, but Minnesota's solar ranking is just better, making the net costs for residents cheaper.

So when we speak of "net cost", what we're referring to is total cost of your investment after you deduct all the incentives and rebates you're eligible to apply to your solar installation costs.

It's Like the Government is Paying You to Go Green

It's almost like the U.S. Government is paying you to install solar when you consider all the tax credits, rebates, and incentives they're creating to push citizens to adopt solar energy.

Take the 30% federal solar Investment Tax Credit ( ITC), for example. If you apply that credit to the cost of the national average price for a solar installation ($17,000), you'll be able to deduct $5,100 from the total cost. That brings the price down to $11,900.

And that's just the beginning.

You start the discounts at the top - the federal level - then work your way down to the state level.

For example, California hopes to produce 33% of its total energy from renewable sources by 2020, so there are over 100 state policies and incentives for making the switch to solar that will discount your install even further.

On top of that, individual cities such as San Francisco may tack on an additional $1,000 in incentives for every kWh your solar panels contribute to the grid.

Depending on where you live, these numbers could make switching to solar cost no more than an inexpensive used car.

Except solar won't break down or depreciate - but actually increases in value - the longer you keep it. Sure, that old jalopy may save you money on car insurance, but solar energy will save you money on your electricity bills.

But exactly how much money are we really talking about?

What Will YOUR Monthly Solar Savings Be?

The higher your electricity bill, the larger your savings will be when you switch to solar energy.

Think about it this way: Hawaiians pay the most for electricity because their coal and gas sources have to be shipped all the way out to the islands. The average monthly electricity bill is over $200.

Conversely, a state like Utah has very cheap sources of power, so their average electricity bills are typically under $100 a month.

So solar energy saves Hawaiians almost $100 more than Utah residents, but that's because their kilowatt-hour rates for power are higher.

Check out the average monthly savings for homeowners in these states after switching to solar energy:

1. Hawaii $270/mo.
2. Nevada $145/mo.
3. California $143/mo.
4. Florida $139/mo.
5. Arizona $137/mo.
6. New Mexico $137/mo.
7. New York $130/mo.
8. Connecticut $124/mo.
9. South Carolina $114/mo.
10. Colorado $102/mo.
11. New Hampshire $100/mo.
12. Montana $91/mo.
13. Vermont $90/mo.
14. Georgia $89/mo.
15. Oregon $78/mo.

Keep in mind that some of these states have the highest electricity prices in the nation, but they're able to offset those thanks to the savings solar brings in.

The longer you own and operate your solar panels, the more savings you'll accrue.

The national average for monthly savings after switching to solar is around $84/mo. This may not sound like a lot, but it adds up to saving over $1,000 in just one year!

Solar panels are the kind of investment that get better with time. It's not a reno house you need to flip fast, or a car that depreciates, or even a financial portfolio you need to watch on pins and needles.

The longer you own and operate your solar panels, the more savings you'll accrue.

Let's talk about how that works.

You'll Save More Money the Longer You Keep Your Solar Panels

If you're the type of person who likes to do a lot of research before making a financial investment and then sit back, relax and wait for it to pay off, solar energy is perfect for you.

If you save $100 each month after switching to solar energy, that's $1,200 each year. Let's say you plan on owning your home for the next two decades. That's a savings of at least $24,000.

Keep your solar panels for 30 years and the savings jumps to $36,000 - well over your solar installation cost. You will even earn a profit!

After 20 years, the national average of savings reported by solar energy adopters was $20,080.

But that's only an average. Check out these states that reported savings of over $20,000 in 20 years:

• New Hampshire
• Vermont
• Connecticut
• Rhode Island
• Pennsylvania
• North Carolina
• South Carolina
• Georgia
• Minnesota
• Montana
• Utah
• Colorado
• Texas

In order to save more than $30,000 in 20 years, your solar energy must generate at least $125 in savings every month for 20 years. Think that sounds impossible?

Tell that to the residents in these states when you see how much they saved by going solar for 20 years:

• Nevada $35,000
• California $34,000
• Florida $33,000
• New Mexico $33,000
• Arizona $33,000
• New York $31,000

Live in Hawaii, or planning to move to paradise?

Hawaiian solar adopters can look forward to over $64,000 in savings over 20 years of owning their solar panels. That's certainly enough to cover the cost of solar installation two or three times over!

Speaking of which, let's talk about how long it takes to pay back the costs of your solar installation with your solar-generated savings.

Solar Gives You a Definite Return on Your Investment

If you're saving tons of money every month thanks to solar, your installation will pay for itself in a shorter amount of time.

Using our previous example, let's say a Hawaiian resident paid $10,000 for their solar installation. They save $270 every month, or $3,240 every year they generate more electricity from the sun than they buy from the electric company.

At that rate, they will save $12,960 in only four short years - which is $2,960 over the cost of installation. Talk about a fast return on investment!

Low net installation prices due to incentives and rebates, coupled with higher electricity prices (i.e. more solar savings) make paying off the initial solar investment less daunting than paying off your credit card or student loan debt.

In fact, states where homeowners paid off their solar installation in less than 9 years include:

• New York
• Massachusetts (4 years)
• New Jersey
• Delaware
• Maryland
• Ohio
• Louisiana
• California
• Hawaii (5 years)

Homeowners from these states were able to pay off their installation investment in 10 - 14 years:

• Maine
• New Hampshire
• Connecticut
• Pennsylvania
• North Carolina
• South Carolina
• Georgia
• Minnesota
• Oregon
• Nevada
• Colorado
• Arizona
• New Mexico
• Texas

Solar energy panels start working to save you money immediately after they're installed, but they keep saving you money well into the future, even after they pay for themselves.

Who's Saving the Most Money with Solar Right Now?

It may surprise you to know that the majority of new solar adopters are middle-class Americans.

A recent Center for American Progress (CAP) study pointed out that most of the new solar installations in California, Arizona, and New Jersey (the biggest solar markets) happened in neighborhoods where the average income is between $40,000 - $90,000.

To check on the statistics of solar adopters in new markets - such as New York, Massachusetts, and Maryland - the CAP conducted another study. Researchers learned that almost 70% of new solar installations in Massachusetts - and more than 80% of new solar installations in New York - occurred in Zip codes with middle-class incomes ($40k - 90k).

If you want to break it down even further, the areas that saw the most growth were homes where the median income was:

$40,000 - $50,000 in Arizona* and California

$30,000 - $40,000 in New Jersey

*Arizona's highest number of installations occurred in this average income bracket.

Of course, this information is not that surprising when you think about it.

If the goal of solar energy is to save money, who would benefit the most from the savings?

Middle-class families need the regular monthly savings solar energy provides, and they have the financial means to make it a reality.

Powering your home or business property with solar energy is the perfect way to balance environmentally-friendly energy practices with practical money-saving advances in technology.

Now that you know what other solar adopters around the country are saving every month thanks to their solar panels, it's time to do your homework.

Find out exactly how much you're paying for electricity. Then, check your state's incentives and rebates for going solar.

Start looking up free quotes to give you an idea of how much a standard solar installation is going to cost in your neighborhood. Your potential solar energy provider will even give you an estimate of how much you'll save every month depending on your configuration.

Once you start seeing the savings roll in - and stop dreading the electricity bill's arrival in your mailbox each month - you'll be kicking yourself for waiting so long to make the switch to solar energy.