Solar power is not just an eco-friendly solution; it’s a financially sound decision. But how do you determine the exact savings you can expect from installing solar panels?
Let’s delve deeper into the calculation process, using numbers and examples for clarity.
Factors Influencing Solar Savings
Several factors can impact the amount of savings one can expect from solar panels:
- Location: The geographical location determines the number of peak sun hours, which in turn affects the energy production of solar panels.
- System Size: A larger solar array will naturally yield more energy, leading to more savings.
- Electricity Rates: The cost of electricity in your area will directly influence your potential savings.
- Government Incentives: Tax credits, rebates, and net metering programs can drastically reduce the initial costs of solar panel installation and increase long-term savings.
How to Calculate Your Solar System Savings?
1. Find Out Your Electricity Rate:
Your electricity rate is what you pay for every kilowatt-hour (kWh) of electricity you use.
This rate can be found on your electric bill or by contacting your utility company.
For instance, if your rate is $0.10 per kWh, that means you’re charged 10 cents for every kWh of electricity you use.
Let’s say your bill mentions that you are charged $0.12 per kWh.
2. Calculate How Much Energy You Use Per Month:
Again, check your monthly electric bills.
They should state how many kWh you consumed for that month, and it’ll help you size your solar system properly.
If you’re building a small off grid solar system for your shed, for example, all you have to do is multiply the wattage of each appliance you have by the number of hours you run it, and then add them all.
For example, if you have a 10W lamp that you use 6 hours per day, a 50W fan that you use for 3 hours per day, and a 70W laptop charger that you use 2 hours per day, then the total daily energy consumption is:
10 x 6 + 50 x 3 + 70 x 2 = 350Wh per day, which translates to 10.5kWh per month.
If you don’t know what is your appliance’s operating wattage, this wattage chart can help you.
3. Find the Number of Peak Sun Hours Your Location Receives Per Month:
Peak sun hours are not just the hours the sun is up, but the hours during which solar radiation is strong enough to be harnessed effectively by solar panels.
Calculators like PVwatts from the NREL can help you find the average peak sun hours for your location.
For example, San Diego receives an average of 5 peak sun hours per day. For a month (roughly 30 days), that would be 5 hours/day x 30 days = 150 peak sun hours per month.
4. Calculate How Much Energy Will Your Solar System Produce
First, you need to know the capacity of your solar system, which is often measured in watts or kilowatts.
Multiply your system’s capacity by the number of peak sun hours to estimate its daily production. Then, multiply that by 30 to get a monthly figure.
For example, If you have a 5 kW system in San Diego (with 150 peak sun hours/month): 5 kW x 150 hours = 750 kWh per month.
5. Calculate The Monthly Solar Savings:
Multiply your monthly energy production by your electricity rate.
Using the numbers above, 750 kWh x $0.12 = $90.
So, you’d save roughly $90 on your electricity bill with your solar system.
6. Calculate Solar System Cost After Incentives & Rebates:
Subtract any government incentives, tax credits, and rebates from the initial cost of the system. These incentives can vary by region and change over time, so be sure to check local and federal offers.
If your system costs $10,000 and you get a $2,000 tax credit, your cost after incentives would be $8,000.
7. Calculate the Payback Period
Divide the adjusted solar system cost by your annual savings to get the payback period.
If your adjusted cost is $8,000 and you save $90/month (or $1,080 annually), your payback period is $8,000 ÷ $1,080 = 7.4 years.
8. Calculate the Net Savings Over the System Lifetime:
Solar panels typically have a lifespan of 25-30 years. Multiply your annual savings by 25 (or whatever lifespan you’re estimating), and then subtract your adjusted system cost.
Using a 25-year lifespan: $1,080 x 25 years = $27,000 (total savings over 25 years) $27,000 – $8,000 (adjusted cost) = $19,000 net savings.
Last Words
Calculating solar savings requires a bit of math, but it’s straightforward.
By understanding your consumption, estimating solar production, and factoring in costs and incentives, you can get a clear picture of the financial benefits.
With substantial long-term savings and the added advantage of reducing your carbon footprint, solar power is both an environmentally and financially sound choice.