If you’re in charge of keeping track of your household’s budget, there’s a big benefit from going solar beyond just lower electricity bills: more predictable electricity bills. Take a look at a chart from the Department of Energy showing average monthly residential electricity prices in the states Trinity serves over the past 15 years.
As you probably know all too well, electricity prices tend to rise over time, with significantly higher prices today compared to 15 or even 5 years ago in every state. However, that’s not the full story. On a month-to-month basis, these prices may rise in some months and fall in others – which means that, even if you use exactly the same amount of electricity every month, you won’t know what your electricity bill will be. When you add in the unavoidable seasonal variabilities in your power use (for instance, using air conditioning in the summer), factoring your electricity bills into your monthly or yearly household budgeting becomes a real challenge.
Solar can change that equation by substantially reducing your exposure to the monthly and seasonal variability that comes with purchasing power from your utility. Or, more simply – the more you control your own power generation, the more you control your monthly electricity bills. This holds true even if you choose to pay off your solar system over time with financing, since your monthly solar bill will be more or less fixed – especially if you choose to go solar with a loan, which can lock in your solar costs at the same monthly payment for 20 years. Can you imagine convincing your utility to freeze your rates for 20 years?
Now, let’s get into the details of how going solar will affect your monthly bill payments.
Your Electricity Bill With Solar
Fundamentally, solar reduces your electricity bill by reducing the number of kilowatt-hours (kWh) you buy from your utility every month. This takes place via a mechanism called net metering, which causes your electricity meter to essentially run backwards to match the kWh your solar panels feed back into the grid. In essence, you are only billed for the “net” electricity your household uses after accounting for your solar generation.
Your monthly kWh consumed – often called a “generation service charge” or “energy charge” – is the biggest part of your electricity bill, and the primary place where solar cuts those bills. It’s not the only impact, however. You’ll also notice a monthly “delivery service charge,” which is a charge for the use of the utility’s transmission and distribution grid. Since this part of your bill is also calculated on a per-kWh basis, it will also be reduced in proportion to your monthly solar generation.
All that said, it’s important to understand that there are some parts of your bill that won’t be affected by solar. Your bill also includes a (usually very low) monthly “customer charge,” a “service charge,” or something similar, which is a flat monthly fee that covers the basic cost of your connection to the utility. This won’t change when you go solar. Some utilities also levy a demand charge that is correlated to your maximum consumption at any one time – this is unlikely to change, unless you also make significant changes to your electricity use patterns during these peak periods (early evenings after work, in most households).
The Impact of Financing
If you pay for your solar system up front with cash, you can stop reading here – you’ll realize those savings every month without any extra payments or paperwork. However, many customers prefer to use one of our financing options to allow them to pay off their solar investment over time. Here’s how they work:
- Same-As-Cash: You’ll have a payment plan to cover the costs of your solar installation over 6 to 12 months, with zero interest. This is the quickest way to pay off your solar installation, but obviously also requires the biggest payments.
- Solar Loan: With a solar loan, you’ll often pay zero money down but instead have a monthly loan payment due that will be the same every month for the duration of your loan (up to 20 years), so long as you pay down your balance on schedule.
- Power-Purchase Agreement (PPA) or Solar Lease: Solar leases are similar to solar loans, as they allow you to go solar for zero money down and instead pay off your system gradually over time. However, unlike a solar loan, these solar leases often include “escalator” clauses that cause your monthly payments to go up over time as your utility rates rise, reducing your lifetime savings.
While using financing can result in having two monthly bills to pay for your electricity instead of just one, these financing options all allow for automatic, online payments that help minimize the hassle. And, most importantly, they are all structured to ensure that the total monthly costs for your utility electricity bill plus your solar system payments will be less than what you were previously paying for electricity.
Your Solar-Powered Budget
Solar is a major investment in your house and your future, so it’s understandable to focus on the big picture, long-term financial benefits of going solar. When you add up the monthly savings over time, plus the 30% federal tax credit, plus the added value for your home, going solar could save you enough to help pay for a new car, or your child’s education. But if you’re in charge of your household finances, you’re also certain to appreciate how going solar that can help you manage your budget and balance your checkbook every single month.