Do You Pay Electric Bill With Solar Panels?

Installing solar panels on your home can significantly reduce your electricity bills. However, it’s a common misconception that solar panels eliminate electric bills entirely. The reality is that most homeowners will continue to receive an electric bill after going solar but their bills will be much lower. In this article, we’ll explain how billing works with solar panels and the key factors that determine how much you’ll save.

How Solar Panel Billing Works

When you install solar panels, you’ll continue to remain connected to the electric grid. This allows you to draw power when your solar panels aren’t producing enough energy, such as at night or on cloudy days. The utility company will install a bi-directional meter that tracks both the electricity consumed from the grid and excess energy fed back into the grid.

During the day when your solar panels are generating more energy than you need the excess electricity is pushed back into the grid. This excess generation is tracked as “credits” by your utility company. At night or during periods of low solar production you’ll draw power from the grid as needed. Your utility company will calculate the net difference between credits and consumption at the end of each billing cycle.

Many states offer a billing mechanism called net metering, which credits solar customers for excess generation at the full retail electricity rate. This helps offset the cost of nighttime and wintertime usage. Depending on your specific utility company and rate plan, you may receive net metering credits monthly or annually.

Why You’ll Still Have a Bill

There are several reasons why most solar customers continue to receive an electric bill

• Fixed charges – Most utility companies charge fixed monthly fees to maintain the electric grid infrastructure. These fees apply to all customers regardless of how much energy they consume.

• Non-bypassable charges – Some states require additional charges to fund public policy programs. These non-bypassable charges cannot be avoided even with solar panels.

• Nighttime usage – Solar panels only produce energy during daylight hours. You’ll continue to draw power from the grid at night to power lights, appliances, electronics, etc.

• Underproduction – During periods of extended cloud cover, your solar system may not generate enough energy to power your home. You’ll need to pull electricity from the grid to make up any shortfalls.

• System sizing – If your solar panel system wasn’t sized properly to match your energy usage, you may end up needing supplemental power from the grid year-round.

• Net metering limitations – Some states impose caps or limitations on the amount of net metering credits. Once you hit the cap, you may need to pay the utility company for additional usage.

How Much You’ll Save

While most solar customers will continue to get a utility bill, going solar often reduces electric bills by 50-90%. The exact savings depends on several factors:

• Solar panel system size – Systems designed to offset close to 100% of your electricity use will provide greater savings compared to undersized systems.

• Electricity rates – The higher your utility rates, the greater the savings from replacing grid power with solar. Typical savings range from 15¢/kWh in low-cost states to over 30¢/kWh in high-cost states.

• Net metering policy – States with full retail rate net metering provide greater bill savings than states with lower compensation rates for excess solar generation.

• Electricity usage – Homes with high energy use will see greater reductions in their electric bills with solar panels. Savings increase as you offset more of your consumption with solar energy.

• Sunlight availability – Solar systems in sunnier locations will produce more energy and higher savings. Panel tilt, orientation, and shading also impact production.

• Financing – Purchasing solar panels with cash or low-interest financing options maximizes your savings compared to high-interest loans.

With optimal conditions, it’s possible to reduce your electric bill by up to 100%. This is most feasible for energy-efficient homes in sunnier states with high electricity rates and strong net metering policies. More typical savings range from 50-80% nationally.

Strategies to Maximize Savings

Here are some tips to maximize energy bill savings with solar panels:

• Size your system properly – Work with solar professionals to size your system to offset close to 100% of your annual electricity usage. Oversizing slightly accounts for future energy increases.

• Install solar batteries – Adding battery storage allows you to use free solar energy at night instead of drawing from the grid.

• Shift usage – Use large appliances like dishwashers, washing machines, and EV chargers during sunny hours to maximize use of solar power.

• Reduce energy waste – Replace incandescent lights with LEDs, upgrade to Energy Star appliances, and improve home insulation to lower energy consumption.

• Monitor production – Use monitoring software to track system performance and quickly identify any solar production issues.

• Go off-grid – Completely disconnecting from the grid eliminates all utility bills. This option requires robust battery storage and an oversized solar system.

The Bottom Line

While solar panels will not completely eliminate your electric bill in most cases, they can still provide dramatic utility bill savings. With optimal system sizing and proper monitoring, many solar customers are able to reduce their electric bills by 80% or more. And as solar panel efficiency improves and electricity rates rise over time, solar energy will become an increasingly cost-effective way to power your home.