If you’re looking to buy or lease a solar energy system, or you've already invested in solar, you may have questions about your solar energy savings. You’re not alone! There are many factors to consider when it comes to solar savings, making it one of the primary sources of homeowner questions. So, let’s break it down.
How do I save money with solar?
The solar panels on your roof generate clean energy for your home. This clean, solar energy offsets your need to source electricity from the grid, thereby reducing your electricity consumption from the grid and the associated costs. Your ability to save money will depend on your total costs relative to your total savings.
What factors impact my solar costs and savings?
To answer this question, we’ll start with the basics, which vary slightly based on how you invest. As a general rule, your electricity savings will be consistent across investment types—the same system for your home will produce the same amount of electricity regardless of how it is financed. What varies most are your costs. We’ll explain some of the differences below.
|LightReach Energy Plan
|Loan Fees & Interest
|Maintenance and Service
|Maintenance and Service
|Tax Credits and Incentives
|Tax Credits and Incentives
Difference 1: Total Purchase or Plan Costs
- With a cash purchase, you pay your investment in full, upfront, without any loan fees or interest payments to consider. This results in the highest upfront costs and lowest total costs.
- With a loan, your investment includes loan fees and interest payments. Costs are spread out across the terms of your loan, resulting in low monthly payments but higher total costs.
- With a LightReach Energy Plan, you pay a low, monthly fee for the installation and usage of solar panels, allowing you to benefit from low monthly payments without the debt. Total costs are often similar to a loan.
Difference 2: Eligibility for Tax Credits and Incentives
- With a cash or loan purchase, you may be eligible for tax credits and incentives, including the 30% Residential Clean Energy Credit (RCEC), that can help you recoup some of your investment costs.
- The RCEC, like many solar tax credits, is designed to incentivize the purchase of residential solar. If you do not own your solar energy system—as with a lease, power purchase agreement, or the LightReach Energy Plan—you are not eligible for the incentives.
Difference 3: Maintenance and Service Costs
- With a cash or loan purchase, you can opt into Palmetto Protect, and pay a low, monthly, or annual fee for system coverage plus discounts on maintenance and service.
- With a LightReach Energy Plan, we own and maintain the panels. All maintenance and service fees are included.
How does this impact my long-term savings?
To see how these factors play out across the 25-year lifespan of a solar energy system, starting at activation, we’ve put together a simple, cost vs. savings analysis for each investment option. Calculations are based on the following assumptions.
- For each option, we’ve used an 8 kW system size.
- The cash and loan models assume that the homeowner is eligible for the 30% Residential Clean Energy Credit, and applies the full value of this credit towards their solar loan in or before month 19.
- The cash and loan models also assume that the homeowner opts into Palmetto Protect Essentials at a total cost of about $2,500 over the 25-year lifetime of their system.
Key takeaway: Total savings are the highest with a cash purchase.
Key takeaway: This model assumes that the homeowner takes 25 years to pay off their loan, so accrues interest along the way. The faster you pay off your loan, the more you will save!
LightReach Energy Plan
Key takeaway: Total savings are achieved the fastest with a LightReach energy plan.
Savings represented are based on median estimated total savings over 25 years for recent Palmetto customers. Your savings may vary.
How are savings numbers calculated?
As with any financial forecast, we use the data available today to project your short-term and long-term savings. While our estimated forecast is both detailed and accurate, it relies on variables that we can’t fully control, notably your electricity usage and rates. Let’s look at each variable individually, including what we can and can’t predict, and any assumptions that are made.
Purchase Price or Plan Costs
Your costs are based on your system size, investment type, and location. With a cash purchase, it’s pretty clear cut—you pay everything upfront so there’s no interest to accrue. With a loan, it’s slightly different. We calculate your savings based on the interest rate and terms of your loan. In both cases, any site improvements such as a roof or wiring upgrade are outlined in your proposal and included in the cost.
With a LightReach Energy Plan, we calculate your costs by multiplying your monthly payment across the 25-year term of your contract, factoring in the rate escalator outlined within.
What we can’t predict:
- New or updated site improvements that lead to changes in price and scope
- Accelerated loan payoff, which may increase your long-term savings
Tax Credits and Incentives
For all cash and loan purchases, your solar proposal assumes that you are eligible for, apply for, and receive the 30% Residential Clean Energy Credit, formerly known as the solar investment tax credit (ITC), based on the purchase price of your solar energy system. If financing your system, the estimate further assumes that you apply your solar credit toward your solar loan in or before month 19. The 30% credit appears as a credit in your calculations, reducing your total cost of investment. The LightReach Energy Plan is not eligible for the 30% Residential Clean Energy Credit, but the credit is used by Palmetto to help lower your monthly payments.
What we can’t predict:
- Homeowners who don’t meet the RCEC eligibility or filing requirements
Solar Energy Production
Based on your home, system size, and panel placement, we can forecast the total amount of energy your solar panels will produce. This is based on a detailed solar mapping of your roof that accounts for factors like location, shade, weather, roof pitch and orientation, etc. It also assumes a 1% annual degradation rate, consistent with solar panel manufacturer warranties.
What we can’t predict:
- Tree growth or new structures that prevent sunlight from reaching your roof
- Unaddressed maintenance or service needs that lead to lapses in production
Electricity Consumption or Usage
We build your estimate based on historical usage data (your electricity bill) multiplied across 25 years. Our model accounts for location- and utility-specific, seasonal variations in electricity costs.
However, electricity consumption can be difficult to forecast across the 25-year lifetime of your solar energy system. Why? Because things change. If, for example, you buy a new electric vehicle, start working at home instead of at an office, introduce new appliances, or replace your gas appliances with electric—your electricity consumption will increase. Likewise, there are changes you can make to decrease your electricity consumption, like re-insulating your home or adding high-efficiency windows and appliances.
Note: Most electricity providers set solar offset limitations that restrict your maximum system size based on your historical usage data. This makes it doubly important that we have a complete understanding of your usage history and needs before we design your solar energy system.
What we can’t predict:
- Significant changes in electricity consumption
- Insufficient or incomplete data due to a recent move, build, or remodel
Electricity Rates and Incentives
Not surprisingly, electricity rates are also difficult to forecast as they tend to change over time. According to data from the U.S. Energy Information Association, residential electricity rates have increased by approximately 30% in the last decade. Based on this information, we assume a 3% annual increase in electricity rates across the 25-year lifespan of your solar energy system.
But there’s more to it than that. Many electricity providers have rate and incentive programs—such as time-of-use rates, net metering, or net billing—that impact savings potential for any solar homeowner. Net metering, for example, credits homeowners (at a rate determined by their electricity provider) for any excess electricity their solar panels produce. Your estimate is built on the rate programs currently available in your area, which may change as new programs or policies are introduced.
What we can’t predict:
- Dramatic changes in the cost of electricity
- Any introduction, removal, or update to rate programs and incentives in your area
Finally, let’s talk savings. Your estimated electricity savings tie together the three variables above: solar energy production, total electricity consumption, and electricity rates and incentives. Here’s how it works:
- We design your solar energy system based on your historical electricity consumption, the solar potential of your roof, and electricity rates in your area.
- In this way, we can carefully map your solar energy production and total electricity consumption to maximize your savings.
- Our calculations account for both solar offset and solar credits. The power that is produced by your solar panels and used in your home offsets your need to source electricity from the grid. The power that is produced by your solar panels and not immediately used in your home flows back to the grid and may earn you credit on your electricity bill.
- The calculations also factor in seasonal variations in production and consumption. Total savings are then averaged across the 12-month, 25-year lifetime of your solar energy system to determine your estimated monthly savings.
- If your monthly savings are less than or equal to your monthly costs, we typically do not recommend installation. In some cases, homeowners may choose to install solar, despite negative savings, for environmental or other reasons.
How do I track my solar energy savings?
There are two ways to look at your solar energy savings: 1) electricity savings and 2) financial savings.
To track your electricity savings, log into your Palmetto account, where you can see the electricity your solar panels produce by day, week, or month. You can use this information to assess your solar energy offset, which is a measure of annual total production to annual total consumption.
If, for example, you produce 9,000 kilowatt-hours (kWh) of electricity over the course of a year and use 10,0000 kWh of electricity, you have an annual solar offset of 9,000 kWh / 10,000 kWh, so 0.9 or 90%. It’s important to take an annual perspective as both production and consumption will vary throughout the year.
However, only some of the solar electricity that is produced by your solar panels is consumed in your home. Any time production exceeds consumption, meaning electricity is being produced by your solar panels and not immediately used in your home, the excess electricity will flow back to the grid and may earn you credit on your electricity bill or stored in a battery, if applicable.
Let’s look at two scenarios, each with a solar offset of 80%.
|Total solar production
|Used in the home
|Total electricity consumption
|Solar electricity consumed
|Grid electricity consumed
- In Scenario 1, all of the solar electricity produced was consumed in the home. In this case, the homeowner only needed to source 200 kWh of electricity from the grid, likely at night when their solar panels were not producing power.
- In Scenario 2, much of the solar electricity produced was not used in the home. This is common in households that are away from home during the day, when solar panels produce the most energy, and thus use most of their electricity in the evening. In this case, the homeowner contributed 600 kWh of excess electricity to the grid and sourced 800 kWh of electricity from the grid to meet their household needs.
This leads us to financial savings, as they likely differ across the two scenarios.
Financial savings are a bit less direct as you have to look at both your solar production, as tracked in your Palmetto account, and cost, or the total impact on your electricity bill.
A simple but imprecise way to assess financial savings is to compare your annual total electricity costs before solar with your annual total electricity costs after. If your electricity consumption and rates are the same in both years, this will give you a rough gauge of your financial savings.
To get more precise, you have to look at the dollar value of each kilowatt-hour of solar electricity produced.
The electricity that is produced by your solar panels and immediately used in your home offsets your need to source electricity from the grid. In this case, the dollar value is the rate at which each kilowatt-hour of electricity would have been charged had it instead been sourced from the grid. If you live in an area with fixed rates, this may be a simple calculation. If you live in an area with tiered, seasonal, or time-of-use rates, you have to know when each kWh of electricity was used to assess its dollar value.
The electricity that is produced by your solar panels and not immediately used in your home flows back to the grid and may earn you credit on your electricity bill. The rate at which each kWh of solar electricity is credited will vary by provider. In some cases, it is credited at the full value, meaning electricity is both charged and credited at the same rate. In many cases, it is credited at a lower rate.
To understand how this plays out, let’s revisit our scenarios from above using a fixed-rate cost of $0.20/kWh of electricity and a net metering credit of 75%, or $0.15/kWh of electricity.
- In Scenario 1, the homeowner would be charged for 200 kWh of electricity at $0.20/kWh and credited for 0 kWh of electricity, resulting in a total bill of $40 plus fees.
- In Scenario 2, the homeowner would be charged for 800 kWh of electricity at $0.20/kWh and credited for 600 kWh of electricity at $0.15/kWh, resulting in a total bill of $70 plus fees.
Why don’t the production numbers in my Palmetto account match my electricity bill?
This is one of the most common questions we receive. Your Palmetto account tracks total production, which includes the solar electricity that is used in your home and any surplus energy that flows to the grid.
Your electricity provider, on the other hand, only sees and tracks the latter. Because your utility meter tracks the flow of electricity into and out of your home, any electricity that is used before it reaches your meter will not register on your bill.
What if my savings don’t match my proposal?
Give it some time.
Your monthly solar savings estimates are calculated as an annual average; actual monthly savings will vary throughout the year. If you just installed solar and are eagerly awaiting your electricity bill, please know that it may take some time to see your savings appear, and it will take at least a year to accurately compare your solar savings estimate with your actual solar savings.
Ask yourself some troubleshooting questions.
Did your electricity consumption increase due to a new electric car, appliance, family member, or work-from-home job? Have you had a lot of cloud cover or snow lately that may decrease performance? Is tree growth or new construction blocking sunlight from your panels? Was your savings estimate based on only 0-2 months in your home? Did your electricity rates change or increase? A yes answer to any of these questions may account for the difference.
Check your performance.
If you’ve given it some time, asked yourself troubleshooting questions, and still notice a difference in savings, it’s time to look at performance. Start by checking your annual production forecast against the annual production in your Palmetto account. If the difference is greater than 5%, you may have panels that need to be repaired or replaced.
Three ways to maximize your savings
1. Manage your electricity consumption.
To maximize your savings, try to schedule high-electricity activities like running the dishwasher or doing the laundry during the day when your solar panels are producing electricity. You can also take steps to reduce your total energy consumption, like turning off lights, unplugging devices when not in use, and replacing old appliances with high-efficiency alternatives.
2. Keep an eye on your account.
While system performance varies throughout the year—due to temperature, cloud cover, day length, and other factors—sudden dips or lapses in performance may indicate a need for repair. In most cases, we can see if a system is down, and work with you to get production restored. However, some errors may not trigger an alert. By tracking your performance in the app, you’ll be able to quickly respond to any dips in performance that may impact your monthly and long-term savings.
3. Pay on time or ahead of schedule.
Pay your loan on time or ahead of schedule, as most homeowners do, and save more money than what’s shown in your estimate. Note: This is only applicable if you opted to finance your solar investment by securing a solar loan.
Still have questions?
Call (855) 339-1831 to connect with Support.