Home solar panels can save you money, especially when combined with energy efficiency measures. But can you make money or passive income with solar panels? Unfortunately, not really.
Still, the savings you could see with solar can be significant. Here’s how you can save, and why solar won’t work as a side hustle.
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Will Solar Panels Make You Money?
Unless you are planning to buy land and start a solar farm, the easiest way to “make money” with solar panels is to replace another expense in your life: your electric bill. Solar panels can help you save money on electricity costs from your local utility company by significantly reducing the amount of grid power you purchase each month.
With net metering, energy credits, tax credits, incentives, and other utility solar programs, the solar power produced on your property can replace some (or all) of the grid electricity you purchase for 25 years or more.
Although you will still have an electric bill with solar panels to pay grid transmission fees and other charges, many homeowners can recoup the upfront costs of their initial solar investment within a decade. After this “break-even” point (also known as the solar payback period) your solar panels will have “paid for themselves” in offset utility spending, and they can continue harnessing solar power and generating cost-saving, clean, renewable energy for another 10 to 15 years or longer.
Essentially, as “a penny saved is a penny earned,” making money with solar panels as a homeowner is more about how much you can avoid paying for electricity, rather than generating a new income stream.
How “Selling” Solar Energy to the Grid Really Works
If you’d like to make money selling your solar power to the grid, unfortunately, installing a solar system on your home is not a one-way ticket to Profit Town. For most homeowners, you will never actually “sell” your solar to the grid, though you can be credited on your electric bills for the power you produce.
Net metering in the US
If you are exporting solar power to the grid during the day’s sunlight hours, your utility can monitor your energy production with a two-way meter. Unlike a traditional meter that only tracks your property’s electricity consumption, your two-way (or smart) meter can also measure your solar energy generation.
Under a basic net metering model, you will only pay for the difference between your property’s solar energy production and total electricity use, otherwise known as your “net” consumption.
For example, let’s say you and your family use 1,200 kilowatt-hours (kWh) of electricity in May. In the same time period, your solar panels generated 1,100 kWh of solar electricity that was sent into the energy grid. In an area with a 1-to-1 net metering policy, you would only be charged for 100 kWh of utility-supplied power on your May energy bill.
In a separate example, let’s say your panels generate 1,100 kWh of solar power, but you only use 900 kWh of electricity in the same month. Here, your excess production (200 kWh) may be “rolled over” into your next month’s bill at a full or partial value of its original worth.
Whenever your credits are redeemed, the actual dollar amount you will receive for your solar power may depend on when it was produced, the cost of local electricity, and the details of your state’s, city’s, or utility company’s net metering or net billing policy.
See how much you can save by going solar with Palmetto
True-up payments and bill credits
While the structures of utility energy credit systems and net metering policies vary across the country, most follow a similar credit redemption process. Your net metering credits are applied to your monthly bill automatically.
While solar credits continue to roll over month to month, some electric utilities designate a moment in which any accumulated credits are accounted for each year. Commonly known as a “true-up,” your true-up bill can be sent 365 days after your solar panels were first installed, though some utilities set a specific time.
True-up payments are often made at avoided-cost rates, which are much less valuable than net metering credits. Like net metering or net billing credits, true-up payments are also typically completed in the form of utility energy bill reductions, rather than cash transactions.
Solar renewable energy credits (SRECs)
In some places, you can make some money by selling SRECs, certificates that represent the renewable nature of the electricity your solar panels generate. One can be created each time your solar panel system generates 1,000 kilowatt-hours of electricity. Because some utilities need to buy SRECs to meet renewable energy requirements, you can sell them on an SREC market (where available) with the help of an SREC company.
You might be able to lock in a price for SRECs for a period of time or sell them on the SREC market as they’re generated. In Illinois, you can sell 15 years' worth in an upfront sale.
SREC prices have been trending downward in recent years, though the price available to you depends on your region’s market.
Solar panel savings calculator
Although you may have been hoping to find a solar panel profit calculator, saving money is a whole lot like making money, at least in our book. As every installation is different, the amount of money you can save over time with solar panels depends on two primary factors: your energy bills and your property’s solar potential.
To find out how much you can save, use Palmetto’s solar panel savings calculator to calculate the solar potential of your roof.
While some homeowners do not use enough electricity or have enough viable installation space for solar panels to make financial sense, installing a solar power system has already helped hundreds of thousands of people in the United States save money on their long-term energy expenses.
Find Out What Solar Can Save You
So, can you make money from solar panels on your house? No. Not really.
Instead, solar panels can help you save money on your property’s ongoing electricity expenses by generating valuable renewable energy for 25 years or more. So, while not necessarily creating any income, solar panels can help keep more money in your pocket.
See what solar can do for you:
Frequently Asked Questions
What is the solar payback period?
A solar payback period is the time it takes for your savings from going solar to match your costs. Installing solar panels can cost you thousands of dollars, but can save you more over their lifespan.
Will my utility pay for the electricity my solar panels make?
If you live in an area with net metering or net billing, you’ll earn credits on your electricity bill. These can be a significant source of savings, but usually don’t result in direct cash payments.
How much can solar panels save me?
That answer depends on many factors, like the amount you pay for electricity now, how much electricity prices rise in the future, how much you pay for your solar panels, and more. While solar panels can cost thousands of dollars to install, a payback period of 10 years isn’t uncommon. That means they could continue saving electricity for another decade or more, given the expected lifespan of solar panels.
Disclaimer: This content is for educational purposes only. Palmetto does not provide tax, legal, or accounting advice. Please consult your own tax, legal, and accounting advisors.
Andrew GiermakWriter and EditorAndrew joined Palmetto in Charlotte in August 2024. He’s been a writer in journalism, then in business, going back to almost the 20th century. He’s lived in Indiana, Virginia, Pennsylvania, Virginia again, and now North Carolina for the last 12 years. He likes golf. Is he good at it? Not so much.
