Make money with solar panels: Fact of fiction?

Saving money is usually the top reason homeowners switch to solar power, and the savings can be substantial. But can home solar panels do more than cut your energy bills and actually turn a profit?

Here's how solar earnings work, how net metering and bill credits affect your bottom line, and why solar panels won’t generate income for you.

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 isn’t really making money at all. It’s reducing another expense in your life: your electric bill.

Solar panels (along with some combination of net metering, battery storage, or shifting your electricity use) can replace some (or all) of the grid electricity you use.

Although you will still have an electric bill with solar panels, many homeowners can recoup the upfront costs of their initial solar investment within a decade. After this solar payback period your solar panels will have paid for themselves in savings. 

(With a solar lease, this calculation often doesn’t apply, since you won’t have an upfront cost. You may be able to save in the first month. And, the estimated solar payback periods given above are just estimates. Actual payback periods will vary by home.)

The financial benefit of home solar panels is about how much you can save in electricity costs, not about generating a new income stream.

How “selling” solar energy to the grid really works

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 sending solar power to the grid, your utility monitors your energy production with a two-way meter that can measure both the electricity you consume and send to the grid.

Under a basic net metering model, you only pay for the difference between what you take from the grid and what you send back, otherwise known as your net consumption.

For example, let’s say you use 1,200 kilowatt-hours (kWh) of electricity in May. But, your solar panels sent 1,100 kWh of solar electricity back to the grid. With 1-to-1 net metering, you would only be charged for 100 kWh of utility-supplied power on your May energy bill.

On the other hand, let’s say you send 1,100 kWh of solar power to the grid, but only take 900 kWh of electricity in the same month. Your excess production (200 kWh) may be rolled over to your next month’s bill as a credit.

In some cases, credits won’t offset electricity at the rate you pay or credit values could vary throughout the day. These policies are generally called net billing.

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.

Excess solar credits continue to roll over month to month, and some electric utilities designate a moment each year in which any accumulated credits are redeemed. Commonly known as a true-up, your true-up bill can be sent one year after your solar panels were first installed, though some utilities set a specific time. Other utilities have no true-up and will roll net metering credits over year to year until you use them or move.

True-up payments are often made at avoided-cost rates, which are much less valuable than net metering credits, and usually come as bill credits, rather than cash transactions.

Under some older billing schemes, customers only pay monthly fees and, if they increase their energy usage over their estimated solar production, their true up bill will go the other way. They pay for electricity their solar system didn’t cover throughout the year. They typically aren’t used of anymore, but if you’re looking to go solar for the first time, you may come across people talking about true up bills over $1,000. This is why.

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.

Find out what solar can save you

Although you may have been hoping to find a solar panel profit calculator, a penny saved is a penny earned, right? As every installation is different, the amount of money you can save over time with solar panels depends on three primary factors: your energy bills, your property’s solar potential, and your state’s and utility’s policies.

While some homeowners do not use enough electricity or have enough viable installation space for solar panels to make financial sense, millions of people in the United States have already decided solar to be a worthwhile investment.

To find out how much you can save, get a free solar savings estimate today.

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 upfront costs. Installing solar panels can cost you thousands of dollars, but can save you more over their lifespan. Payback periods are mostly relevant to purchased systems. Leases can provide savings in the first year with little to no upfront investment.

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 for a purchased system 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.