Can You Make Money With Solar Panels?

Installing solar panels on your home can be a great avenue to saving money. That's the main goal for most homeowners who buy or lease solar.

But can home solar panels do more than save you money? Can they actually make you money? Here’s what you should know.

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 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 some combination of solar panels, net metering, battery storage, and scheduling electricity use, 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. (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.)

Essentially, the financial benefit of home solar panels is more about how much you can save in electricity costs, 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, your utility can monitor your energy production with a two-way meter that can measure both the electricity you consume from and send to the grid.

Under a basic net metering model, you 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.

In some cases, utilities may offer a different variation of net metering policy. Credits won’t offset an entire kilowatt-hour of grid energy 1-to-1 or credit values could vary throughout the day. These distributed generation 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 1 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 used or until you move.

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.

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. These are older schemes closed to new customers, 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, 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.

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 are designed to 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.