Annual solar savings vs. monthly: Why you should take the longer view

There are plenty of good reasons to go solar, but if you’re like most people, your solar panels are there for one reason: to save you money.

Bad solar deals can result in high costs and little savings. But even good solar deals can look like bad ones over short periods of time. In months of low solar production, solar panels can look like they’re underdelivering, even if the system will deliver savings overall over its lifetime. Understanding solar’s seasonality can go along way to setting expectations in the right place, and saving yourself some stress in the shorter days of winter.  

Seasonal solar savings: changes throughout the year

It’s natural to think of savings in monthly increments — that’s how we pay most of our bills, after all. But, solar energy production shifts with the available sunlight: Longer days and fewer clouds? More clean electricity generated from your roof. Shorter, cloudier days? Less. 

Spring and summer: building a credit bank 

During the long days of June and July, your system is likely producing at its highest levels for the year. In many areas, any excess electricity earns you bill credits when it’s sent back to the grid, possibly building a bank you can pull from in the fall and winter. Your monthly bill might be the bare minimum (for example, just a connection fee), or even zero. 

(It’s important to remember (and understand before you go solar) that state and local policies can significantly affect solar savings.)

Fall and winter: use credits to offset lower production

As the sun sits lower in the sky and winter weather moves in, production naturally dips. Meanwhile, your energy usage might actually spike if you use certain types of electric heating or spend more time indoors and at home. In areas where you can build a bank of bill credits, you can offset your bill with them through the winter. If you haven’t had a summer to build a bank of credits, your bill might be higher than expected. Seeing a higher utility bill in January can be jarring, but it doesn’t mean your panels aren’t working.

Why you need an annual view

Focusing on solar savings over a full 12-month cycle is the only way to get an accurate return on investment (ROI). Here’s why the annual perspective matters.

• Net metering balance: If your utility provider offers net metering, those credits you can bank in the summer offset lower production in the winter. You’re essentially using the grid as a giant battery.
• Averaging out the weather: One rainy March doesn't define your system's performance. Annual data smooths out the anomalies of an unusually cloudy month or a particularly harsh winter.
• Match performance with the design: Most solar systems are designed with annual production and offset in mind. Annual performance is the most meaningful standard to judge a solar system against.

How to calculate your true solar savings

To see the real impact on your wallet, stop looking at your monthly statement in isolation. Instead, try this.

1. Total your annual spend: Add up your electricity costs for the last 12 months.
2. Compare to pre-solar totals: Compare that number to what you paid in the year before you went solar, adjusting for any major rate hikes from your utility company and any major new electricity use at your home (like a new electric vehicle or hot tub).
3. Factor in the credits: Look at your banked credits at the end of your utility's true-up period.

This year-long comparison will get you closer to your true savings. There will still be some variation due to weather and changes in your energy consumption, but the long view will give you the more complete picture.

Annual savings and solar leases

This seasonal cycle can be even more pronounced when you lease your solar panels. Because your lease payment stays the same throughout the year (it may increase year to year), your total electricity cost has a higher floor (e.g. if your lease payment is $75, you won’t ever have a total electricity cost (lease bill + utility bill) less than $75). That can make winter months feel even worse, since your utility bill will be at its highest and your lease payment will stay the same.

Of course, a bad solar deal, whether leased or purchased, may deliver few or no savings at all. The best way to avoid one is to educate yourself and get multiple quotes.

Still, by shifting your mindset from "What did I save this month?" to "What did I save this year?" you’ll have a much clearer — and potentially much more satisfying — understanding of your clean energy investment.

Don't let a cloudy December get you down. The sun always comes back, and factoring in those sunny seasons can make the picture look a lot different.

If you’re considering solar, consider getting a free quote and solar savings estimate today.

Annual solar savings frequently asked questions

Why is it important to look at annual savings?

Solar production and any associated energy bill savings can fluctuate throughout the year. Annual production and savings are a better measure of a solar system’s performance than any one month.

Do solar panels always save you money?

Some homes may be unsuitable for solar and an overpriced system may never recoup its cost or save more than its lease payment. 

Will I save money with solar panels?

How much a solar panel system can save you depends on a number of factors: how much your electricity bill is to start, how much sunlight your solar panels get, how your utility structures the rate, whether it offers net metering or net billing, and much more. Talk with a trusted solar installer to get a clear understanding of your potential to save.

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.