Solar Electricity Savings

A solar power system will save you thousands of dollars a year on your energy bill. However, it may take more than a decade for these savings to pay back the cost of installation. The costs and benefits of private solar power can vary depending on how much power you use and how much the sun shines on you. Nevertheless, we can identify the sources of solar electricity savings and expenses over time.

In the short run, you can benefit from the a federal tax credit that will reimburse you for 30% of the installation cost. In the long run, you will save piles of money when you no longer pay large energy bills. Your primary energy costs will be for the (one hopes) very occasional maintenance necessary for the solar panels.

Let’s break down these costs a little further.

Short Term: Installation Cost

Solar power systems do require large expenditures upfront. Linda Pinkham, formerly of Home Power magazine, provides the following estimates for a solar electricity system inter-tied to the primary power grid.

  • $16,000 for a small (2 kW) capacity
  • $40,000 for an intermediate (5 kW) system
  • $80,000 for a gigantic (10 kW) solar electricity powerhouse

These costs are about 20% higher if the system is going to include a reserve battery and 30% higher for total independence from the main electrical grid.

Most contractors who install these power systems will accept a slower form of payment, so homeowners will often not pay all of these costs up front. (The overall cost will presumably increase, but the value of dollars will probably have decreased.)

Short Term: Tax Credit

The federal government offers a substantial solar rebate for solar electricity and solar water heating, as well as for other other forms of renewable energy. Taxpayers can credit themselves 30% of the total cost (materials and labor) of a solar energy system.

For the intermediate system described above, costing $40,000 this is a credit of $12,000. This leaves individual homeowners paying $28,000 for the whole system.

The credit can be claimed on tax returns for the year in which the system went into operation. However, the credit is non-refundable: if you already pay no taxes, you can’t get this money. This program allows you to reduce the taxes that you do pay, but not to receive a refund.

In addition to the big federal refund, you can increase your solar electricity savings by seeking out renewable energy incentives provided by state and and municipal governments. Added together, these breaks can reduce your initial cost by as much as 50%.

Long Term: Energy Costs

The Department of Energy estimates a household’s annual energy costs at around $2200. Over half of this energy goes into temperature control and water heating; most of the rest is used for appliances and electronics.

A large solar power system providing all of a household’s electricity has the power to reduce this bill by $1200 per year.

A total cost of $20,000—assuming an intermediate solar power system and some well-chosen tax rebates—would therefore pay for itself in 17 years.

If you can’t afford to wait 17 years for solar power to be profitable, you can start supplying your home with solar power from the electrical grid at


Maintenance costs do cut against solar electricity savings. However, the cost of upkeep for photovoltaic panels is relatively low. These costs will can vary based on the agreement you make with the contractor who installs your solar panel system; make sure to scrutinize warranty agreements carefully.

Some state governments exempt value created by renewable energy for the purpose of assessing property taxes. This is a form of long-term savings, although it will not actively decrease a homeowner’s taxes.