How Much Money Does Solar Actually Save? Understanding the Long-Term Value of Solar Energy Understanding the Cost of Solar Energy One of the most common questions we hear from homeowners is, "How much money will solar really save me?" The answer becomes clear when looking at the long-term value of solar over the 30 to [...]

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How Much Money Does Solar Actually Save? Understanding the Long-Term Value of Solar Energy

Understanding the Cost of Solar Energy

One of the most common questions we hear from homeowners is, “How much money will solar really save me?” The answer becomes clear when looking at the long-term value of solar over the 30 to 40 year lifespan of a system, against what you would expect to pay for power over that same 30 to 40 year span.

While the upfront investment in solar may seem significant at first, the cost per kilowatt- hour (kWh) of solar energy is much lower than what your power company charges.

When calculating the long-term savings of solar energy, it’s essential to understand the concept of levelized cost of energy (LCOE). This is the total cost of your solar system divided by the total energy it produces over its lifetime. Essentially, LCOE is the average cost per kilowatt-hour of energy generated by your solar system.

Your solar setup’s costs of kWh can be compared to current costs per kWh of energy in your area, but energy costs always increase over the long term due to inflation. This is why going solar is basically locking in your energy costs for the next 30 to 40 years.

How to Calculate Solar’s LCOE:

Upfront Costs: The total cost of your solar system includes the price of the panels,
inverter, installation, permits, and any other related expenses. For example, let’s
say your solar system costs $37,000 before any rebates and incentives.
Lifetime Energy Production: Solar panels typically last 30 to 40 years, with the
system producing energy throughout its lifetime. If your system generates an
average of 13,000 kWh per year, and the system lasts for 35 years, it will produce
455,000 kWh over its lifetime (13,000 kWh/year × 35 years).
LCOE Calculation: To find the levelized cost of energy, divide the total cost of the
system by the total energy production. Using our example, the LCOE would be:

$37,000 ÷ 455,000 kWh = $0.081 per kWh
In this scenario, your solar energy costs around 8.1 cents per kWh over the lifetime of the
system. This means that even 25-30 years from now when everyone else’s power costs

have gone up, you still will be covered by solar and effectively “locked in” at that 8.1 cents
per kWh cost of your usage.

Comparing Solar Energy Costs to Utility Rates

Let’s use Ontario as an example. If you use energy evenly throughout the day on their “Time-of-Use” rate plan the average cost is about 12 cents per kWh. Their other billing plans (ULO and Tiered) also have similar average costs of about 10-12 cents per kWh. This may be even more or less based on where you live in Canada and what time of day you use power, but for most of us the average cost is between 9 and 12 cents per kWh.

Over time, electricity prices tend to rise due to inflation, demand, and infrastructure costs, while the cost of your solar system will be stable since you locked in those costs – as described earlier. If you factor in a quite modest 3-5% increase in power yearly you can definitely see the savings in solar. Some years the increase may be less, and in some there may be huge jumps in power costs, like when Ontario raised rates by 20% for the year 2024 that we wrote about in our blog.

Going back to our above example, if you invested in that $37,000 system you would be saving money immediately by eliminating that power bill. Most solar system’s project to return their value to you in 7-15 years, which is ultimately determined by how much you pay for power and how much power rates increase. After the solar install has returned its value, that means pure savings for you.

Any government programs that you can secure by going solar also sweeten the deal. The 0% interest Canada Greener Homes Loan makes going solar easy, and available grants in your area for solar just make solar that much cheaper upfront – meaning a system that might be expected to pay you back within just 9 years could do so in only 7.

Solar Energy: A Hedge Against Rising Utility Rates

So how much money can solar save you over 30 years? Let’s use another example, and we’ll keep it simple.

Let’s say your average monthly electricity bill is $250. Your bill in 25 years would be $523 dollars if there was a modest 3% rate increase yearly over that span. That would mean the 25 year cost of not going solar would be $115,659. If you went solar, you would have over $100,000 more money in your pocket that would have otherwise been spent on power bills.

Maybe you don’t live in your house for the next 30 to 40 years and that’s fine. In the same way that owning your home is having equity in your housing arrangement, going solar is having equity in your power usage. If you stayed in your home long enough to recoup your initial costs then you’ve already earned some savings. You will also more than recoup the cost of the system if you choose to sell your home since solar has a long lifespan.

Get the Most out of Solar with XOLAR

When you do the math over the 30- to 40-year lifespan of a solar system, it becomes clear that solar energy offers a much lower cost per kWh than what the power company charges even at current year rates. With these rates only expected to go up, due to inflation, you are taking a bigger risk by not going solar.

Our Solar Specialists and Project Managers can cleanly walk you through the steps of what is required and make sure you maximize the value of the provincial or federal programs in your area. We’ll also get you started on the vital first step of acquiring a tailor-made solar proposal for your residential project’s energy needs.

Schedule a consultation for our solar specialist’s expert guidance here.