Your utility rates keep getting higher every year. Yet sunlight is free and abundant.

Accessing power straight from the source makes more sense than paying for it indirectly from your local power plant. Clearly, solar power is more cost-effective than "regular" or "standard" electricity. 

According to the World Economic Forum (WEF), installing new solar panels is cheaper than a comparable investment in coal, natural gas, or other fossil fuel options. ¹  

One way to think about it is that the sun isn't going anywhere (for now), and so it's what's known as a renewable resource. It takes a lot of work to produce electricity, but when you set up your private power plant on the roof of your house, that is the definition of efficiency. Directly harnessing the power of the sun cuts out the middleman.

Let's Do The Math

Residential electric utility rates are, on average, approximately 15.47 cents per kilowatt-hour in the U.S., according to the Energy Information Administration (EIA). There was a 12.8% increase from 13.72 cents/kWh in January 2022 to 15.47 cents/kWh in January 2023. ² Check the average rates in your area on this map.

According to the latest data from the EIA, the average electricity cost per consumer group as of January 2023 was:

• Residential – 15.47 cents/kWh, up from 13.72 cents/kWh

• Commercial – 12.79 cents/kWh, up from 11.36 cents/kWh

• Industrial – 8.30 cents/kWh, up from 7.30 cents/kWh

• Transport – 12.70 cents/kWh, up from 10.91 cents/kWh

• Every Sector – 12.78 cents/kWh, up from 11.34 cents/kWh

From the information above, costs for all consumer groups have increased by approximately 12% over the past year.

In 2021, the average residential household in the U.S. used 886 kWh per month, and the average monthly electricity bill was $122 before taxes and fees. ³

Electricity costs over the years have fluctuated a great deal — annually, seasonally, and monthly — but overall, they've gone up significantly. Retail residential electricity rates (the amount you pay per kilowatt-hour, or ¢/kWh) have risen nationwide at about 27% on average over the last ten years (2012-2022).⁴ Some states, like California and Massachusetts, have seen increases of over 50%. Yipes!

Solar energy might be your solution

A solar energy system can help you insulate yourself against regular electricity cost fluctuations and increases. In 30 years, the cost of solar panels decreased by 80%, from $10/W in 1980 to about $2/W in 2010. 

Incredibly, over five years (from 2015 to 2020), average solar panel module prices dropped by over 70% from $0.7 per watt to about $0.2 per watt. All the other costs related to buying and installing solar energy systems have also decreased over the years. 

Of course, it's all about your property structure, home's location, and local weather patterns. The availability of our solar resource (that's how often and how strong the sun shines) can also greatly affect the cost-effectiveness of your installed solar system.

Factors affecting solar vs electric costs

Several factors drive the costs of solar power and regular electricity. These include

Production Costs

The cost of solar power will depend on the manufacturing expense of the solar panels, batteries, and other components. The cost calculation will depend on the materials used and the quality of the product. For example, monocrystalline solar panels are the best-quality panels, costing more than others on the market. Electricity production costs depend on fuel costs, labor costs, and demand.

Availability of production resources

Solar power depends on the sun, a free and renewable energy source made possible by solar panels. Regular electricity relies on the availability of resources such as coal, gas, and oil, which are not renewable.

Fuels Prices

Increased fuel costs can affect new solar installations. However, once you install your PV solar panels, rising fuel costs will not affect your power bill. For regular electricity, any slight increase in fuel prices will directly impact the cost of electricity you get from your utility company.

Weather Conditions

Extreme weather, such as high temperatures, affects both the cost of solar power and regular electricity. High temperatures decrease solar panels' efficiency by 10% to 25%, increasing cooling demand which can affect your system's payback time. 

Extreme weather, such as winter storms and heavy rains, are among the leading causes of power outages in the U.S. power outages have grave consequences for homeowners. Electricity costs can be affected by increased demand and high production costs that may arise due to extreme temperatures, increased demand, and high fuel prices. With a solar system, you can reduce costs that may come due to bad weather.

Government Policies

The government introduced financial incentives such as tax credits, grants, loans, and rebates to promote the use of renewable energy. These incentives have played a significant role in reducing solar power costs. On the other hand, government regulations on utility companies can increase electricity production, transmission, and distribution costs.

Can electricity prices reduce in the future?

It's challenging to predict the cost of electricity due to variations in demand, fuel prices, weather conditions, and the availability of power utilities. However, previous trends and patterns show cost fluctuations, increasing prices in the long run.

Greenhouse gas emissions increasingly lead to severe weather damage, resulting in global warming and climate change. Climate change can increase the need for heating and cooling, making electricity from utility companies more expensive than solar power.

Since electricity is generated from non-renewable sources such as coal, gas, and natural gas, it will eventually deplete. Research shows that oil and gas will run out in less than 55 years to come, meaning electricity prices will continue to increase as we continue to deplete fossil fuels.

What does this mean for homeowners who want to switch to solar?

As past trends show, electricity costs are increasing, making solar energy attractive. Homeowners installing a PV solar system can generate electricity for free, reducing grid dependence and overall energy costs.

While the setup cost of solar power systems may seem prohibitive for some homeowners, in the long run, the system will pay for itself. The total price of a complete residential solar panel system has dropped by almost 60% in the last decade. Mostly, the decrease is due to new, widely available financing and leasing options plus incentives available.

When you purchase and install a solar power system for your home, such as with the Sunrun BrightBuy option, all the electricity it produces will be free. However, this will materialize once the system pays off, which usually takes 5-10 years, depending on where you live. If you finance your system, such as with Sunrun's BrightAdvantage plan, you can save money from the first day your system generates power.

You can also take advantage of net metering service if it's available in your area, which allows you to sell excess solar energy to your utility company at a retail price. Battery backup storage is also essential, as you can store solar energy for use at night when production doesn't meet your needs or during grid outages. Sunrun's Brightbox Home Battery can help optimize your battery's performance if you're on a grid-tied system.

Besides reducing electricity costs, here are other reasons to switch to solar power:

• Reduce greenhouse gas emissions (GHGs): Electricity generation is among the top contributors to GHGs. The electric power sector contributed 31% of carbon dioxide (CO2) emissions in 2022 only. Switching to solar power reduces GHG emissions and the costs related to its effects.

• Get more control over your electricity bills: Having a system that generates energy from your rooftop gives you control over your electricity bills. Your system will not be affected by regulations or changes in fuel prices since you'll lock in the initial rate. A properly designed system can lower your electricity bill or produce excess energy to sell your utility company. 

• Increased home value: When you install a solar energy system, you not only save money but also increase your home's value. With this system, you can sell your home at 4% more than a home that doesn't have a PV system. Your home's value also increases by $20 for each dollar you save on the annual utility bill.

How much can you save with a solar panel system?

You can save between $19,000 and $97,000 over the lifespan of your solar power system, which is around 25 years. However, the actual cost depends on your area's electricity rate, system size, energy usage, and the policies of your local utility company. In addition, sunlight hours, the angle of your roof, and the incentives available can affect your solar power savings. See full details on how much you can save depending on your state.

Will solar panel systems eliminate energy bills?

You will continue to receive energy bills even after solar power installation. However, the amount will depend on several factors, including system size and utility charges such as customer service and delivery fees. It can also depend on your location, season, and energy usage. Generally, even if a solar system does not entirely eliminate your electricity bill, it will reduce regular electricity costs.

Start saving with the sun

Calculate how much you could save using our free solar calculator tool. To summarize, consider Sunrun solar panels your not-so-secret natural weapon against rising power costs. They absorb the sun's energy and power all your appliances and electronics. And Mother Nature knows what she's doing. Visit Sunrun today or contact us at 833-394-3384 to see how much you'll save with solar installation.