To understand why they have become so expensive, we first need to step back and look at how power prices are calculated in the first place.
What it costs the utility to provide you with electricity
The price of power typically reflects how much it costs the utility to source and supply the electricity. There are two ways that utilities generate power and those are:
Both of these options cost money. Generally speaking, your electricity rate measured as cents per kWh is a reflection of how much it’s costing your utility.
In the United States, most energy is still sourced from fossil fuels, specifically petroleum, coal and natural gas. The price of these fuels has been rising and will continue to rise as these are finite resources that are being depleted. This has made energy more expensive to produce, which in turn has caused electric rates to climb steadily.
Distributing the power to customers also costs your utility a lot of money. When an electric company produces power, the voltage must be scaled down to be used safely in your home; a process causes some power to be wasted. To supply you with electricity, your power company must produce more power than you actually use in order to cover the power lost in transmission.
Image source: U.S. Energy Information Administration, Annual Energy Outlook 2018, February 2018, Reference case, Table 8: Electrical Supply, disposition, prices, and emissions.
Are electricity rates going up?
The graph below shows that the average price of power has increased by almost 70% since December 2000. As oil, natural gas and coal prices rise, it's unlikely utility-provided power will get any cheaper.
Image source: U.S.Energy Information Administration.
Luckily, the cost of renewable energy is heading in the opposite direction. The price of solar power has fallen 70% since just 2010.
How you can reduce your electric bills
One thing you should do is make sure you’re on the right rate plan. A great site that helps you do this is cutmybill.com. CutMyBill will show you how to save money based on different rates offered by your utility, alongside your savings from installing solar panels.
Image source: CutMyBill
The slide above showcases the potential savings for a PG&E customer assuming they’re on the standard residential rate. CutMyBill can do this for different utility companies across the US.
Image source: CutMyBill
You will also receive a detailed breakdown of your savings from installing solar with local incentives.
Is installing a solar system worth it?
Installing a solar system is the best home investment you can make. There are two reasons why Americans receive such significant savings from solar panels:
How does net metering work?
Net metering is a program which allows you to sell your excess solar generation back to the grid for the full retail price per kilowatt hour (kWh). Provided you size your solar system correctly, your solar system should export enough energy to the grid to cover most or all of your electric spend. Almost all states offer net metering or some method of compensating solar owners.
Most Americans who install solar energy can save $30,000-$100,000 in avoided energy costs over the 25-year life of their system.
How do I sign up for net metering?
When you install solar panels in your home, you apply to your utility to switch to a different electricity plan. This will allow you to start selling your electricity generation to the grid. Your local solar company should be more than willing to help you with any paperwork so you can
What is the Federal ITC?
The federal ITC is a program that allows you, as of 2020 to claim 26% of the cost of your solar system as a deduction to your federal income taxes - basically a 30% discount. Some states also offer their own tax credits on the purchase of a solar system.
What if I don’t owe as much in taxes as 26% of my solar system cost?
You may elect to receive the full 30% credit in increments over up to 10 years.
How long will my solar system take to pay for itself?
Depending on where you live it can be anywhere from 4-15 years. The best way to find your solar repayment time is to get a free estimate by entering your zip code below.
How can I find reputable solar companies in my area?
SolarReviews has reviews for thousands of solar companies all across America. If you’re fed up with expensive power, enter your zip code below for a free estimate on the cost of your solar system with local incentives.