Economics of Solar Power

Electricity can be expensive. According to the U.S. Energy Information Agency, the average cost of electricity[1] in the United States in April of 2021 was 13.76¢ per kilowatt-hour (kWh) for residential customers (compared with December of 2020 was 12.8¢ per kWh and 12.68¢ per kWh for December 2019). Depending on where you live in the United States, these costs can range from 9.65¢ in Idaho to 32.8¢ in Hawaii. Here in Maryland, if your electricity provider is Baltimore Gas & Electric (BGE), you can expect to pay 7.284¢ per kWh for electric supply plus another 4.502¢ per kWh for delivery and 0.0749¢ per kWh for taxes. This means that a kWh of electricity costs 11.8609¢ for BG&E customers right now. Depending on your usage, this can really add up.

Those concerned about where your electricity comes from may be surprised by how little renewables are actually used in the generation fuel mix. According to PJM, the regional supplier of electricity to the Mid-Atlantic area of the United States, they used the following for electricity generation[2] in 2019:

  • Natural Gas - 36.53%

  • Nuclear - 33.95%

  • Coal - 23.78%

  • Oil - 0.10%

  • Fuel Cell - 0.03%

  • Renewable Energy - 5.61%

That is abysmal.

Solar power generation in Maryland

In Maryland, there are several initiatives that make solar power an easier, more affordable solution for homeowners. First, there are state and federal rebates available when you first install your system that help offset the initial costs. Next, low-interest loans for solar systems make these systems more affordable over the long run. Net metering allows system owners to sell their electricity back to the electricity distributor, offsetting, and even generating moneys on, their electric bill. And last, SRECs help generate ongoing moneys that help pay for the system every month.

State and Federal Rebates

Maryland’s Residential Clean Energy Rebate Program (CERP) allows for rebates for clean energy projects including solar and geothermal. Solar photovoltaic projects can be awarded $1,000 per project (as of 2020 July 01 for a minimum of 1KW DC).

With an investment tax credit (ITC), also known as the federal solar tax credit, you can deduct 26% of the cost of installing your solar energy system from your federal taxes.

There is also a Maryland state income tax credit for energy storage devices. This is based on a first-come, first-served basis on a set amount of funds that the state legislature has made available. For a residential user, this amounts to the lower amount of 30 percent or $5,000 of the total insta lled costs for the energy storage system.

Low-interest loans

Many loan companies specifically cater to those that are trying to fund their renewable energy projects. Because these projects are low risk, they can offer a low interest rate. The one I’m familiar with is Mosaic.

Net metering

Net metering is allowing your electric meter to run backwards; selling electricity back to your electrical distributor at the same cost as they sell electricity to you. In Maryland, along with some other states, you can sell back the electricity that you aren’t using to the grid. Whether or not net metering is scalable is up for debate but it certainly does help with the electric bills!


Solar Renewable Energy Certificates, or SRECs, are a way to increase adoption of solar energy by utility companies. State legislatures mandate a certain percentage of a utility’s electricity generation must come from solar. The utility may then either invest in that infrastructure or purchase SRECs as a means to offset their liability. Solar producers that aren’t utilities, can sell their production in the form of SRECs in the marketplace.

Our electricity generation

We installed as many solar photovolatic panels as would fit on the back (south-facing) of our roof. This equates to 9.75kW of generation potential (under perfect conditions). What we’ve actually generated varies based on the time of day, the season, sky clarity, and a variety of other factors. In the Summer, around mid-day, we’ve seen 9kW being generated before. In the Winter, our generation goes down significantly.

Chart depicting solar production from 2018 through 2022.

As I’m writing this, Tropical Storm Elsa is on its way here and with the cloud cover we have we’re currently generating 3.1kW of electricity. The house is only using 700W so the remainder is going to the grid where our neighbors can use it.

Since we installed the system, at the beginning of 2018, we have reduced our home’s energy grid-demand by a third (36.6% to be exact). We have also sold more than 10MW of electricity back to the grid which I didn’t calculate into the grid-demand reduction. But this is where it gets complicated. The financial and ledger book entries of electron flows aren’t as cut and dry as just how much energy did you use and not use.

Let’s talk dollars.

Solar panels are expensive. Installation is expensive. All the electrical panels, wiring, and switches are expensive. When it was all said and done, the cost was figured to be right around 10¢/kWh when the estimated system generation was calculated over thirty years[3]. We added two Tesla Powerwall battery backup systems to the system which allow us to store our generated power and use it at night or when there is a power outage[4][5]. Our loan is especially designed for solar projects and has an interest of 2.99%. We financed the entire project over ten years so our monthly payments are a bit higher than what many people would opt for but after that, we will be generating free electricity (kind of). (We actually paid off this loan early so we are saving on not paying the interest on this loan. Haven’t done the figures on this, yet.)

BGE’s rates change twice a year, based mostly on fuel rates and expected demand. As of late, they have hovered around 11¢ to 12¢ per kWh. So, immediately, if our system was built with 10¢ per kWh in mind, we’re already doing better, right?

BGE says that our "efficient neighbors" are using 821 kWh of electricity per month, right now. That’s around $100 per month figuring 12¢ per kWh. But at 10¢ per kWh, our bill would be only $82! That almost a $20 savings in the month of July with running the air conditioner. And this is before we even consider the ~$70 we can get for each megawatt we generate through selling an SREC.

A deeper dive into our usage and demand.

Our solar production in 2019 was ~10MWh[6]. Our home usage was ~18MWh during the same time frame. So, it would seem like we would have only needed to have taken 8MWh from the grid to satisfy our demand. Unfortunately it doesn’t quite work that way.

First, solar production isn’t linear. It really looks like a bell curve with the highest point of production being around midday when the sun is directly overhead. Like a nice breakfast with coffee? You’re going to be pulling most of that power from the grid. Of course that also means that around mid-day there is a lot of excess power being generated, more than we use on a regular day.

Our supply side numbers look something like this:

  • Solar power going into the home: 41.7% - 4,223 kWh

  • Solar power going into our batteries: 31.1% - 3,149 kWh[7]

  • Solar power going back into the grid: 27.2% - 2,755 kWh

  • Total solar production: 10,127 kWh

Flipping those numbers a bit we can look at the demand side:

  • Home supplied from solar: 22.6% - 4,227 kWh

  • Home supplied from batteries: 12.8% - 2,394 kWh[7]

  • Home supplied from grid: 64.6% - 12,084 kWh

  • Total home demand: 18,706 kWh

Some of those numbers are going to leave you scratching your head. Unfortunately, a lot of this data is coming from a variety of sources, some being more accurate than others.

Are batteries worth it?

We paid $7,500 for our first Powerwall and $5,000 for the second which adds up to $12,500 for both Powerwall devices, installed. During 2019, we used 2,394 kWh of power that was stored in those batteries. At ~14-cents per kWh, that comes up with a savings up $335[8]. If we do that consistently during the batteries' twenty-year life span[9], we will have saved ~$6,700 or about half of the cost of the batteries.

Based on BGE’s upstream supplier, we also saved 1.27 pounds of Nitrogen Oxide, 1.68 pounds of Sulfur Dioxide, and 2,212 pounds of Carbon Dioxide from being generated.

And because the batteries also act as a whole-house power backup[10], which was used for around 4 hours during 2019, and almost 38 hours in 2020[11].

What about a petrol generator?

A Generac 10kW whole house generator costs around $2,800 plus installation and parts to make that happen. It requires annual maintenance and fuel. When in use, it gives off emissions and noise. When not in use, it does nothing but take up space.

Now here’s a scenario that makes me love my batteries as compared to a generator. Consider a weather event that affects your area for days or even weeks. With a generator, you’re going to have to continuously get fuel for it during that period of time. During Hurricane Isabel, my house was without power for more than two weeks. Further, no one could have even gotten to my house for two weeks due to the many trees that fell during that storm. Are you prepared to maintain two weeks of fuel on hand for just such an event? That’s going to be difficult to do.

With my solar panels and batteries, the panels just keep charging the batteries so they can pretty much go indefinitely. They don’t require any fueling or care and feeding during a power outage event. And the system is also constantly tested everyday, all day, so I know they work (or when they break and are in need of repair).

Are solar panels worth it?

Again, in 2019, we produced ~10MWh of electricity. If we had to purchase that directly from BGE, it would have cost us ~$1,400[12]. Over the course of our twenty-year guaranteed production time frame, that comes to around $28,300 of electricity that we won’t have to buy. But, of course, solar panels don’t just stop working after their guaranteed production time frame. They don’t even stop working after their warranty period. Their efficiency may reduce to below their rated generation output but they’ll keep on generating.

Source data

Table 1. Solar generation per month in kilowatt hours.
2018 2019 2020 2021 2022 2023 2024


























































































2. From January 2019 through December 2019
3. We also did some roof work and added backup batteries to our system which added to the cost so it’s difficult to separate all of these costs cleanly. The 10¢/kWh was a calculation only for the solar system and their installation.
4. We’ve had power outages that we weren’t aware of because of the Powerwalls. They make no noise so we never really know that they are there.
5. The Powerwall system also allows our solar system to function during a power outage. Without it, your solar system would just switch off and not function at all.
6. Looked at the numbers for 2020 and they aren’t that much different.
7. The difference between the power going into the batteries and what’s coming out is due to power being used to maintain the batteries. Total is 775 kWh during the course of the year.
8. Actually, the savings isn’t this at all. It’s based on difference between what your generation cost is compared with the commercial rate.
9. The manufacturer guarantees the units for that long with a certain performance. After twenty years the batteries will continue to function, just without the guaranteed performance.
10. These devices also allow the solar panels to keep producing power even when the grid is down. Without these batteries, our solar panels would just shut down during grid outages.
11. Hurricane Isaias spun off a tornado or two that tore through our neighborhood and left several houses damaged and felled many trees. This brought down many power lines that left us without power for 34 hours. Between the batteries and the solar panels, we had power the entire time and did not really notice the outage except for the generator noise from our neighbors.
12. At roughly 14-cents per kWh. Electricity generation rates change regularly as do the rates for paying for the infrastructure.
13. January and February 2018 was our installation month and, thus, was only on for testing so the production numbers are lower.
14. Our inverter decided to stop processing electricity during peak hours. The manufacturer replaced the unit but it took a while for a new device to become available.