How Solar Panels Help You Fight Rising Electricity Prices

It's hard to miss the headlines or the heat: This summer is shaping up to be one of the hottest on record. And if you're trying to cope by cranking up your air conditioning, you'll probably notice something else: sky-high electricity bills.

But there's an unexpected solution here, and it doesn't involve touching your thermostat. Installing rooftop solar panels can help you fight inflation and act as a hedge against future energy rate increases. That's because producing your own energy through solar reduces your reliance on the electrical grid and its ever-rising prices.

"Having your own energy system behind the meter is going to be a cost savings," said Lauren Rosenblatt, co-founder of Barrio Eléctrico, a solar and home-energy installer in Puerto Rico.

Here's what you need to know about how solar panels can help insulate you from surging energy costs.

How are energy prices changing?

Let's start with why electricity costs so much in the first place.

There are a few different factors at play, Rosenblatt said. The obvious one is the inflationary pressure that has pushed up the prices of all kinds of consumer goods and services, from eggs at the supermarket to rent on your apartment. (Though that inflation has finally started to cool this summer).

The war in Ukraine also added to the problem, by spiking fuel prices that electric utilities rely on to generate power. "Utilities, just like the rest of us, have to adjust for and grapple with rising fuel prices," Rosenblatt said, and some responded by raising electricity prices for consumers and spreading the costs out over many years.

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But even without these global forces, utilities have been struggling in recent years to adapt to an increasingly renewable and distributed energy landscape. As more people install solar panels, for example, they reduce their reliance on utilities and stress a decades-old business model that assumed all households would need energy from expensive, fossil fuel power plants.

"The solar panels and the batteries on the roof of your home and at your house, they're [partly responsible for] these rate changes, but they're also the antidote," Rosenblatt said.

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Here's a look at how average electricity prices, in cents per kilowatt-hour, have changed in recent years, according to data from the US Energy Information Administration:

How will solar panels affect my energy costs?

Installing solar panels on your roof is a powerful way to reduce your energy costs.

Think about it this way: When you rely 100% on the electrical grid and utility provider for your power, you're totally at the mercy of their energy rate increases. But when you install solar panels, you suddenly have your own source of energy production.

Solar panels obviously have an upfront cost, but once you own them, the energy they produce is eternally free, and maintenance costs are very low and predictable. "That scenario provides you control over the resource and what it costs you," Rosenblatt said.

With solar, you're essentially hedging against future inflation or rate increases, because you don't need the utility-provided electricity as much -- or at all. "You save money against a utility that's a business model subject to the forces of the market," Rosenblatt said.

This may sound counterintuitive -- how will a $15,000 investment in solar panels save you any money at all? "It's very hard for us living in our houses to think about the monthly bills we have over a long-term horizon," Rosenblatt said. But when you install solar or home batteries, "those require a large investment today that lowers your cost over a long term horizon," Rosenblatt said.

Will my solar panels get more expensive over time?

Contrary to the ever-rising cost of utility-provided energy, solar panels don't get more expensive over time. In fact, they become cheaper.

Again, solar usually represents a large upfront investment (sometimes $20,000 or more), but the average payback period (how long it takes for the money you spent to be outweighed by the money you're saving on your electricity bill) is six to 12 years. 

Once you've paid off the solar system, you have a free electricity source for decades to come -- which makes it an even more powerful hedge against inflation. 

And as Rosenblatt explains, there's little to no maintenance required for the system: An annual cleaning (which some homeowners even do themselves), and some minor hardware replacements that can be factored into a service plan with the installer. All of the costs are predictable, Rosenblatt said, and usually quite low. Not to mention, the cost of parts and equipment is likely to keep dropping.

How energy prices should factor into your decision on solar

Ultimately, whether to invest in solar is a personal decision that depends on your circumstances as a homeowner. 

"Price is a major factor in your overall energy budget," Rosenblatt said. For those with the luxury of doing some long-term planning and upfront investment, installing solar would translate to long-term savings (and predictability) in energy costs.

It also depends on how much you value the electricity in your home, Rosenblatt said. If you rely on the energy to power your work-from-home setup or to maintain life-saving medical equipment, then electricity is suddenly a lot more valuable. And in that case, investing in rooftop solar (to reduce energy prices) or a home battery (to increase reliability) could be even more attractive.

"You control the cost, and by adopting solar, you also insulate yourself from the uncertainty of what's going on with the utility," Rosenblatt said.

More on solar costs

• Why the Cost of Solar Panels Will Likely Keep Falling
• How Much Do Solar Panels Cost?
• Solar Panels Will Eventually Save You Money. This Formula Will Tell You When
• Free Solar Panels: Here's What the Fine Print Means