A year ago, I was second-guessing my choice to buy Tesla Solar. It seemed cool to be a Tesla (TSLA) customer, save money, and help the environment, but was it really worth the hype? When I crunched the numbers back in my first article, it appeared that the cost savings to my electricity bill was not enough to fully offset my loan payment for the solar system. As we all know since the pandemic started, a whole lot can happen in a year. So here I am again, a year later and (maybe) a year wiser, to provide an update on my Tesla Solar system.
When I wrote about Tesla Solar back in January 2021, it may not have been the ideal time to assess the financial savviness of my new solar panels. I had owned them for only three full months. I had not yet gone through the full cycle of a year, including the blazing hot summers of Tucson, Arizona. The sample period I used was during some of the coolest months of the year in Arizona, where energy usage drops significantly due to the beautiful winters we have here. Looking back, it was more of a review of the purchase process than anything, with some financial analysis provided based on the current data I had at the time. Now, with 14 full months of energy production now under my belt, I have a lot more data from a full seasonal cycle, and can provide a much better picture of the value a Tesla Solar system provides.
Let's start with a recap of my solar system. My solar system is a 14-panel, 4.76 kilowatt (kW) system with an estimated annual production capacity of 7,302 kilowatt hours (kWh). Six panels face the north, and eight panels face directly south, with both sides receiving partial shade from nearby trees. I purchased the system from Tesla in October 2022 for $11,066, financed with a personal loan. The loan terms were for 360 months at an APR of 3.99%. In the Spring of 2021, I claimed a Federal energy tax credit of $3,033 and Arizona state energy tax credit of $1,000 to offset the overall cost of the loan by $4,033. A tax credit is simply a dollar-for-dollar refund of the taxes you owe to the government. (Based on tax legislation, these Federal incentives have usually been reduced every year as cleaner energy options have become more available to the general public. Make sure you do your own research to determine what tax incentives are available for you if you are considering purchasing a solar system). I used the $4,033 credit to pay off a portion of the loan principal, leaving a balance of $7,633. With a 3.99% APR and a term of 120 months, the estimated loan interest I will pay over the life of the loan is $1,186. Interest included, we end up with a total cost of $8,819 that I will have paid for the solar panels. Here's a cost breakdown:
We can use the total cost of the solar panels to help in our analysis of whether the solar panels are worth the money over the long run.
Before I can properly analyze how much benefit my solar provides, it's important to define how we are going to measure its performance. Here are some important assumptions I will be making:
Monthly averages - One could get deep into the weeds of all the factors that can impact energy production and consumption: the numbers of days in a month or billing period, the time of year, peak demand, number of solar panels, number and size of devices and appliances drawing power, location of the panels, usage habits, etc. However, for simplicity, I am only going to be looking at monthly averages before and after I got the solar panels. With18 months of recorded data pre-solar and 15 months of recorded data post-solar, I have a pretty good idea of how much benefit my system is providing.
Year-over-year (YOY) comparison - In addition to the comparison of these two periods, I will also compare the average consumption over the same months from year to year in which I have complete data to compare apples to apples (i.e. January 2020 vs January 2021). This helps to provide a clearer view of the energy impact my solar system makes throughout seasonal changes.
Fixed rates - Electricity rates are always changing, along with local and state taxes and fees. For simplicity, I will assume electricity rates and taxes/fees are fixed in the future and baked into my overall electricity bill. This removes the complexity of trying to figure out what cost in each monthly bill is attributable to rates, taxes, and fees, and what is attributable to electricity usage.
Net energy usage - Lastly, I will note that when I talk about energy consumption or usage, I will be referring to the billed amount of energy I consumed. For example, I may have used 1,000 kWh of energy in a month pre-solar, and then 1,000 kWh in a month post-solar, but if my solar panels generated 300 kWh of energy that second month, my net usage (i.e. the amount billed) would be for 700 kWh.
Energy Consumption and Cost
In the preceding 18 months before I got solar, my average billed kWh usage was 1,134.4 kWh per month, or 13,612.7 kWh annually. My average monthly electricity bill was $164.20, with the highest bill being $281.23 (July 2020) and the lowest being $55.62 (May 2019). This amounts to $1,970.40 on average I was paying annually for electricity. In other words, assuming I had the same average monthly cost and usage, I would have consumed 408,380.4 kWh over the 30 years I did not have solar panels, and would have paid $59,112 over the same period. Those are eye-popping numbers to me! So what difference has solar made in my energy consumption?
Since getting Tesla Solar, my average monthly energy usage has been 641.3 kWh, and my average monthly bill over 15 months has been $81.78. My highest monthly bill was $191.49 (July 2021) and my lowest monthly bill was $16.47 (April 2021). These dates correspond with my peak monthly energy usage of 1,322.6 kWh and lowest monthly usage of 299.0 kWh. This means I have paid on average $981.36 annualized since getting solar, and have consumed an average of 7,695.6 kWh per year. Assuming the same averages over the 30 year lifetime of the solar panels, that means I will be consuming a grand total of 230,868 kWh at a total cost of $29,440.80. This represents a 50.19% reduction in cost over the lifetime of the solar panels simply looking at $29,440 I will pay versus the projected $59,112 I would have paid without solar, or a savings of $29,672. That's $989.04 in savings per year!
Using a year-over-year (YOY) approach, my pre-solar bill averaged $144.19 per month, and my pre-solar electric usage averaged $82.83, representing a 42.6% reduction in cost.
Solar Energy Production
My reduced net energy consumption is directly due to the solar power generated by my system, which decreases my home's burden of power drawn from the electric grid. It's interesting to look at the energy production of my system, both estimated and actual. Thanks to the Tesla app, I can accurately track exactly how much energy my system is generating. Tesla estimated my solar system would produce 7,302 kWh annually. In actuality, my system has produced an average of 482.9 kWh per month, or the equivalent of 5,794.8 kWh annually. This means the actual output of the solar panels is about 20.6% less efficient than Tesla's estimate. That is significant, and I would certainly consider that factor if I had to go back and rethink my decision to purchase the solar panels from Tesla.
As you can see in the graph above, in some of the early months last year I actually generated energy in excess of what I used. And no, unfortunately my electricity provider did not send me a check; I still had to pay some taxes and fees. However, it's still fun to see the overall reduction of net energy I consumed. Having solar also greatly helped in the summer, when my energy usage was the highest, as this was near the peak of my system's production, which greatly offset the amount I used from the grid.
While my solar panels may not live up to their estimated production capacity, the energy they produce is certainly better than my initial impression when I originally reviewed them. They offset my carbon footprint by 5,794.8 kWh annually, which represents a 42.6 percent reduction to the annual 13,612.7 kWh of energy I used pre-solar. To put that into perspective, according to the US Energy Information Administration (EIA) the average American household used 10,715 kWh in 2020. That means before I got solar my home was using 33.7% more energy than the average American household, and now I am using 28.2 percent less energy than the average American household. I consider that a huge win!
Overall Net Benefit of Tesla Solar
To find out whether the solar panels actually provide financial value, let's calculate the total lifetime benefit of the solar panels versus the total lifetime cost. The total lifetime benefit is essentially the total energy savings from the solar power generated. In making this calculation, I will assume a useful life of 30 years, and will also assume Tesla's estimated 0.5% decrease in solar production capacity due to the age of the system. With a savings of $989.04 in the first year, the total lifetime benefit provided by my solar panels will be $26,628.08. The total cost, as we already calculated, is $8,819 after tax incentives. Therefore, Tesla Solar will save me $17,809.08 over its useful life. That's no chump change! Also, That also doesn't include the positive impact the solar system has on my home's value, but that's hard to quantify. Additionally of interest, the roughly $82 in monthly savings that my solar power provides nearly covers the $90 monthly payment from my loan. Once my loan is paid off, the savings will be even more noticeable. It's also important to note that the break even period (i.e. when the dollar benefit derived from the solar panels exceeds the net cost) is 8 years and 11 months in my case. I would need to live in my home for at least that long to realize the benefits of owning solar.
When all is said and done, is Tesla Solar worth the money? As so many questions are answered with "It depends", so it goes with Tesla Solar. There are so many factors that go into making the decision. Are you a homeowner? How long will you live in or own your home? Can you afford the monthly payment or make a large down payment? Will it actually increase your home value? What rules and regulations does your area have regarding solar panels? Does your location have enough sun? Will solar panels be compatible with your roof?
It's clearly not a simple process to decide if solar power is right for you, but I hope the insight and experience I've shared from purchasing and owning Tesla Solar can at least help you weigh your options. If anything, it's interesting to see the financial and environmental impact one solar panel system can have. All in all, I'm glad I could prove my initial doubts about Tesla Solar to be wrong, and I am ultimately glad I made the decision to purchase.
While I am not writing with any affiliation or partnership with Tesla, if you are interested in their solar products please use my referral link here. You will automatically receive $500 off Tesla Solar Roof or $300 off Tesla Solar Panels.
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The opinions expressed in this article are solely the opinions and views of the author. None of the views expressed are to be misconstrued as professional advice or recommendations, but rather for entertainment and recreational enjoyment. Neither Micah Brown nor FreelancedFinance have endorsed or have any professional affiliation with Tesla and neither recommend nor discourage readers from purchasing Tesla products.