Part 2 of my Residential Solar Power series is What to Do Before You Buy Solar Power. Here’s a checklist of what to do before installing solar. These steps could save you thousands of dollars.
Before you buy solar power:
- Make your home energy efficient.
- Check your energy use.
- Check energy costs.
- Decide how much energy you want to produce with a solar system.
Make Your Home Energy Efficient
The first step to saving energy, money, and the environment, is to make your home energy efficient. If your home wastes energy, improving its efficiency should be your first priority.
The cheapest way to reduce your energy cost is to reduce your power use. If you can reduce your power consumption by 250 kWh per month, and avoid top-tier pricing, you can save about $100 per month off your energy bill.
If you decide to buy solar power, you can save thousands of dollars by reducing your energy use first. Increasing the energy efficiency of your home reduces the size, and cost, of the solar system needed to supply your power needs. If you reduce your consumption by 250 kWh per month, you can buy a smaller solar system. The amount of panels you would need to produce that extra 250 kWh per month, or 3,000 kWh per year, costs about $4300.
Benefits of an Efficient Home
- Improved air quality. Homes that are sealed and insulated properly have improved air quality, which can minimize health concerns. Read about Attic Sealing and Insulation.
- Improved comfort. Proper sealing and insulation also make a more comfortable home, with more consistent temperatures. SDG&E is offering rebates for smart thermostats to homeowners with air conditioning. A smart thermostat allows you to control your home’s heating and cooling system with your smartphone. It can also reduce your monthly heating and cooling costs. Read about how to qualify for the SDG&E Smart Thermostat program.
- Safety. A professional inspection of all natural gas appliances can protect you from gas or carbon monoxide leaks.
- Increased property value. Energy efficient homes have greater quality and durability. They are popular with home buyers, and usually sell faster, and closer to list price.
Get paid to upgrade!
SDG&E’s Energy Upgrade California website offers thousands of dollars in incentives to upgrade your home. SDG&E also offers generous rebates on new appliances and other energy upgrades. Read about their Energy Upgrade Rebates.
If you have an old HVAC system, you may decide to replace your air conditioner and furnace with new, energy-efficient models. While you’re at it, install new insulted ductwork, so that you aren’t air conditioning your attic instead of your home. Read more about what to know when buying a new HVAC system.
Read about 7 Ways to Finance Energy Efficient Upgrades, which can cover sealing, insulation, windows, and even solar panels!
Home Energy Assessment
The most effective way to make your home energy efficient is to start with a professional home energy assessment. Read my article about Home Energy Assessments. Investing in an effective home energy upgrade will give you a greater return on investment, and costs less than the solar panels you would need to buy for the same reduction in energy use.
Some of the least expensive energy upgrades provide the greatest energy savings, such as replacing incandescent bulbs with LED lights, installing weather stripping on all doors and windows, cleaning air filters monthly, and planting shade trees around your home. A professional home energy assessment will identify where energy is being wasted, and the most effective ways to reduce your consumption.
FREE Shade Analysis
You can order a FREE Shade Analysis to find the ideal location for solar panel installation. Contact Ryan Robinson at the Center for Sustainable Energy at (858) 244-1177.
Check Your Energy Use
Once you have completed your energy upgrades, find out how much electricity you use each month.
The SDG&E website offers surveys, calculators, and other tools to help you analyze your energy use.

Access your account at www.sdge.com. When you log in, select “My Energy,” then “My Energy Overview,” and then “My Energy Use,” and select the “Monthly Energy Use” chart. This chart shows you exactly how many kWh you have used each month for the past year.
In August 2017, the California Center for Sustainable Energy released a new solar calculator – use it to calculate how going solar will affect your utility bills.
Check Energy Costs
When you buy solar power, energy cost savings is an important consideration for choosing the right solar system. How you are billed for electricity may help you decide how much energy you want your solar system to produce. Here’s how SDG&E currently bills for electricity, and how it is expected to change in the near future.
SDG&E Current Prices
The image here is from my January 2021 SDG&E bill. There are three pricing tiers: $0.32, $0.40, and $0.50. The price per kWh is much higher from the first tier, when usage exceeds 1,233 kWh.
Here’s a link to SDG&E’s Current Rate Schedules. SDG&E’s current tiered pricing structure means that you can save the most money by avoiding the “High Usage Charge” tier.
SDG&E Future Prices
SDG&E has announced that their pricing structure is changing. More details are on SDG&E’s Rate Reform Page. Although some energy experts have predicted that SDG&E’s rates will double in the near future, I don’t expect that to happen.
Decide How Much Energy You Want to Produce
First, how much energy you want to produce depends on what you want to get from your solar power system. Secondly, how much of your energy load do you want to offset? Finally, do you want to produce all of your energy, or do you just want to avoid the more expensive pricing tiers?
Decide on your strategy before you choose your system size. Choose the size of system based on:
- Your energy consumption.
- How much energy you want your system to produce.
- How much you’re willing to spend on a solar power system.
Here are two examples of how your energy strategy will help you choose your system size.
Example 1: Maximize the System
Let’s say that after energy upgrades, your household’s electricity use is 1,000 kWh per month. According to the current pricing structure, your monthly electricity bill for 1,000 kWh is approximately $335. You want to produce ALL of your electricity with your own solar system, and have the smallest electricity bill possible.
Calculation
First, calculate the size of solar system you need to produce 1,000 kWh per month, or 12,000 kWh per year. Remember the Southern California Rule of 1700 from Solar Power Basics:
Annual Projected System Output (kWh) = System Size (in kW) x 1700
We calculate the required System Size by dividing our desired annual output by 1700:
12,000 kWh divided by 1700 = 7.06
According to this calculation, you should buy a 7 kW system. If you buy the system instead of lease, you will qualify for the 26% federal tax incentive. The price after the incentive is approximately $2-$4 per Watt. This will cost between $14,000 and $28,000 for a 7 kW system. As a result, you save approximately $330 off your monthly energy bill.
This maximizing strategy is more expensive than the balancing strategy below. However, the benefits of producing most, if not all, of your electricity from the sun are:
- You stay relatively immune to future SDG&E pricing structure changes.
- Most importantly, you become less dependent on fossil fuel energy production.
Example 2: Balance of Solar and Grid Power
Using the same household that uses 1,000 kWh per month, let’s take a different strategy. Instead of wanting to produce all of your electricity, you want to balance the cost of a solar system with keeping your electricity bills low. With the current SDG&E pricing structure, this balancing strategy is usually the most financially advantageous.
The current SDG&E pricing tiers mean that energy consumption over 433 kWh is billed at a considerably higher rate. Avoiding the higher tier’s rates (by reducing your consumption to less than 433 kWh) will reduce your electricity bill from approximately $335 to only $91. This strategy means that you want a solar power system that produces at least 567 kWh per month:
Calculation
Before you buy solar power, calculate the size of the solar system you would need to produce 567 kWh per month, or 6,804 kWh per year. Remember the Southern California Rule of 1700 from Solar Power Basics:
Annual Projected System Output (kWh) = System Size (in kW) x 1700
We calculate the required System Size by dividing our desired annual output by 1700:
6,804 kWh divided by 1700 = 4.00
According to this calculation, you should buy a 4 kW system. If you buy the system instead of lease, you will qualify for the 26% federal tax incentive, which has been extended through 2022. The price after the 26% tax incentive is approximately $2-$4 per Watt. This will cost between $8,000 and $16,000 for a 4 kW system. As a result, you save approximately $244 each month off your energy bill.
Again, keep in mind that SDG&E’s pricing structure is changing. In the near future, rates will likely increase. As a result, it’s possible that it will make more financial sense to buy a larger system, so that you can rely less on the grid.
Solar Calculator
SDG&E provides a Solar Calculator. It estimates the size of solar system you will need to produce 50%, 75%, or 100% of your power. It also lists federal tax credits, costs, and estimated savings. When you access your account at www.sdge.com, look for “Calculators and Tools” on the right-hand column, and select “Savings With Solar Energy.”
Finally, consider the challenges that may come with selling a property with financed solar. You may find that you need to pay off the loan in order to sell your home. For more information, read my Selling with Solar article.
Federal Tax Incentive (through 2034)
While prices of solar power systems vary, the federal tax incentive is the same, no matter what company you choose. Federal tax code allows for a one-time 30% Residential Clean Energy Property Credit to purchase home solar photovoltaic systems.
Currently, the 30% Residential Clean Energy Property Credit is available through 2032. It then falls to 26% for 2033, and then 22% for 2034. Finally, the credit will expire after 2034.
Continue Reading
Solar Power Basics – Residential Solar Power, Part 1 of 3 – How solar power systems work. Also, read about different options to choose from, costs and incentives, and the benefits of buying vs. leasing a solar power system.
Choosing a Solar Power Contractor – Residential Solar Power, Part 3 of 3 – What to look for, what to avoid.
7 Ways to Finance Energy Efficient Upgrades – So many ways to pay for energy efficient upgrades, and solar installation!
Special thanks to Mark for helping me with this article series:
