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How Does Solar Billing Work?

In a world increasingly focused on sustainable energy solutions, solar power stands out as a beacon of hope. Did you know that the energy from the sun that reaches Earth in just one hour is enough to power the entire planet for a year? It’s an astonishing fact that highlights the immense potential of solar energy. 

As experts at Ethical Energy Solar, we’ve seen the transformative impact of solar power. Therefore, we explore solar billing,  providing you with a clear understanding of how it all works and how it can benefit you and your wallet.

Components of Utility Bill

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Service Fee/Charge

The service fee or charge on your utility bill is a fixed, recurring cost you pay your utility provider for the privilege of being connected to the electric grid. This fee covers the expenses associated with maintaining the infrastructure, providing customer service, and ensuring the reliability of your electrical service. 

It is a non-negotiable, essential fee that solar customers pay regardless of their electricity consumption. Even if you generate your electricity through solar panels, you’ll likely still incur this fee because you remain connected to the grid for backup power.


Taxes on your utility bill can vary by location and are imposed by federal, state, and local governments. They include sales tax, gross receipts tax, and other regulatory fees. These taxes add to the overall cost of your utility bill and contribute to government revenue for various purposes, such as infrastructure development or environmental initiatives.

Kilowatt Hour Usage (kWh)

This is the variable portion of your utility bill and represents the actual electricity consumption in your home or business. The bill is calculated based on the kilowatt-hours (kWh) you use during a billing cycle. 

Your electric meter tracks your consumption, and the utility company multiplies the kWh used by the applicable rate to determine the cost. KWh is the part of the bill you have the most direct control over by implementing energy-efficient practices and technologies.

Difference between Solar Lease and PPA Billing

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Solar Lease

A solar lease is an arrangement in which a third-party solar company installs and maintains a solar system on your property. In return, you pay a fixed monthly lease payment to the solar provider. This payment covers the use of the solar panels and any associated maintenance.


No upfront costs: With a solar lease, you don’t need to make an initial investment, making it more accessible to a wider range of people.

Predictable payments: Monthly lease payments are fixed, allowing for better budgeting and predictability.

Maintenance included: The leasing company is responsible for system maintenance and repairs, reducing hassle and additional costs.


Ownership: You don’t own the solar system, so you don’t benefit from the associated tax credits, incentives, or increased property value.

Fixed payments: While predictable, lease payments don’t decrease with increased energy production, so you may not fully realize the savings as the system’s efficiency improves over time.

Contract terms: Leases often come with long-term contracts, which may limit your flexibility.

Power Purchase Agreement (PPA)

Power Purchase Agreements - Ethical Energy Solar

Power Purchase Agreements (PPA), like a lease, involves a third-party company installing and maintaining solar panels on your property. However, instead of a fixed lease payment, you agree to purchase the electricity the system generates at a predetermined rate per kilowatt-hour (kWh).


No upfront costs: You avoid the initial investment and can start benefiting from solar energy immediately.

Variable payments: Your electricity payments are based on the actual energy produced, potentially leading to savings as energy production increases.

Maintenance included: The PPA provider handles system maintenance and repairs, reducing your responsibility and costs.


Ownership: Like with a lease, you don’t own the solar system and, therefore, miss out on various financial benefits.

Long-term commitment: PPA agreements are often long-term, and exiting early may result in penalties or fees.

Rate fluctuations: While PPA rates are typically lower than utility rates, they can still fluctuate over time.

So, How Much do Solar Panels Save on Electricity Bills

solar panel saving on future utility bills

Solar panel systems save 10% to 30% or more on your electricity bills. These savings are primarily influenced by the size of your solar installation, your electricity consumption, local sunlight conditions, and the cost of electricity in your area.

For example, a residential solar panel system can offset a significant portion of your electricity costs, if not all of it, depending on the system’s size and your energy usage. In many cases, excess electricity generated by your solar panels can be credited back to your account or sold to the utility grid, further reducing expenses.

Note that the actual savings become greater over long term, considering the increasing cost of electricity and potential incentives, tax credits, and rebates available in your region. 

How To Lower Your Electric Bill with Solar Panels

Reduce Your Energy Usage

One of the most effective ways to lower your electric bill with solar panels is to reduce energy consumption. Implement energy-efficient practices and technologies, such as LED lighting, smart thermostats, and energy-efficient appliances. 

When you use less electricity, your solar panels will generate more of your total energy needs, reducing your dependence on the grid and, subsequently, your electricity bill.

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Install Solar Battery Storage

Solar battery storage systems allow you to store excess energy generated by your solar panels during the day for use at night or when the sun isn’t shining. By adding a battery to your solar installation, you further reduce your reliance on the grid and avoid paying higher electricity rates during peak periods. This decreases your electric bill and provides greater energy independence and security.

Enroll in Net Metering and Other Government Incentives

Many regions offer net metering programs that credit you for any surplus energy your solar panels feed back into the electricity grid. By enrolling in such programs, you can offset your electricity costs and even receive compensation for your excess energy. 

Also, take advantage of government incentives, tax credits, and rebates to promote solar energy adoption. These financial incentives significantly reduce the initial cost of installing solar panels and increase your long-term savings.

Maintenance and Cleaning

Dust, dirt, and debris can accumulate on the panels, reducing efficiency. Regular cleaning and maintenance help maximize energy production, ensuring that your solar energy system operates at its full potential.

Time Your Electricity Usage

If your utility provider has time-of-use (TOU) rates, shift energy-intensive tasks, such as running appliances or charging electric vehicles, to off-peak hours when electricity rates are lower. This results in substantial savings by optimizing energy usage when electricity is cheaper.

Common Reasons Why You’ll Still Have Electric Bill with Solar System

person installing solar panels
  • Cloudy Days & Nights: Solar panels rely on sunlight to generate electricity, so on cloudy days and at night, their energy production decreases, necessitating grid electricity use.

  • Utility Service Charges: Even with a solar system, you’ll still receive utility service charges, including connection fees and other non-variable costs associated with grid access.

  • Lack of Solar Battery Storage: Without solar battery storage, excess energy generated during sunny periods can’t be stored for later use, leading to reliance on the grid when solar production is insufficient.

  • No Net Metering: In the absence of net metering or other credit programs, you won’t receive compensation or bill reduction for excess energy your solar panels feed back into the grid, resulting in continued charges for grid electricity use.

Wrap Up: Expect Electricity Bill with Solar Panels

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When you embrace solar panels, expect an electricity bill that surprises you—in a good way. The transition to solar power empowers you to generate clean energy and watch your traditional utility bill dwindle. 

With the knowledge of how solar billing works, you can navigate the renewable energy landscape with confidence, knowing that your investment benefits your pocket and our environment. So, as you embark on this sustainable path, remember your electricity bill may never look the same again.


What Will My Electric Bill Look Like After Installing Solar Panel System?

With solar panels in place, you’ll generate your electricity from the sun’s energy. This means your bill will reflect reduced or even eliminated electricity consumption from the grid. In some cases, your electric bill may drop to zero. Your energy provider may still charge you a monthly connection fee or a minimal “net metering” fee for grid access, but the overall cost will be substantially lower

What Does “Permission to Operate” (PTO) Mean?

It signifies that your solar system has been properly installed, inspected and is now authorized to generate electricity and connect to the grid. Your local utility or regulatory authority grants the PTO after ensuring your solar installation complies with safety and technical standards. Once you receive PTO, your solar panels can start generating electricity and potentially reduce your reliance on the grid.

Does My Electric Bill Change Depend on the Season?

Yes. Seasonal changes in solar panel performance are influenced by factors like sunlight intensity and day length. During sunnier seasons, such as summer, your solar panels may produce more electricity, potentially leading to lower or even negative electric bills. In contrast, during overcast or shorter daylight seasons like winter, you might draw more power from the grid. 

What Happens With Net Energy Metering?

Net Energy Metering (NEM) is a billing arrangement that allows you to receive credit for any surplus electricity your solar panels generate and feed back into the grid. Your electric meter tracks the excess energy sent to the grid during sunny days, and you receive credits for this surplus. These credits can offset your electricity costs when your solar panels produce less, such as at night or on cloudy days.