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Solar vs Electricity: Are Solar Panels Cheaper Than Electricity?

Are solar panels cheaper than electricity?  

The term “cheap” might imply lower quality, but this is not true with solar panels. Solar panel installation is a substantial investment offering long-term, cost-effective benefits. 

When compared to conventional energy sources like oil, gas, and coal, solar power is still more affordable, according to the International Energy Agency’s report in Energy Intelligence.

So, why are solar panels considered cheaper than conventional electricity? This article explores the 3 main reasons: cost-effectiveness, efficiency, and potential financial returns.

But first, let’s have an overview of what solar is.

Solar Overview

Solar energy is derived from the sun’s power, which emits energy as electromagnetic radiation, some reaching Earth to be transformed into usable electricity. 

Solar panels, or photovoltaic (PV) panels, mostly made of silicon cells, are the primary instruments for harnessing this energy.

The photovoltaic effect is the process of absorbing sunlight and releasing electrons to generate electric current. Applications range from residential electricity supply and electric vehicle charging to powering industrial processes and satellites. 

Over the years, advancements in technology have increased the efficiency of solar panels, enhancing their ability to convert sunlight into electricity and reducing the cost per watt of solar-generated power.

Today, solar power is among the least expensive new energy sources, competitive with wind energy, and poised to become the world’s main energy source. 

The International Energy Agency projects that solar energy will soon lead global energy supplies, aligning with climate goals due to its scalability and adaptability. 

Whether integrated into vast solar farms or small rooftop installations, solar power provides a reliable, cost-effective energy solution for diverse needs, from residential savings to essential services in remote areas.

Why Are Solar Panels Cheaper Than Electricity?

Solar Power vs. Electricity: Cost

Over the past decade, the cost of solar power has dropped by 90%, with an initial investment of $10,000 to $18,000 depending on your needs. After this, homeowners can enjoy “virtually free electricity” within the system’s lifespan of around 25-30 years! 

According to the Levelized Cost of Energy Report, utility-scale solar arrays now present the lowest cost for construction and operation compared to all other energy sources. 

Consider: The average cost per kilowatt-hour (kWh) for fossil fuels ranges from $0.05 to $0.17 per kWh, with residential electricity rates having increased by approximately 4-40% annually over the last decade, in contrast with solar energy’s $0.10 per kilowatt-hour.

The bottom line is that choosing solar energy allows households to accurately predict their electricity costs, despite the high initial investment, and avoid the unpredictable pricing of traditional utility companies.

Solar Power vs. Electricity: Efficiency

Solar power offers a more sustainable alternative to fossil fuels. Today’s solar panels achieve efficiency rates between 19-22%, influenced by the brand, size, and panel materials. 

In contrast, coal and natural gas boast higher efficiency rates, up to 40% and 60%, respectively. However, the energy from fossil fuels is expended in a single use to produce heat, depleting these resources permanently.

Despite seemingly lower efficiency, solar energy is inexhaustible and uses an abundant, free source—sunlight—with no emissions. 

The sun’s energy isn’t also subject to depletion and provides a consistent power supply that varies only by geographic location, time of day, and seasonal changes. 

Regions like Alberta, with its ample sunlight, are well-suited for solar investments, capitalizing on this renewable energy’s availability and sustainability.

Solar Power vs. Electricity: Financial Returns

Solar panels offer numerous financial advantages over traditional electricity, making them a cost-effective solution in the long run. These benefits include:

1. Long-Term Cost Savings:

  • The initial investment in solar can be recouped over time through savings on energy costs once the system is paid off—typically within 5 to 10 years based on location and system size—all subsequent energy production results in cost savings. Solar panels have a long lifespan, often 25 years or more, ensuring that savings continue long after the initial costs are recovered. 

2. Net Metering:

  • This credits solar energy users for the electricity they add to the grid. For instance, if solar panels produce excess power during the day, the energy is sent to the grid, and the user gains credits. These credits can then be used to draw power from the grid during periods of low production, effectively balancing out energy costs over time.

3. Government Incentives:

  • Many regions offer incentives, such as tax credits, for installing solar panels. For example, a 30% tax credit on the installation costs can significantly lower the upfront expenses, enhancing the system’s affordability.

4. Increased Property Value:

  • Commercial and residential properties with solar systems have been shown to increase in resale value. The potential for lower utility bills is a strong selling point, making properties with solar installations more attractive to potential buyers.

Final Thoughts

Are solar panels cheaper than electricity?

In terms of long-term benefits, solar panels are cheaper than electricity. The dramatic decline in solar energy costs, fueled by technological innovations, and supportive government policies, has positioned solar power as a pivotal player in the global shift towards a low-carbon economy.

On the contrary, traditional electricity sources contribute significantly to carbon emissions, air pollution, and ecological degradation. Therefore, switching to solar power is a smart financial move and a necessary step toward long-term sustainability and environmental benefits.

If you’re considering this transition, Panel Upgrade Experts provides expert guidance and personalized estimates to help you harness solar power efficiently. Contact us today to discover how much you can save on solar.


Is solar energy better than electricity?

Despite higher initial costs, solar power offers significant long-term savings, environmental advantages, and potential property value increases, making it a cost-effective alternative to traditional electricity.

What are the cheapest energy sources today?

Renewable energy, particularly solar and wind, is the most cost-effective power source today, offering substantial savings and protection against rising energy costs while allowing homeowners and businesses to produce sustainable energy and help the environment.

Are solar panels enough to power a house?

Newer solar systems with power storage can fully power a home using solar energy, which is now more affordable with high-efficiency panels and batteries. The number of panels needed depends on location, home size, and panel specifications.

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