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Our guide to installing solar panels on your home in Austin, Texas

The numbers below are estimates for the average home in Austin. Your home is unique, and your financial estimates depend on that uniqueness. If you’d like to get personalized solar estimates for your home, our network of solar experts are on call to assist you.

Simply sign up for personalized assistance on our special solar deals page.

Austin is the weird, wild, beating heart of Texas. But it’s not all parties and BBQ and ear-destroying rock shows— the city is also home to many large companies, which means there are lots of young families who own homes and want to do right by their kids.

Well, Austinites, we’re here to tell you that you can do right by your kids both financially and environmentally by going solar. Yes, you can save money and save the planet at the same time. In fact, Austin Energy offers rebates to reduce the up-front cost of solar, and they’ll buy back all the electricity your panels generate at a special rate that accounts for the total value of solar energy. And with great financing options available, you can probably install solar for $0 down, and start saving immediately! Yes, you read that right.

Important numbers for solar on the average Austin home

7.7-kW

Average System Size

$15.8k

Cost after incentives

13

Years to payback

$17.9k

Savings after 25 years

The system outlined above can eliminate most of your power bill and provide you with decades of clean electricity. The panels are under warranty for 25 years, during which time you’ll save $17,900 (but solar panels often last longer than that).

Those numbers look pretty good, and they can get even better depending on your installer and increases in Austin Energy’s rebates and Value of Solar tariff. Keep in mind, those numbers are for an average home in Austin, and many factors determine how much you could save.

Note: the numbers on this page represent the savings from a solar installation in the Austin Energy service territory. The average system size and electricity usage per household will be the same for areas outside of Austin proper, but the electricity rates and incentives vary. If you live outside of that area, you can read on down the page, where we’ve also got some additional information below for those served by:

If you’re ready to skip the very complicated step of determining what your solar savings might be based on the average Austin home, and get right to a custom estimate for your home, connect with our solar experts in the Austin area today.

If you’d like to learn more about how we got the numbers above, read on! Here’s our guide to the ins and outs of going solar in and around Austin, Texas:

Average size for a home solar system in Austin

The average Austin home uses about 11,500 kilowatt-hours (kWh) of electricity per year, and spends about $1,130 on electricity annually. A 7.7-kW solar system that will offset all that usage and save you around $1,120 a year. That’s about 22 350-watt solar panels which take up about 480 square feet of roof space.

The cost of solar panels in Austin in 2018

Solar installation costs are quoted in terms of dollars per watt, and in Austin in 2018, you can expect to spend a gross cost (before incentives) between $3.15 and $3.40 per watt, depending on the age and geometry of your roof, as well as other factors. That’s the price before a potential Austin Energy solar rebate and the federal solar tax credit.

Austin solar incentives and rebates

Austin Energy Logo

Austin Energy offers a one-price-fits-all rebate of $2,500 to all homeowners who wish to install a solar panel system of 3-kW or larger on a relatively shade-free roof. You earn the rebate by taking an online solar power class and passing a quiz after.

This is actually an interesting way to do a rebate. Usually, they’re based on system size, bringing down costs by a certain amount of dollars per watt, but at $2,500 for all systems above 3-kW in size, the rebate is actually more effective for smaller systems. For example, $2,500 represents just $.325/watt for a 7.7-kW system that would provide all the power needed for a typical Austin home, but would represent a $.90/watt reduction in the cost of a smaller, 3-kW solar system.

That’s food for thought. If you use less electricity or don’t mind smaller electricity bill savings, your rebate dollars go further with a smaller system. Getting back to our example, the Austin Energy rebate brings the cost of our 7.7-kW sample system down from $25,000 to $22,500.

The federal solar tax credit

A fanned-out stack of a few 1040 tax forms

Through the end of 2019, the federal government will give taxpayers a credit equal to 30% of the cost of their solar installation. For our example system, that represents $6,750 (30% of $22,500) that you won’t be paying in taxes next April. That’s a huge savings, and well worth it if you have the tax appetite to take advantage of it.

After the federal tax credit, our sample system in Austin costs just $15,750, over $9,000 cheaper than its initial cost.

Other Texas solar incentives

The state of Texas offers a property tax exemption for all the value solar panels add to your home. A 6-state analysis of home value increases from solar panels showed an average sale-price bump of about 70% of the gross (pre-incentive) cost of installing solar.

The 7.7-kW system we discuss here at $25,000 might add $17,500 in value to your home. And thanks to the bright and beautiful Texas legislature, all of that new value won’t be taxed. Ya-hoo!

Solar payback time and lifetime savings in Austin

OK, so we’ve covered how much it costs to pay for a solar system in cash, but what about how much money those panels will save you off your energy bill? And there are other questions to deal with, like when will the system pay back its initial cost, and how much money will you save over the lifetime of the panels?

It all gets a bit complicated in Austin, because the city’s electric company, Austin Energy, does things a bit different than other utility companies. For starters, they use a special formula to determine the true value of distributed solar energy (home installations like the one we’re talking about), and then credit your electric bill for that cost based on the total number of kWh your system generates. It’s called a Value of Solar (VoS) tariff, and it requires some explanation.

Austin Energy’s Value of Solar tariff

Way back in 2013, Austin Energy decided to stop paying homeowners full retail price for the energy their solar panels produce, and start paying them a set amount per kWh instead. It’s actually not as bad as it sounds, though! The VoS tariff started out at 12.8 cents/kWh, which was actually quite a bit more than the retail price at the time.

Each year, the tariff amount is adjusted annually based on the latest and greatest run-through of Austin Energy’s VoS formula (pdf link). The tariff has fluctuated in the past several years, and now stands at 9.7 cents/kWh as of 2018.

Austin Energy’s tiered rates and the value of solar

Austin energy charges rates that increase based on usage in blocks of 500 kWh. The lowest users of electricity pay lower rates, and the highest users pay higher rates. For example, if a household uses 500 kWh of electricity (the upper limit of tier 1), they pay $.07731/kWh for that electricity, plus a $10 monthly service charge (adding up to about $48.66), and a household that uses 1,000 kWh of electricity pays the same $.07731 for the first 500 kWh, and $0.10762 for the next 500 kWh (tier 2), plus the same $10 service charge (about $102.39).

There are 5 tiers, maxing out rates for those homes that use greater than 2,500 kWh per month. The rates are “bundled,” which means they’re made up of smaller charges for delivery and production of electricity, plus tiny fractions of pennies for public benefit programs and regulation. Here’s how they look as of mid-2018:

Austin Energy rates, mid-2018

The good news for people interested in solar is the VoS rate will never drop below the cost of electricity for a customer who qualifies for tier 3 energy rates. Unfortunately, that number doesn’t include the power supply adjustment charges in the table above, meaning the actual VoS rate will be less than what the customer is otherwise charged for energy. And that makes a difference, due to the way Austin Energy calculates the savings from solar.

Calculating solar savings with Austin Energy’s VoS rate

The way Austin Energy calculates the credit your solar energy earns sounds really complicated when written out (which we do, below), but it boils down to this: Austin Energy tallies and charges you for all the electricity you would have used without solar panels, then they give you credit at the VoS rate for all the energy your panels generated.

Here’s an example of what the resulting bill looks like, direct from Austin Energy:

Austin Energy VoS explainer

That does seem more complicated than what we said above, so let’s break down how it works:

  1. They count how many kWh they delivered to your home at times the sun wasn’t shining or you needed extra energy. On the bill above, that number is 632 kWh.
  2. They subtract the number of kWh your solar panels sent to the grid during times it produced more electricity than you could usel in this case 278 kWh. The result is a number called “net read.” And in this case, it’s 355 kWh (yes 632-278 is 354, but let’s call it a rounding error and move on).
  3. They also install a meter that can track “total generation” (i.e. every kWh produced by your system, whether you used it in your home or sent it to the grid). In the bill above, that’s 681.
  4. They add the numbers from steps 2 and 3 to get a number called “Whole House Consumption”. In this case, it’s 1,036 (681+355).
  5. They apply the 1,036 kWh to their billing tiers, the first 500 at $0.02801/kWh, the next 500 at $0.05832/kWh, and so on.
  6. They add other per-kWh charges (regulatory and power supply adjustment), and fixed charges like the $10 service charge and $5.81 community benefit charge
  7. They multiply the total generation number, 681 kWh, by the VoS rate (-$0.097), and subtract that amount from the total bill. The result is what you see on the Taxable amount line, which then has an additional 1% added ($.40 in this case) as city sales tax.

That makes it sound like rocket surgery, but remember: you’re basically being billed for all electricity used, then credited at the VoS rate for all solar electricity generated. This can sometimes result in a bill of $0, or lower, in which case, you get a credit that can roll over to the next month.

Year 1 example savings under Austin Energy’s VoS rate

So how does this all work in practice? Well, let’s look at an example. As we said above, an average home in Austin needs about 11,500 kWh of electricity, but the monthly usage varies based on the need for things like air conditioning and heat.

The table below shows columns that represent the home’s monthly usage, solar production, bill before solar, and bill after solar. In the interests of saving space, we skipped showing the complicated math of multiplying out the tiered rates and the difference between summer and winter power adjustment charges, so what you see below are the results of those complicated calculations:

Estimated 1st-year savings for a 7.7-kW system in Austin

MonthUsage (kWh)Bill Before SolarSolar kWhSolar savingsBill after solarCredit  
Total11,500$1,171.2611,561$1,121.44$54.13
January897$90.74821$79.64$11.10$0.00
February774$77.59864$83.81$0.00$6.22
March717$71.50975$94.58$0.00$29.30
April681$67.65979$94.96$0.00$56.61
May796$79.951,041$100.98$0.00$77.64
June1,110$114.301,064$103.21$0.00$66.55
July1,318$136.691,100$106.70$0.00$36.56
August1,378$143.151,125$109.13$0.00$2.54
September1,349$140.021,015$98.46$39.02$0.00
October993$101.011,000$97.00$4.01$0.00
November732$73.10805$78.09$0.00$4.99
December755$75.56772$74.88$0.00$4.31
The table shows the estimated monthly savings for the 1st year from a 7.7-kW solar installation on an average Austin home.

*Any amount of kWh over usage is credited to the customer's account and used to reduce future months' bills.

The table shows how the solar panels overproduce energy starting in spring, before Austinites need a lot of juice to power their A/C units. That causes a credit balance to build up, which gets quickly used up over the expensive summer months, but begins to build up again in the fall.

The system is estimated to produce 61 kWh more than the house needs for the year, but the credits earned get used up during the high-temp summer months, resulting in a couple of medium-sized energy bills. Still, this example solar system cuts the electricity bill of the homeowner from $1,170/year to just $54, with a $4 credit left over to roll into the following January.

But is it a good deal in the long term? Let’s find out.

25-year estimate for solar savings for an Austin home

To determine whether solar is a good deal for the long-term, you have to look at how much it costs vs. how much you can expect to save over the long haul. We know we have a 7.7-kW solar system here that costs $15,750 after the Austin Energy rebate and federal solar tax credit, so now we have to determine a few other things.

First is the amount of energy the system will produce, which we quoted above at 11,561 kWh in the first year. Solar panels decline in production over time as the panels age, but for good quality solar panels, that rate is about 0.5%, so that by the end of their warranty, in year 25, they’ll be generating around 89% of their rated capacity, or about 10,250 kWh.

The next consideration is the price of energy, which presents a unique question for customers of Austin Energy, because of the VoS rate. Will it stay relatively low, pegged to the price of tier 3 electricity, or will it soar, as the city recognizes the value of solar above and beyond its simple direct economic value?

We think it’s better to choose a conservative path when estimating financial returns, so we’ll assume the VoS will rise by an average of 2.5% per year over the next two-and-a-half decades. That’s a lower rate of increase than the nation average for electricity prices, and we think that’s fair.

When you put it all together, you get a payback period of 13 years and a final savings after payback of just about $16,500. Here’s how that looks as a graph of the net returns plotted over 25 years:

25-year estimated savings from solar panels in Austin

The numbers above are estimates for the average home in Austin. Your home is unique, and your financial estimates depend on that uniqueness. If you’d like to get personalized solar estimates for your home, our network of solar experts are on call to assist you.

Simply sign up for personalized assistance on our special solar deals page.

The financial returns of solar in outlying areas near Austin

As we said above, the numbers represent our best estimates for an average home served by Austin Energy. But many people who live in the Austin area are outside AE’s service territory, which means they’re served by another electric supplier. Those to the west of the city are served by Pedernales Electric Cooperative (PEC), those to the south by Bluebonnet Co-op, and those to the east and northeast are part of the deregulated energy market, with delivery by Oncor.

There are various advantages and disadvantages to going solar, depending on where you live, and we’ve covered them below:

Installing solar panels on your home in Pedernales Electric Co-op’s territory

PEC service area map

PEC’s service areas

First things first: PEC charges less for electricity than Austin Energy. At just $.08618/kWh, the rates here are lower than almost any place in Texas. But the bad news is PEC charges a bigger flat monthly service fee—$20 at the cheapest, if you choose to elect automatic payments and electronic billing.

On top of that, PEC will give you full retail-rate credit for every kWh up to your monthly usage, meaning you can wipe out all energy charges on your bill with a solar system sized to meet your needs. Unfortunately, any excess generation in a given month is not credited to future usage, but instead paid for by PEC at their avoided-cost rate of just $.0465/kWh, or about half of retail.

That could mean that a 7.7-kW system would over-generate in April, for example, earning you small credit for the extra kWh, while under-generating in July, costing you more in the long run.

With the differences in rates and savings from solar, PEC customers with a 7.7-kW installation can expect to save about $950 per year, instead of the $1,100 saved by Austin Energy customers. The difference adds up over time as well, with average payback time extending to 15 years, and a total 25 year net profit of $13,150.

That’s still not a bad deal, and PEC even offers a solar loan program to help folks go solar with no money down and limited fees.

If you live in PEC territory and want a custom quote for your home, connect with a local solar expert now.

Installing solar panels on your home in Bluebonnet Electric Co-op’s territory

Bluebonnet Co-op service area map

Bluebonnet Co-op’s service areas (outlined in blue)

Members of Bluebonnet co-op can also use solar to reduce their electricity consumption, saving full retail rates on any kWh that were used to power their home. Bluebonnet customers can also sell their electricity back to the co-op, but every excess kWh that gets sent back is credited at about 3/4 the retail cost of electricity.

That special solar buyback rate is known as a “feed-in tariff,” or FIT, and it takes into account what the co-op would have paid for wholesale electricity, plus the savings they see from not having to transmit the electricity across their power lines. The current residential rate for power sold to customers by Bluebonnet is $.087618/kWh, while the solar FIT is $.0632732/kWh.

Considering the total usage and generation pattern, an average home with a 7.7-kW solar system can expect to save about $1,000 per year, rather than the $1,100/year we estimated for customers of Austin Energy. The difference adds up over time as well, with average payback time extending to 15 years, and a total 25 year net profit of $14,174.

That’s still not a bad deal, with decades of clean electricity being just one in a series of benefits. If you live in Bluebonnet territory and want a custom quote for your home, connect with a local solar expert now.

Installing solar panels on your home in Oncor territory

Oncor service areas near Austin, TX

Oncor’s service areas near Austin

Oncor delivers energy to huge swaths of Texas, including the northeast Austin area. The most important thing to know about going solar in Oncor territory is that you’ll have to choose a retail electric provider (REP) that will buy your solar power from you, but that isn’t as hard as it sounds like it might be.

The second most-important thing to know is Oncor offers huge solar incentives that can take thousands of dollars off your up-front cost of solar, leaving you with the most excellent payback time of just 9 years, and over $26,000 in net profit over the lifespan of your solar panels.

Don’t hate us for saying so, but you can learn a lot more about going solar in Oncor territory over at our Dallas solar power information page, because that city is also served by Oncor, and the numbers are much the same.

That does it for home solar power in the Austin area! Be smart and get yourself a custom solar quote for your home today.

Last modified: August 29, 2018

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3 thoughts on “Our guide to installing solar panels on your home in Austin, Texas

  1. Jim says:

    Not everyone in Austin in on Austin Energy. A significant portion of the surrounding area is on Pedernales Electric Cooperative’s grid. You need to include information for those residents.

  2. Randy says:

    Does that mean that regardless of your tier usage you will only receive .80/kW?

  3. Matt says:

    Austin Energy incentive is currently at .80/watt. They have a goal of 55% renewable energy on the grid by 2025. Leases are not allowed in AE territory

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