Home solar offset: what's a good number?
Adding solar panels to your house will offset your electricity usage - but what does that mean exactly?
If you’re exploring home solar for the first time, there’s probably a lot of terminology that’s new to you.
One that confuses a lot of people is the concept of solar offset. Simply put, a home solar system reduces the number of kilowatt-hours of electricity that the utility company bills for. The amount of reduction is the solar offset, and it’s usually expressed as a percentage of the home’s annual electricity usage.
When planning for a solar installation, many homeowners and installers assume that the system should be designed for a 100% offset. While that works for many households, it’s not always the best choice. Sometimes a smaller solar array with a lower offset is more economical. Other times, a homeowner may want to install the maximum size array allowed by the utility company.
This article will show you how to calculate your solar offset and help you decide what is a good sized system for your home.
How do solar panels offset a home’s electricity usage?
Nearly all solar homes retain a connection to the electric grid, which means that they are not truly energy independent. When a solar array generates more electricity than a home needs, the excess is sold to the utility company. If the home needs more electricity than the array is producing at any point in time, the extra power is purchased from the utility company.
These transactions happen continuously throughout the day and are automatically tracked by the utility meter. On your monthly utility bill, you will be billed for the net amount of electricity, which is the difference between the number of kWh you sold and purchased. To summarize:
kWh purchased from utility - kWh solar electricity = net usage (kWh)
To be more specific, there are different billing schemes for solar, including net metering, net billing, and tariffs. With net metering, you are billed simply for the difference between the solar energy you generated and the utility electricity you purchased. Time-of-use plans also complicate things, so your utility company might track different credits for off-peak and on-peak usage. You can read all about net metering to learn more.
How to calculate your solar offset
Understanding how electricity from a solar home flows back and forth between the grid is one of the things that often confuses people when they’re new to solar. Once you have a handle on that, the concept of a solar offset is easy to understand.
Here’s a couple examples. Let’s say that your home used 10,000 kWh of electricity in the past 12 months.
If you have solar panels that generates 10,000 kWh of electricity during that same 12 month period, you would have a 100% offset.
If instead the panels generate 5,000 kWh, that would be a 50% offset.
Solar offsets are always calculated based on a year. It’s important to look at a full year of electricity usage and solar generation because both are seasonal, and can be dramatically different between winter and summer. If you use the Solar Nerd calculator to estimate your solar generation potential, you can scroll down the page to see a graph showing how your solar generation will change each month based on the weather.
What’s a good offset for your home?
The right offset for your home is based on a few factors:
- The per-watt cost of different size systems
- How many solar panels you can have in a sunny, unshaded location
- How your future electricity needs may change
- Your expectations for your utility bill
As mentioned earlier, not every home has a 100% solar offset. For example, my own home had about an 80% offset when the system was installed 10 years ago, and the offset has gotten smaller because I’ve added a heat pump and EV to my home, causing my electricity usage to go up.
Use the best sections of your roof for solar panels, but maybe forget the rest
The vast majority of solar homes use roof-mounted panels. This means you have to take what you can get when it comes to the orientation of your panels and shading of the roof. (Orientation refers to the direction the panels face.)
Solar panels that are oriented south will capture the most sunlight. (That’s true in the northern hemisphere. If you live in the southern hemisphere, such as Australia, north-facing panels will be best.) If you have a section of southern-facing roof that doesn’t have shading, that will usually be your first choice for where to install solar panels.
Not every homeowner is so lucky, and will end up placing some or all of their panels on a section of roof facing west, east, or even north. Many homes have complex roofs and end up with solar panels distributed across multiple sections of roof, so they have panels facing in different directions.
Here’s the general advice for where to place solar panels: maximize your use of sunny, unshaded roof space, and only expand to other areas of your roof if you need the extra power generation. Less optimal locations on your roof will generate less power per panel and be less cost effective.
Watch out for unethical sales pitches
To expand on that last point, some less-than-ethical solar installers will encourage you to install the largest possible solar array - not because it’s what’s best for your home and finances, but because they’re paid on a commission that is a percentage of the sale. The larger the array you install, the higher the invoice price and their commission will be.
While most solar sales people are ethical, it’s an unfortunate fact that there are many documented abuses in the industry. Just read about the lawsuits against Pink Energy and Vivint Solar (now owned by Sunrun) for some examples.
For this reason, when you receive a quote from a solar installer, pay particular attention to the proposed location of the solar panels. As mentioned earlier, south-facing is usually the best orientation, but west-facing is often recommended when you have a time-of-use plan that makes electricity more expensive in the evening when the sun is in the western part of the sky.
If the installer proposes putting solar panels on a section of roof that is north-facing or affected by shade, you should ask more detailed questions. For example, if the design proposal has one string of panels facing south and another string facing north, ask the installer to create power generation estimates for each string individually. This will help you better understand what the payback for each string of solar panels will be.
To be clear, while north-facing panels are rare, it is possible for them to work in some installations, especially if special reverse-tilt frames are used.
You should have the same questions for solar panels that are shaded. Even partial shade can have a major impact on electricity, no matter which direction the panels are oriented.
A 100% solar offset won’t eliminate your utility bill
One point that is worth emphasizing is that you will still receive a utility bill when you have solar panels, and it will typically be more than zero dollars, even when your net electricity usage on that bill is zero. This is because most utility companies have a monthly minimum fixed charge. Having a net negative electricity in a month won’t eliminate that. For example, I pay $18 every month no matter what.
This is something that unethical sales people are sometimes deceptive about. They’ll say that having solar panels will eliminate your electricity bill. It won’t. You can certainly have a significantly reduced bill, but a bill will still arrive every month.
System sizes and per-watt costs
One reason why most installations will aim for a 100% offset is because solar systems are cheaper on a per-watt basis. This means that you’ll get more bang for your buck if you install a larger system. In fact, many solar contractors won’t install a system that is very small - perhaps 3 kW or smaller.
Here’s a table showing the median price of home solar installations in the United States by system size. (Data is from Berkeley Lab.)
| System size (kW) | Median price per watt ($) |
|---|---|
| ≤2 | $4.30 |
| 2-3 | $4.20 |
| 3-4 | $4.20 |
| 4-5 | $4.10 |
| 5-6 | $4.00 |
| 6-7 | $4.00 |
| 7-8 | $3.90 |
| 8-9 | $3.60 |
| 9-10 | $3.70 |
| 10-11 | $3.60 |
| 11-12 | $3.60 |
| >12 | $3.20 |
According to this data, a homeowner installing a very small system will pay about a 35% per-watt price premium compared to one that is installing a large system.
For that reason, if you have a section of roof that is great for solar, it’s often a good idea to maximize your solar output on that section.
However, it’s often not a good idea to expand your system onto sections of roof that are marginal for solar, even if that means you’re getting a better per-watt price.
Planning for future expansion if you have a smaller offset
It’s always cheapest to install a system all at once compared to installing a small system and expanding it later. However, you might not always know what your future plans are that will increase your future electricity usage. For example, you might electrify your home by switching from a natural gas furnace to a heat pump, or add an electric car charger to your garage.
If that happens, your solar offset will shrink, and you might decide that you want to increase the size of your solar array to compensate.
If you think that’s a possibility, you may want to install the maximize size array allowed. Some utility companies will let you install a solar array as large as 125% of your average annual usage. By oversizing your system this way, you’ll have extra electricity generation that will compensate for future increases in electricity use.
You can also select an inverter system that will allow for future expansion. The best choice would be microinverters because they allow you to add as many or as few solar panels as you want in the future. Each panel is independent, so the size of your existing system doesn’t matter. Popular microinverters include the Enphase IQ7 and IQ8 series and the Tigo TS4 series.
Another option would be to choose a string inverter that has the capacity to add more panels or another string in the future. In most cases, this means oversizing your inverter. That will often be a less cost-effective option than microinverters.
Bottom line: you don’t have to have a 100% solar offset
Your solar offset is the percentage of your annual electricity usage that is replaced by solar electricity. Many solar homes aim for a 100% solar offset, resulting in zero net electricity usage from the utility, but that’s not necessary. A smaller offset is often the best when your roof has sections that aren’t ideal for solar. In other cases, a homeowner may want a greater than 100% offset if they think their electricity usage will go up in the future.
In any case, make sure that you understand when it makes sense to install a large system versus a smaller one, and don’t let a sales person bully you into installing panels on any section of roof where they will perform poorly.
