Selling Electricity With Solar Panels: How It Works

As the world makes significant changes in how it produces energy, there are a lot of questions about how efficient these electricity sources are. Many critics of solar and wind power state that they are borderline useless because these sources don’t produce energy while the weather is cloudy or the wind doesn’t blow. But the option of selling electricity makes these arguments irrelevant, as they can provide power when those sources hit roadblocks.

When homeowners and businesses produce more energy than they need to power their facilities, they can send that energy back to the grid. Staying connected to the grid — even though one of the benefits of going solar is being able to cut ties with it — creates supplementary profits many people don’t consider when making the change.

How Much Energy Do Solar Panels Produce?

The amount of electricity a solar panel system produces will vary depending on where the homeowner or business resides, as this will affect the number of sunlight hours they receive. According to Solar.com, most of the United States gets around 4.5 hours of sun per day, which will cause a 400-watt (W) panel to produce 1.8 kilowatt-hours (kWh).

The typical American household uses anywhere from 500–1,200 kWh per month, with the median hovering just under 900 kWh. For a solar panel system to power the average house, it would need a system of 17 panels that have a 400W output. Sunnier areas that get five or more hours of sun will need around 14 panels to go fully solar.

However, a homeowner may decide to install more solar panels than they need as a safety net or because they get a discount for buying a particular amount. One week’s weather might also be much sunnier than usual, allowing the solar panels to produce more power than the household needs. In these instances, staying connected to the grid is beneficial, as the person can sell that extra energy back to the grid to provide clean energy to those who have yet to make the switch.

Selling Electricity Back to the Grid

When homes or companies make more electricity than they need, they can sell that energy to the grid in a few different ways. Here are the methods they can use and why one might choose a particular option.

Solar Renewable Energy Certificates

Solar renewable energy certificates (SRECs) allow people to earn money for every additional megawatt hour the system produces. They exist because utility companies must offer a specific amount of renewable energy, which they can either generate themselves or pay others to provide — such as homeowners or businesses. Utilities buy renewable energy credits from these sources to prove their renewability, therefore incentivizing individuals to go renewable.

The value of SRECs depends on demand and how much a utility company has to pay for not being compliant. If there are many SRECs, the price will decrease as there is less of a challenge to find them. Additionally, some states have alternative compliance payments (ACPs) the utility will pay for not producing enough renewable energy. Those charges vary by state, so if the fee is low enough, a utility company will likely pay the ACP instead of buying SRECs, driving the price down.

One of the benefits of going the SREC route is it can raise the value of a building when selling it. While the owner could keep the rights to sell the SREC, transferring those rights to whoever successfully buys the property is common practice. That can be an enticing negotiation tactic for the seller, allowing them to barter for more money.

Net Metering

Net metering will automatically send the excess power a building produces to the grid, allowing the owner to save the energy they don’t use and get it back from the utility when the panels don’t make enough. The utility company charges them for the power they use minus what they generated, leading to a more accessible way to switch to solar.

This tactic is valuable because it can help a property owner transition to solar power much more accessibly. The utility company banks the excess electricity and gives it back to the individual when their panels can’t make enough to power the building. In turn, the home or business owner’s power bills are lower, making the switch much more efficient. Those credits can be instrumental in places where the weather switches from sunny to cloudy unexpectedly.

Net Billing

Like net metering, net billing automatically sends the excess power to the utility company. However, they do not bank that energy — instead, they will pay for the electricity wholesale. Thus, the building owner gets a direct monetary return for the extra power that goes to the grid, which can entice those who want an immediate return.

While tax incentives are available to make installation costs cheaper, solutions like net metering can help recover what home and business owners spent faster. Those savings on energy bills — plus the rebates one can get for going solar — make solar panels pay for themselves and go on to keep earning the owner profits. Opting for net billing can also help someone pay off their solar panels sooner rather than later.

Can You Make Money Selling Electricity?

Yes, selling electricity can make a home or business owner money — though those returns will vary depending on which selling option they choose. Additionally, how much they make will change from state to state.

Because the value of SRECs fluctuates, it is challenging to nail down exactly how much they will earn solar panel owners. However, a solar panel system will generally earn a building 10–13 SRECs in a year. Someone in Washington D.C. could get around $300 per SREC — garnering nearly $4,000 annually — but someone in Ohio might only receive up to $52 a year. Location and demand are crucial when determining how much a property owner will receive from SRECs.

Net metering does not incur a direct monetary return but will provide discounts on monthly electricity bills. The cost savings of this method and net billing are also tricky to average because the rates can vary so widely per state and day. However, those cost reductions on electricity bills or additional funds will certainly add up to make solar energy more affordable.

Selling Electricity from Solar Panels

Switching to solar power is a costly undertaking. However, there are plenty of ways to make those costs more accessible to the average consumer. Selling electricity to the grid is a fantastic way to recoup the transition’s costs and continue generating cheaper energy.