Most solar shoppers can save between $20,000 and $97,000 on electricity over the lifetime of a solar panel system. Solar panels aren’t just good for the environment – you can benefit from serious savings which can vary based on a number of factors including your location, current energy usage trends, and the size of your solar panel system. Most importantly, solar savings are influenced by the price you pay for electricity.
Key takeaways about solar savings
- Solar panels cost money upfront, but will provide significant savings on energy bills over time.
- The average home can save between $20,000 and $97,000 over the lifetime of your solar panel system, depending on the cost of electricity in your area.
- Generally, higher local electricity prices means higher potential for solar savings.
- Start comparing custom quotes on the EnergySage Marketplace to see your estimated savings from solar power.
What’s in this article?
- Do you really save with solar?
- How much do you save with solar?
- What’s the cost of solar?
- Reducing your carbon footprint with solar
- FAQs about solar savings
Do solar panels really save you money?
The simple answer to the question “do solar panels really save you money?” is yes. That being said, how much you’ll save depends on a number of factors. Direct hours of daily sunlight and the size and angle of your roof are both important, but local electricity rates and your energy consumption play the biggest roles in determining how much solar can save you. Why? Because the more you pay for electricity, the more you can offset by producing your own solar energy.
With so many trendy investment opportunities available in today’s day and age, it’s easy to be skeptical of new products that boast promises of “saving you tons of money.” However, a solar panel installation is a sound investment – you’ll save significant money over time by reducing (or even eliminating!) your electric bill.
How much do solar panels save on electric bills?
The first step to understanding your solar savings is to calculate how much you’re currently spending on electricity every year. For example, the average annual electricity use required for a U.S. household is 10,632 kilowatt-hours (kWh). Multiply that by the national average electricity rate as of December 2022 ($0.15 per kWh according to the Energy Information Administration, or EIA) and you’ll find that the typical American family is spending around $1,600 a year on electricity alone.
Then, you have to consider the volatile nature of electricity prices and determine what utility company rates will be in years to come. When you compare the cost of utility electricity with home solar, you should keep in mind that you can expect electricity rates to increase annually. Over the past decade, national electricity costs have increased at a rate of around 2.5 percent per year. Utility rate inflation is an added incentive for solar: when you generate your own energy with a rooftop photovoltaic (PV) system, you’re locking in energy costs at a constant rate so that you no longer have to consider variable utility company rates.
Because of the nature of solar as an up-front investment, the only costs associated with a solar system will be the equipment and installation costs and any added electricity costs in the event that your panels do not completely offset 100% of your electricity use. Whether or not your system will completely offset your electricity needs is primarily determined by how accurately you size your PV system – you can calculate how many solar panels you’ll need to secure that percentage.
To provide a snapshot for typical energy bill savings from a solar installation, the following table offers state-by-state data for 25-year savings estimates with solar – this is the amount of time solar panels are typically covered under warranty, but solar energy systems will typically last 30+ years, leading to even more savings. The data incorporates a number of assumptions:
- Electricity demand: 10,632 kWh per year (national average)
- Utility rate inflation: 2.5% (10-year average)
- Percent needs met by solar panels: 100%
- System size: 8 kilowatts (kW)
- Electricity rate: state average as of December 2022 (according to EIA)
- Ownership of the solar panels
Solar panel savings estimates by state
|State||Average price (8 kW solar system)||Average electricity rate per state ($/kWh)||25-year savings|
|New Jersey||$17,464||$0.17|| $46,552.95
|New York||$20,602||$0.23|| $66,655.55
*Note: the federal solar tax credit IS applied to the above table
What’s the cost of solar panels?
On the EnergySage Marketplace, the average cost per Watt (W) of a solar energy system is $2.95/W – for a 10 kW system this amounts to a total cost of $29,500. However, there are significant solar incentives in the U.S. that help lower this cost. For example, the government provides a tax incentive that allows you to deduct 30% of your solar energy system costs from your federal taxes, lowering the average cost to $20,650. Many states also provide local incentives that can reduce your upfront cost of going solar and increase your return on investment. If you live in an area with net metering, your local utility company will compensate you with bill credits for the excess energy your solar panel system sends back to the grid. It’s also important to know that as solar deployment continues to grow, the cost of solar will likely further decrease.
Will you still have an electric bill with solar panels?
Yes, you will still receive an electric bill after installing solar panels. Importantly, your utility bill may not include any charges and may simply indicate how your usage was offset by net metering credits for the month. In the case where you provide more electricity to the grid than you pull, your utility will usually roll over these unused bill credits to the next month for you to take advantage of. Regardless, installing solar panels will almost certainly lead to lower average monthly electric bill charges, and may eliminate what you owe on your monthly electric bill in some cases.
How much can solar panels reduce your carbon footprint?
Financial returns are a major incentive for leveraging renewable energy, but money isn’t the only thing that solar panels save. When you install solar, you’re also improving the environment and reducing greenhouse gas emissions. That’s why the question, “How much can solar panels save?” can be answered two ways: how much money solar can save and how much CO2 it can save (avoid being emitted into the atmosphere).
The Environmental Protection Agency provides a formula to help you calculate how various green practices result in carbon emissions reductions. The table below converts solar power energy production into greenhouse gas offsets using the metric converters 7.44 × 10-4 metric tons CO2 / kWh of energy produced and the national average for solar panel production ratio, 1.42 kWh / W of power.
CO2 Reductions by Solar System Size
|System size (kW)||Annual Solar Energy Production (kWh)||Carbon Emission Reductions per year (metric tons)|
A good comparison point to use when thinking about carbon emissions is that a typical vehicle emits 4.7 metric tons of carbon dioxide every year. This means that a 6 kW (6,000 W) solar panel system comfortably offsets the emissions produced by one fossil fuel automobile in a year. In addition to significant bill savings, a solar system comes with the satisfaction of “taking a car off the road,” so to speak.
Commonly asked questions related to how much money solar panels save
Yes, in most cases, solar panels are definitely worth it, with potential savings between $20,000 to $97,000 over 25 years. Read this article to find out if switching to solar is worth it for you.
When it comes to installing solar panels, there are a few different financing options. First, you can choose to pay for your system outright, which will generate the most long-term savings but comes with a big price tag. You can also use a solar loan to pay for your system, which will still enable you to take advantage of incentives but with low or no upfront cost. Finally, you can lease your solar system – but keep in mind that you won’t be eligible for tax breaks and your energy savings will be significantly lower.
Although solar panels are a form of renewable energy, they still produce a finite amount of electricity – an amount that’s consistent with the size of your system. If you require more energy than your solar panels are capable of producing, you’ll still owe money on your electric bill. And in some cases, it may still be high if you significantly increase your energy usage or if your system wasn’t sized properly to meet your energy needs. If your bill suddenly increases and you haven’t increased your usage, make sure to contact your installer – they’ll likely want to inspect your system to ensure everything is working properly.
There are many factors that affect a solar panel system’s payback period including the initial cost of the system, financial incentives, your average electricity usage, and the estimated electricity generation. Some of these factors are easier to calculate than others, but on average, it takes between 8 and 9 years for most homeowners who shop for solar on EnergySage to get their solar panels to pay for themselves.
Two disadvantages of solar energy include its high upfront costs and intermittency. While investing in renewable energy pays off in the long run, this technology is typically more expensive than traditional energy generators when it comes to installation. Luckily, there are financial incentives, such as tax credits and rebates, available to help alleviate the initial burden. Additionally, intermittency can be an issue since renewable energy resources aren’t available 24/7, year-round. For example, solar panels produce less electricity at night and on overcast days. Learn more about how solar panels work to uncover the science behind them.
Solar panels can create big savings
Ultimately, regardless of whether you’re looking at finances or carbon emissions, a solar panel system will generate big savings for homeowners. The deciding factor will primarily be the cost of electricity, which varies significantly depending on where you live. Nonetheless, a good rule of thumb is if you live in a state with middle- to upper-level utility rates, solar will be a risk-free investment with major returns. If you’re looking for customized estimates, try our Solar Calculator. If you’re ready to start looking at quotes and installation costs from pre-screened solar companies in your area, check out the EnergySage Marketplace so you can start generating free, clean energy right at home.