How Much Do Solar Panels Save?

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Do solar panels really save you money?

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.” Solar panels are no different – saving money through reducing your electric bill is one of the main appeals and selling points for solar as a product and home upgrade. 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 size and angle of roof are both important, but local electricity rates play the biggest role in determining how much solar can save you.

How much do solar panels save on electric bills?

The first step to understanding how much solar can save you is to calculate how much you are currently spending on electricity every year. For example, the average annual electricity use required for a U.S. household is 11,000 kilowatt-hours (kWh). Multiply that by the national average electricity rate as of November 2017 ($0.1301 per kWh) and you’ll find that the typical American family is spending over $1,430 a year on electricity alone.

Then, you have to consider the volatile nature of electricity prices and determine what utility 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 2.2% per year. Utility rate inflation is an added incentive for solar: when you generate your own energy with a rooftop PV system, you’re taking control of energy costs so that you are no longer victim to variable utility rates.

Because of the nature of solar as an up-front investment, the only costs associated with a solar system will be the cost of your installation 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.

 

how much do solar panels save

 

To provide a snapshot for typical bill savings from a solar installation, the following table offers state-by-state data for 20-year savings estimates with solar. The data incorporates a number of assumptions:

  • System size: 6 kilowatts (the national average)
  • Electricity demand: 11,000 kilowatt-hours per year (the national average)
  • Utility rate inflation: 2.2%
  • Percent needs met by solar panels: 84% (EnergySage marketplace average)
  • Electricity rate: State average as of November 2017 (according to EIA)
  • Ownership of the solar panels is assumed

2018 Solar panel savings estimates by state table

State
Average price (6 kW solar system)Average electricity rate per state ($/kWh)20-year savings
Arizona$11,2140.1226$16,866
California$13,566 0.1877 $29,424
Colorado$13,314 0.1202 $14,216
Florida$10,584 0.1247 $17,976
Massachusetts$13,818 0.1936 $30,523
Maryland$11,550 0.1335 $19,026
New Jersey$13,188 0.1534 $19,655
New York$14,154 0.1781 $26,637
Texas$12,390 0.1140 $13,720
Washington$11,802 0.0973 $10,483

How much can solar panels reduce your carbon footprint?

Financial returns are a major incentive for going solar, 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 below table converts solar energy production into greenhouse gas offsets using the metric converters 7.44 × 10-4 metric tons CO2 / kilowatt-hour of energy produced and the national average for solar panel production ratio, 1.42 kilowatt-hours / watt of power.

CO2 Reductions by Solar System Size Table

System size (kW)Annual Solar Energy Production (kWh)Carbon Emission Reductions per year (metric tons)
2kW2,8402.1
3kW4,2603.2
4kW5,6804.2
5kW7,1005.3
6kW8,5206.3
7kW9,9407.4
8kW11,3608.5
10kW14,20010.6
12kW17,04012.7
15kW21,30015.8

 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. When you take into consideration that the national system size average in the U.S. is 6 kW (6,000 watts), a 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.

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. As the first data table illustrates, 20-year electricity savings from solar can be significant, ranging from the low end of $10k to almost $30k. 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. On the emissions side, as panel system size increases, so do the CO2 reductions in the surrounding environment, making solar an eco-conscious investment. If you’re looking for customized estimates not only around potential solar savings but also around the cost of a solar panel system, try our Solar Calculator. If you’re ready to start looking at quotes from pre-screened solar contractors in your area, check out the EnergySage Solar Marketplace.

 

how much do solar panels save

 

4 thoughts on “How Much Do Solar Panels Save?

  1. Ridley Fitzgerald

    Solar panels sound like a great idea. I love the face that they can save over $20,000 over a 20 year period, in some places. We get a lot of sun where I live, so I think it’s a worthwhile investment.

  2. Gene Nordgren

    Your savings estimates may be misleading. For example your chart shows the average cost for the solar panels in Arizona is about $11,000, and the average 20 year savings is $20,000. Just what does that mean? Is this savings less the solar panel cost, or over and above the $11,000 solar panel cost? The former reflects an actual savings of $9,000 over 20 years, while the latter reflects a $31,000 electrical savings. Which is it? Don’t tell me it depends upon usage and KWH costs because you have listed a determined cost. Use the same assumptions. I am trying to decide if solar panels is cost effective for me in Arizona.

  3. Sara Matasci

    Hi Gene,
    The average 20 year savings calculation takes the cost of the installation into account, so it would be a total of $31,000 in savings minus $11,000 in installation costs.

    If you’re interested in customized estimates for your home, you can use our Solar Calculator (no registration required!).

    –Sara
    Content @ EnergySage

  4. Sarah Angelo

    It’s great that solar panels not only help the environment, but also help save you money. The price of solar is continuously dropping, hence why solar installation has been on the rise more recently. Solar panels are great investment for any homeowner.

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