Solar panels aren’t just good for the environment – you can benefit from serious savings over the lifetime of your solar panel system.
How much will solar panels save you? Key points to consider
- Solar panels cost money upfront, but will save you money on energy bills in the long term
- The average home can save between $10,000 and $30,000 over the lifetime of your solar panel system
- Start comparing custom quotes on the EnergySage Marketplace to see your estimated savings from solar power
How much do solar panels save? 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 play the biggest role in determining how much solar can save you.
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 by reducing your electric bill is one of the main appeals and selling points for solar as a product and home upgrade.
How much money do solar panels save you on electric bills?
The first step to understanding how much solar power 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 10,649 kilowatt-hours (kWh). Multiply that by the national average electricity rate as of October 2020 ($0.1360 per kWh) and you’ll find that the typical American family is spending just under $1,450 a year on electricity alone.
Then, you have to consider the volatile nature of electricity prices and determine what utility company rates will be in years to come. When you compare the cost of utility electricity with home solar, you should keep in mind that you can expect electricity rates to increase annually. Over the past decade, national electricity costs have increased at a rate of around 2.2% per year. Utility rate inflation is an added incentive for solar: when you generate your own energy with a rooftop photovoltaic (PV) system, you’re locking in energy costs at a constant rate so that you no longer have to consider variable utility company rates.
Because of the nature of solar as an up-front investment, the only costs associated with a solar system will be the installation costs and any added electricity costs in the event that your panels do not completely offset 100% of your electricity use. Whether or not your system will completely offset your electricity needs is primarily determined by how accurately you size your PV system – you can calculate how many solar panels you’ll need to secure that percentage.
To provide a snapshot for typical energy bill savings from a solar installation, the following table offers state-by-state data for 20-year savings estimates with solar. The data incorporates a number of assumptions:
- System size: 6 kilowatts (kW)
- Electricity demand: 10,649 kWh per year (the national average)
- Utility rate inflation: 2.2%
- Percent needs met by solar panels: 96% (EnergySage marketplace average)
- Electricity rate: State average as of October 2020 (according to EIA)
- Ownership of the solar panels is assumed
Solar panel savings estimates by state
|State||Average price (6 kW solar system)||Average electricity rate per state ($/kWh)||20-year savings|
*Note: the federal tax credit IS applied to the above table
Do you still have an electric bill with solar panels?
A common misconception about installing solar panels is that your electric bill will go away entirely. Even if you install enough solar to completely offset your electricity use, you will still receive an electric bill from your utility as long as your property remains grid-connected. However, this doesn’t mean you will always be paying money on your bill – here’s why:
Thanks to a policy called net metering, which is available in most states, renewable energy your solar panels produce that you don’t use immediately is sent to the grid in exchange for credits on your electric bill. This allows you to draw energy from the grid during the night (when the sun isn’t shining and powering your solar panels) but not pay any extra money, as long as you draw back the same amount or less than you provided to the grid. When you receive your monthly electric bill, any net metering credits you used that month will be indicated and you won’t be charged for that power. The remaining electricity you pulled from the grid that wasn’t offset by net metering credits and wasn’t produced and used immediately at your home is where you might see small charges for electricity.
In summary, yes, you will still receive an electric bill when you install solar panels. Importantly, the bill may not ask you to pay anything, 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 your 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 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 below table 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 / watt 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 watts) 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
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 will 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 was not 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 7 and 8years for most homeowners who shop for solar on EnergySage to get their solar panels to pay for themselves. Read this article to find out if switching to solar is worth it for you.
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. 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 and installation costs from pre-screened solar contractors in your area, check out the EnergySage Solar Marketplace.