how much do solar panels save

How much do solar panels save?

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 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

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 do solar panels save

How much money do solar panels save you 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 10,400 kilowatt-hours (kWh). Multiply that by the national average electricity rate as of April 2019 ($0.1326 per kWh) and you’ll find that the typical American family is spending just over $1,856 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 approximately 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 locking in energy costs at a constant rate so that you no longer have to consider 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.

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: 10,400 kilowatt-hours per year (the national average)
  • Utility rate inflation: 2.2%
  • Percent needs met by solar panels: 94% (EnergySage marketplace average)
  • Electricity rate: State average as of April 2019 (according to EIA)
  • Ownership of the solar panels is assumed

2019 Solar panel savings estimates by state

State
Average price (6 kW solar system)Average electricity rate per state ($/kWh)20-year savings
Arizona$12,852$0.1295$18,528
California$12,432$0.1805$31,307
Colorado$13,230$0.1209$16,066
Florida$11,046$0.1189$17,766
Massachusetts$14,272$0.2261$41,516
Maryland$11,634$0.1425$22,897
New Jersey$12,474$0.1642$27,315
New York$13,482$0.1756$29,069
Texas$11,970$0.1201$17,133
Washington$11,844$0.0972$11,709

*Note: the 30% 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, 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 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.

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CO2 Reductions by Solar System Size

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

21 thoughts on “How much do solar panels save?

  1. Yacelys Mendez

    It is a fight with the monopoly of electricity company. Making solar panels expensive is a way they are sure people will continue to depend on electricity. It is just like gas and electric cars. You hardly find where to charge your car. These huge companies provide billions of dollars to the government.

  2. Alfred Lippe

    You left out the rest of the cost. $11,000 to 12,000 is just for the panels. Add another $10,000 for the storage, transformers, rectifier, etc., plus battery replacement and other maintenance, and you just break even over yhe 20 year life of the system. Then you have to replace it and start again with the “savings”.

  3. malinda walters

    This is a great article however it fails to address the fact that if you live in California (don’t know if this is different in other states) PG&E will charge delivery charges for any power that goes over their infrastructure. This includes power you sell back to the grid. In California the delivery for energy is approximately twice the cost of generation. So if you sell power back during the day you pay delivery charges at say (2xGeneration rate X) and get credit for the power you provide at Generation rate X. Then you will pay X back to PGE for that power. Meaning it will cost you more money to give power back to the grid. I see many reviews on Yelp for installers where the customer is upset when they found out they still have a $1500 Delivery bill from PG&E after they oversized their system. Buyers should be aware of this potential issue.

  4. Karl

    The prices quoted are for the entire system, not just for the panels. I have a 5.14 kw system. I paid for the 20 year lease up front. The total amount was just over $8,400, and it included the panels, racking the inverter, and all the wiring. I basically wanted the system to cover about 50% of my utility costs. It has performed as advertised and saved me close to $1,000 per year for the past seven years according to my calculations. If you live in an area with net metering, there is less of a need for battery storage because you can reduce your load from the grid during peak times so that most, if not all, of your usage us covered by your panels. This depends on the size of your system. As far as other maintenance and equipment replacement, most systems have a 20 year warranty. That doesn’t mean it stops working after 20 years. It just means the owner would need to cover the cost of any maintenance after the warranty period is up. Most systems are guaranteed to produce at 80% of what they are rated for 25 years. The newer inverters typically carry a 12-15 year warranty. Most cost as much as a water heater to replace at that point. So maintenance costs are minimal for at the time that the system is under warranty. The only thing I can think of that might need to be done is cleaning them occasionally, and that won’t cost much. I have never cleaned my panels in the seven years I have had them. The rain usually does a good enough job. My point is that if someone is telling people that there are additional costs of $10,000 or more, I would be very skeptical. Because in the seven years I have had my panels, I haven’t spent one dime beyond my initial investment. At the end of 20 years, I was informed that they would likely sell me the system for $1 since the technology would have advanced quite a bit. I will hit my break even point sometime in year 8, not year 20. By my calculations, my net savings will be close to $13,000. And the panels would still continue to work. They just won’t be as efficient as the when they were first placed on my roof, that’s all.

  5. Karl

    Malinda’s comments are on point. It is very important for consumers to understand the rate structure that their utility company uses. Quiz your installers hard on this. It makes more sense to get an undersized system and figure out other ways to reduce your consumption as opposed to putting an over-sized system on your roof.

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