How Much Do Solar Panels Save? (Cost & Energy Savings)

Are you trying to cut down on your energy bills and lower your carbon footprint? You should consider installing solar panels on your roof. Solar is a clean energy that can produce lots of electricity, helping you pay fewer utility bills. Keep reading to learn how much you can save by installing solar panels today.

Average Cost of Solar Panel Installation

Solar Panel Cost Savings

Average Solar Panel Savings per month

On average, a residential utility customer in the United States consumes 10,715 kilowatt hours (kWh) per year. With a national average electricity rate of $0.14 per kWh, the average American family has a yearly electric bill of close to $1,500. A recent study has shown that solar panels can save you between $44 and $187 per month on electricity.

Average Solar Panel Savings Annually

Solar panels can save American families an average of $2,200 per year on electricity. If you live in a state with additional tax credits and policies designed to make solar panels cheaper, you may be able to install more panels and save even more per year.

Average Solar Panel Savings Over 20 Years

Over the lifetime of a solar panel system, you are likely to save between $10,000 and $40,000 on electricity. With a lifespan of 25 to 30 years, that makes for pretty good savings for most American families.

Average ROI on Solar Panels

The National Renewable Energy Labratory states that for homes with solar-powered systems, every dollar saved on energy increases a home’s value by $20. That means solar panels offer a 20-to-1 return on investment (ROI).

Estimating Your Solar Panel Cost Savings

Before taking the leap and purchasing solar panels, it may be useful to estimate what savings they will bring to your average expenses. Follow the steps outlined below to calculate how much solar panels will cut down on your energy bills.

Energy Used Per Month

To begin, look at the number of kilowatt-hours (kWh) that you consumed for the last billing period and divide that number by the number of days in the month. For a more accurate estimation, you can add up your monthly kilowatt-hours for the entire year and divide that by 365. Knowing your yearly energy consumption will help you account for seasons during which you use more or less.

Solar systems calculate energy consumption differently than your local power company. The capacity of solar panels to produce electricity is measured in the maximum kilowatts the system can produce in an hour. For example, when a system that produces 2 kilowatt hours (kWh) per hour is exposed to the sunlight for five hours per day, the maximum amount of electricity that it can produce is 10 kWh per day.

When you look into purchasing solar panels, you should compare your yearly energy consumption with the maximum kWh of the panels to see how much energy the panels will cover. Next, to figure out the cost per kilowatt-hour of your panels, multiply the daily output of the panels by 365 to arrive at the annual output for the system. You can additionally figure out the output of the system’s life by multiplying the annual output by 25 — the average lifetime of a solar energy system.

Finally, divide the lifetime energy output by the cost of your system. For example, if your 4 kWh system costs $36,000, your system will cost $0.165 per kWh to operate. Now you can compare this sum to the cost per kWh that your electric company charges you, and you will be able to assess how much you would be saving on your energy costs.

Roof Size and Sun Exposure

When considering savings from solar panels, you need to factor in your roof size and your roof’s sun exposure. The larger your roof, the more space you have to install solar panels, which means a bigger upfront investment but more savings in the long run. Solar panels installed on the south-facing slope of roofs will also maximize the amount of sunlight they receive. Roofs that tilt at about 30 degrees will additionally help to maximize the amount of sunlight that hits your panels. Finally, in regard to sun exposure, more hours of sunlight will obviously increase your overall energy savings.

Home Location

If you live in a warmer, sunnier region, your potential for savings will certainly increase. Panels in colder climates risk being covered in snow and ice, which can prevent panels from receiving direct sunlight and reduce their effectiveness.

Average Local Solar Installation Prices

The national average cost for a 6kW solar panel system for a 1,500-square-foot home is $16,500. Most residential solar panel systems are sized between 3kW and 8kW, and these can cost anywhere from $9,255 and $28,000 in total installation costs.

Solar Energy Tax Credits, Incentives, Net-Metering

Solar Tax Credits

Federal Solar Tax Credits

In 2022, homeowners and businesses can claim 26% of their solar system costs from their taxes, thanks to the investment tax credit (ITC). To access this credit, you must own your solar system. If you had signed a solar lease, you won’t receive this benefit. Finally, even if you don’t have a tax liability that is high enough to claim the entire credit in one year, you are allowed to “roll over” the remaining credits into future years.

State-by-State Tax Breaks

Some states offer their own incentive programs to make buying solar panels cheaper for Americans. At least 10 states have additional tax credits similar to the ITC. These credits range from 10% to 40% and cap at levels between $1,000 and $5,000. The following states have the best credits: New York, Rhode Island, Iowa, Connecticut, Maryland, New Mexico, Colorado, Massachusetts, New Hampshire, and New Jersey.

Solar Rebates

Many states also offer upfront rebates for installing solar panels. While they are not widespread and often only available while funds last, it is still worth looking to see whether your state offers rebates. State government rebates can reduce the cost of your solar power system by 10% to 20%. Local utilities often provide additional financial incentives for homeowners to install solar panels. Some utility companies offer rebates on monthly electric bills, and others provide one-time subsidies to install a power system.

Low-interest Solar Installation Loans

Before you purchase solar panels, check to see if your state, local utility, or other non-government organizations offer loans to help you finance the purchase of a solar power system. These loans can help offset part of the associated costs.

Net Metering

Net metering is the process of producing electricity during the day through your solar panels and sending the electricity that you don’t consume to your local provider. The excess electricity will be banked as a credit that you can use to buy electricity from the grid. If you end up using more electricity from the grid than your credits can cover, the utility company will simply charge you the difference.

Solar Panel’s Effect on Electricity Bills

The amount of money that you save on your electricity bills when you install solar panels depends on the size of the solar power system you install. Larger systems are able to collect more sunlight, thereby increasing the amount of electricity they produce. As previously mentioned, the climate in which you live, the angle of your roof, and the type of panels that you install can all impact how much electricity your system produces and, in turn, how much money they save on your electricity bill.

On average, solar panels can save you $2,200 a year on your energy bills and between $10,000 and $40,000 over the course of their lifetime.

Carbon Footprint Reductions

Solar panels produce roughly 20 times less carbon than coal-powered electricity sources. But for your carbon footprint to be offset by solar panels, you’ll need to keep them in operation for at least three years to pay off the carbon debt created by the process of manufacturing the panels. After three years of using your solar panels, your overall carbon footprint from energy production will remain neutral for the rest of the panels’ lifetime. If solar panels produce all of your electricity, you could have a carbon neutral footprint for over 20 years — the average lifespan of solar panels.

Final Verdict: Are Solar Panels Worth It?

Yes, solar panels are worth it because they can save you money and reduce your carbon footprint. Obviously, there are caveats to this assertion. If you live in a cold climate that receives little sun, you may not benefit as much from solar panels as someone who lives in an area that receives lots of sun. Nonetheless, all homeowners should look into buying solar panels for their homes.