Table of Contents:
Key takeaways
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Solar panels could save you the full amount of your electricity bill once your system is paid for.
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How much you can save depends on several key factors, such as the energy capacity of your system, local energy rates, your energy usage, your location, and more.
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Government policies like renewable energy incentives and net metering regulations can have a substantial impact on your solar savings potential.
There are many good reasons to consider a solar energy system for your home, but saving money is at the top of the list for many homeowners. While solar panels come with a hefty price tag, the cash you save by not having to pay for power can add up quickly.
In this article, our experts provide information about how much those savings might be, so you can decide if buying solar panels is worth the investment. We also explore some of the key factors that impact the savings potential of solar energy.
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How much can you save with solar panels?
Solar panels could save you everything you spend on electricity for your home if you size it right. This means the panels cover 100% or perhaps a little more of your energy needs. For the average American home, that was $136.84 per month, or $1642.08 per year in 2023, according to the U.S. Energy Information Administration (EIA). Our own data shows that the average solar energy savings over a 20-year period in the U.S. is $16,587 after the system pays for itself.
Even if you can’t completely eliminate the need for outside electricity, the savings can still be substantial. Essentially, any energy you generate with your solar panel system is energy you don’t have to buy.
Electricity bill savings depend on usage and utility rates
The amount that home solar panels can save you comes down to two main factors: how much energy you use and how much you pay for that energy.
Your utility bill should tell you how much energy you use each month in terms of kilowatt hours (kWh). It should also tell you the rate you pay per kWh for that energy in addition to the total cost.
These figures can be helpful in estimating your solar savings, especially if your system can’t fully replace the energy you use from the grid. You can use the per-kWh rate to calculate the cost of the energy you’ll have to buy to supplement your solar setup.
It’s possible that your electric bill is cheap enough that solar isn’t worth it. For example, say a solar system costs you $15,000 and would only save you $50 per month. It would take 300 months (or 25 years) to recuperate your investment.
Consider how much solar panels cost
The money you save each month in utility fees is just one part of the equation. You also have to consider the cost of a solar panel system, as you haven’t actually saved money until the system is paid for.
In the U.S., the average cost of a new solar panel energy system is $17,823, and typically ranges from $13,958 to $21,082, according to our data. Whatever the cost of your system, you’ll need to weigh that against your monthly energy savings over the lifetime of your system to get an accurate estimate of the money you could save with solar energy.
How long do solar panels last?
Modern solar panels are guaranteed to perform with minimal degradation between 25 and 30 years. They can continue to put out power long after that, too. This is another critical factor in determining your solar savings potential. It may take several years—10 on average in the U.S.—for your solar system to pay for itself. This is called the payback period. However, once your panels are paid for, everything you don’t spend on energy for the remainder of your panels’ lifetime is yours to keep.
How net metering shapes total savings
In many cases, your solar panels can actually generate some revenue through net metering. Net metering is a billing policy that allows solar panel owners to sell energy they create and don’t use back to the grid, typically at market rates.
If your home makes it possible to generate excess electricity, net metering can significantly increase your energy savings and increase your return on investment (ROI) from your solar panels. Regulations around net metering vary by state, so be sure you understand the regulations where you live before factoring these figures into your savings formula.
Your location impacts solar exposure and financial return
Where your home is located also has a powerful effect on how much you can save with solar. Location plays a role in a few different ways:
| Factor | How it affects solar ROI |
|---|---|
| Climate | Homes in areas with significant regular precipitation won’t get as much sunlight, limiting how much energy panels can generate. |
| Regulations | State laws around net metering and other related issues have a direct impact on how much money a solar system can save you. |
| Local economy | Installation costs are dependent on local labor rates. Getting professionals to install your solar system can be much more expensive in some areas than others. |
| Latitude | Areas in the northern part of the country get less sunlight in winter than areas further south. This means that solar panels in these areas won’t be able to generate as much energy during winter. |
| Lot specifications | Your individual lot where your home is located can also play a role in your savings potential. If your home is in a heavily wooded area, your access to sunlight and the energy it generates may be limited. |
Tax incentives can increase savings
Federal, state, and local governments offer incentives to encourage people to invest in cleaner energy solutions. These incentives can really cut your out-of-pocket cost of a new system.
All homeowners in the U.S. are eligible for the federally issued Residential Clean Energy Credit through the Internal Revenue Service (IRS). This credit allows homeowners to deduct 30% of the total cost of their solar energy system on their tax return.
Your state and local governments may also offer their own financial incentives for going solar. The amounts and availability of these programs vary from one location to another. However, these incentives could save you thousands of dollars on a new solar panel setup, making it well worth your time to see what is available in your area.
Bottom line on solar panel savings
A solar energy system could save you everything you currently spend on your electric bill, which could be thousands of dollars per year in some cases. While a new system will set you back nearly $18,000 on average, it is likely to pay for itself over time and help you save money for many years to come. That said, solar isn't worth it for everyone, so calculate your potential carefully.
FAQ about solar panel savings
Below are a few frequently asked questions about solar panel savings:
Do you really save money with solar panels?
You can really save money with solar panels through energy savings and, in some cases, returns generated through net metering. However, it typically takes several years’ worth of energy savings to pay for the cost of the system.
How much will solar panels reduce my bill?
Solar panels can reduce your energy bill by 100% in many cases. However, your energy savings depend on the capacity of your system, your location, your energy usage, and other factors.
How do solar panels affect your electric bill?
Solar panels will reduce the cost of your electric bill. Depending on the capacity of your system, your energy needs, where you live, and other factors, the energy from your panels could eliminate your electric bill entirely. However, your actual savings will vary based on those factors.
How long do solar panels last?
Modern solar panels are guaranteed to perform around 25 to 30 years on average, though they'll often produce power for years beyond that. Environmental factors, the quality of your panels, and other factors can affect their working lifetime.