olar panels are the ultimate win-win situation: not only are they beneficial for the planet, but they also have the potential to greatly reduce your monthly expenses. Want to know how much can solar panels save? It might be more than you think!
Navigating the solar world: how to go solar without feeling overwhelmed
Solar energy continues to expand across the United States, with more and more households going solar month over month and year over year. One of the first questions someone considering buying solar panels may ask is whether solar energy will be the right choice for them. Here is the answer: before taking the plunge, do your research and gather as much information as you can about the benefits you will receive with solar. This article will be especially helpful for those willing to discover how much they can save on electricity if they decide to invest their money in a solar installation.
Why go solar? What benefits come with solar panels?
It’s hard to overestimate the importance of the green energy transition in today's world. Renewable energy production is crucial to protecting our planet from the effects of climate change. One simple and convincing example of how solar panels help with it: a typical passenger vehicle (a fossil fuel car) emits about 4.6 metric tons of carbon dioxide per year1. These emissions can be offset by just one average residential solar system! Now, let’s talk about another big plus, namely solar energy savings.
Do solar panels save money? Can solar energy reduce your electricity bills?
Solar panels can save you a lot of money in the long run, and we'll back this up with data from various states later on in the article. Generally, savings with solar energy can reach up to 50% of your electricity bill! If you decide to equip your solar system with a battery to store the generated energy for later use at night or when it is cloudy, you can even go completely off-the-grid and forget about power bills as long as your solar panels work.
Solar price today: how much will it cost to install solar panels?
Before reaping the benefits of solar energy savings through lower electricity bills, keep in mind that there will be significant initial expenses when installing a solar system. Although the upfront price of solar panels has fallen dramatically over the last decade, it may still be quite a big budget purchase. But don't let that discourage you because, in the long run, you'll see significant savings on your electricity bills.
How much does an average U.S. solar panel system cost? The price of a typical residential photovoltaic system has dropped by half since 2010, from $40,000 to around $20,000, without considering solar incentives that reduce the cost of your solar installation2. In the next section, let’s see how you can benefit from different solar projects initiatives.
Do solar incentives really cut the cost of solar panels? And if so, by how much?
The Federal Tax Credit (also called the ITC), the main initiative for solar setups, covers up to 30% of the total system and installation price. With the Federal Tax Credit, solar panels will cost you about $16,000, or between $3,500 to $35,000, depending on the size and the type of your system. As stated in the Inflation Reduction Act of 2022, the 30% Federal Tax Credit is available through 2032 and will decrease to 26% in 2033 and 22% in 2034, so now it is a really perfect time to go solar.
Additionally, there are various state initiatives that further reduce your initial costs. Thanks to numerous tax rebates, a solar energy system becomes much cheaper. To find out how else you can save on your solar installation, check the Database of State Incentives for Renewables & Efficiency.
How much do solar panels save? What is the average solar power ROI?
With all the information you now possess, it’s time you learn about your potential savings with solar panels. On average, American homeowners save roughly $1,500 a year on their electricity bills by installing a solar panel system, which is $37,500 over the course of 25 years. And this figure could be higher since these savings range from $10,000 to $90,000 depending on numerous factors.
Of course, the amount of solar power your photovoltaic system generates determines how much money you pay to your electricity provider. The efficiency of solar panels depends on various factors, such as the quality of solar panels, the size and orientation of your roof (if you're installing a rooftop system), and the number of panels you install. Each home is unique, so it's best to consult with a local solar installer to know exactly about the solar electricity you will be able to produce and determine how significant your potential savings are.
Solar energy savings by state. What are the states with the best solar ROI?
To give you a general picture of how solar savings vary across the country, we've put together a table that shows the potential savings of solar panels in ten different states3. Since most solar panels come with a 25-year warranty, we've calculated savings based on that time frame. However, your solar energy system is likely to last even longer, as the latest models have an expected lifespan of 40-50 years, meaning that you will be able to save significantly more money. These calculations were done for a typical residential 6.6 kW solar array which satisfies 100% of a household's electricity needs.
In this table, the electricity bill parameter was chosen for a reason because the price you pay for electricity plays one of the most critical roles in determining how much you will save by installing a solar energy system. As a rule of thumb, higher local electricity rates mean a higher potential for solar savings. Among the states mentioned above, Massachusetts, California, and New York have the highest electricity tariffs, and these are the places where you can take the most financial advantage of your solar setup. The fact of how much you’ve spent for installing solar also matters, but your long-term solar savings are mostly dependent on the electricity rates in your state.
How to calculate solar savings for your solar system. Saving calculators
In this section, we suggest that you look through simple calculations showing how energy saving solar panels may be, or, in other words, how less electricity you may need from the grid with solar. To calculate the savings of solar panels for your household, stick to the same calculation approach using your numbers.
Step 1: Let’s assume that you use 10,632 kWh of electricity each year for the price of 13.72 cents, or $0.1372. Multiply these numbers together to get the amount of money annually spent on electricity:
10,632 kWh x $0.1372 = $1,458
Step 2: Then, let’s suppose your solar system is expected to generate 10,000 kWh of energy in a year:
10,632 kWh – 10,000 kWh = 632 kWh leftover
Step 3: Multiply the leftover that you will need to pay for each month and the cost per kWh:
632 kWh X $0.1372 = $87
Step 4: If you go solar, you will only pay $87 per year on energy, or around $7.25 per month:
$1,458 (total electric energy cost) – $87 (leftover for you to pay) = $1,371 in savings each year
If you don’t want to do the math on your own, use one of the online calculators, for instance, Project Sunroof Google Calculator or PVWatts Calculator by NREL.
The final verdict on solar savings: Solar panels have the potential to save you much money
Switching to solar can lead to significant savings on your bills in the long run. With fossil fuel prices on the rise, solar energy is becoming an increasingly cost-effective option thanks to improved technology and financial incentives.