How much money do solar panels save in 2024?

Savings with solar panels

Solar panels aren't just good for the environment, they can also provide serious savings. How much money you can save varies based on several factors including your location, current energy usage, the size of your solar panel system, and, most importantly, the price you pay for electricity. For example, if you currently pay $150 a month for electricity, you’ll save about $65,000 over the next three decades. Most solar shoppers save between $20,000 and $96,000 on electricity over the lifetime of their solar panel system.

In this article, we'll walk you through what you need to understand how about going solar can save you money and how to figure out what your personal savings will be.

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Key takeaways

  • Solar panels are an expensive initial investment, but provide significant savings on energy bills over time.

  • The average homeowner can save between $20,000 and $96,000 over a solar panel system's lifetime, depending on the electricity costs in your area.

  • Generally speaking, the higher your local electricity prices, the greater potential for your solar savings.

You can calculate your total solar savings by subtracting the amount you pay for solar (including tax incentives) from what you would have otherwise paid for electricity. 

Graph of solar panel payback period

How much do solar panels cost?

Because solar is an up-front investment, the only costs associated with a solar system are the equipment, installation costs, and any minimal additional electricity costs if your panels don't wholly offset 100% of your electricity use. 

How much installing a solar system on your property will cost varies depending on the size of your system and how much energy it needs to produce. For example, if you need an 8 kilowatt (kW) system and a solar system's average cost per watt ($/W) is $2.95/W, the total cost of your system will be $23,600. Significant solar tax incentives then help lower this cost by thousands of dollars. 

The federal solar tax credit allows you to apply 30% of your solar system's cost as a credit to your federal tax bill, lowering the average cost to $16,520. Many states also provide local incentives to reduce the upfront cost of going solar and increase your return on your solar investment. If you live in an area with net metering, your local utility company will compensate you with bill credits for any excess energy your solar panel system sends back to the grid, further reducing your costs. Lastly, as solar deployment continues to grow in popularity, the cost of solar is likely to decrease further.

How much do you spend on electricity?

The first step to understanding how much you can save is to calculate how much you spend on electricity annually. For example, a U.S. household's average annual electricity use is 10,632 kilowatt-hours (kWh). Multiply that by the national average electricity rate, which is $0.16 per kWh as of April 2023, and you'll find that the average American family spends around $1,700 per year, or $142 each month.

It’s also important to take the volatile nature of electricity prices into account and estimate how much utility company rates will increase over time. When you compare the cost of electricity with home solar, you should expect electricity rates to rise annually. Over the past decade, national electricity costs have increased by about 2.5% every year

Annual utility rate inflation is one of the reasons it makes sense to go solar. When you generate your own energy with a solar panel system, you lock in your energy costs at a consistent rate, which means you no longer have to worry about annual rate increases from your utility.

Electricity costs over time

Current Electric Bill Cost
10-year Electricity Cost*
20-year Electricity Cost*
30-year Electricity*
$50$6,722$15,327$26,342
$100$13,444$30,654$52,683
$150$20,166$45,980$79,025
$200$26,888$61,307$105,366
$250$33,610$76,634$131,708

*Assumes an annual electricity price increase of 2.5% based on the 10-year average inflation rate. 

Whether or not your system completely offsets your electricity needs depends on the size of your solar system. You can use the EnergySage calculator to determine how many solar panels you need to cover 100% of your energy needs.

The average U.S. homeowner will save around $42,000 over 25 years after installing solar panels, but your savings will vary depending on where you live and the cost of electricity in your area. The table below shows our state-by-state solar savings estimates over 25 years. We chose 25 years as the solar lifetime because most solar panel companies cover their products under warranty for 25 years. However, most solar energy systems will last more than 30 years, so you can expect even more substantial long-term savings. Our estimates are based on the following assumptions:

  • Electricity demand: 10,632 kWh per year (national average)

  • Utility rate inflation: 2.5% (10-year average)

  • Percent needs met by solar panels: 100%

  • System size: 8 kilowatts (kW)

  • Electricity rate: state average as of April 2023 (according to EIA)

  • Ownership of the solar panels

  • Solar lifetime: 25 years

Solar panel savings by state

State
Average Price (8 K W Solar System)*
Average Electricity Rate Per State ($/k Wh)
25-year Savings
Arizona$14,445$0.14$36,798
California$16,931$0.30$90,348
Colorado$20,365$0.14$28,880
Florida$15,274$0.16$42,288
Massachusetts$20,957$0.32$95,292
Maryland$18,530$0.16$39,576
New Jersey$17,464$0.17$45,799
New York$20,602$0.20$51,341
Texas$16,398$0.14$35,135
Washington$19,240$0.11$20,563
U.S. Total$16,520$0.16$41,986

*The federal solar tax credit is applied.

Significant financial returns are a compelling reason to invest in renewable energy, but money isn't the only thing solar panels save. When you install solar, you also reduce CO2 emissions by limiting your fossil fuel consumption. 

The Environmental Protection Agency has a formula to help you calculate how much various green energy practices help lower carbon emissions. The table below 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 / W of power.

CO2 reductions by solar system size

System Size (k W)
Annual Solar Energy Production (k Wh)
Carbon Emission Reductions Per Year (metric Tons)
2 kW2,8402.1
3 kW4,2603.2
4 kW5,6804.2
5 kW7,1005.3
6 kW8,5206.3
7 kW9,9407.4
8 kW11,3608.5
10 kW14,20010.6
12 kW17,04012.7
15 kW21,30015.8

For reference, a typical vehicle emits 4.7 metric tons of carbon dioxide every year. This means that a 6 kW (6,000 W) solar panel system easily offsets the emissions produced by one fossil fuel automobile in one year.

Are solar panels worth it?

Investing in solar panels is worthwhile because you can save as much as $20,000 to $96,000 over 25 years. For instance, if you pay about $150 a month for electricity right now, you’ll save around $65,000 over the next 30 years.

How can you pay for a solar energy system?

When it comes to installing solar panels, there are three main financing options. Paying for your system outright will generate the most long-term savings – but comes with a hefty upfront price tag. You can also take out a solar loan to pay for your system, which enables you to go solar even if you can’t afford to purchase a system with cash. Most solar loans don’t require a down payment, either. The third option is to lease your solar system, but you won't be eligible for valuable tax incentives and your savings will be significantly lower with this option.

Why is my electric bill still high with solar panels?

Although solar panels are a form of renewable energy, they still produce a finite amount of power. If you require more electricity than your solar panels can produce, you'll still owe money on your electric bill, though typically only a small amount. In some instances, your bill can still be high if you significantly increase your energy usage or your system isn't appropriately sized to meet your energy needs. If your bill suddenly increases and you haven't increased your usage, contact your installer as they'll likely want to inspect your system to ensure everything is working correctly.

How long does it take for residential solar panels to pay for themselves?

Many factors determine a solar panel system's payback period including the system's initial cost, tax incentives, your average electricity usage, and how much electricity your system generates. Some of these factors are easier to calculate than others, but on average, it takes between eight and nine years for most EnergySage customers to break even on their solar investment.

What are the disadvantages of solar energy?

There are two main disadvantages of going solar. The first is high upfront costs. While investing in renewable energy pays off over time, this technology is typically more expensive than traditional energy generators when it comes to the initial installation. However, you can reduce your costs through financial incentives like the federal solar tax credit and state rebates, which help alleviate some of the initial cost burden. 

The second disadvantage of solar energy is that it doesn’t consistently produce energy all the time, which is known as intermittency. Since solar panels produce less electricity at night and on overcast days, your solar system may not produce enough energy to cover 100% of your energy needs during certain times of the year. You can invest in battery storage to help lessen this problem.

Solar panel systems generate significant financial savings while simultaneously reducing carbon emissions. For most homeowners, the key factor that determines how much you’ll save is your current cost of electricity, which varies significantly depending on where you live. Solar is a risk-free investment that offers high returns if you live in a state with middle- to upper-level utility rates. To start generating free, clean energy at home, check out the EnergySage Marketplace. We provide up to seven free, custom quotes from vetted installers so you can confidently go solar.

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