How Much Will Solar Panels Save On Electric Bill

With the increasing accessibility and widespread adoption of renewable energy, an increasing number of homeowners are opting for solar power to lower their carbon footprint and cut down on monthly electricity bills. However, the amount of money one can expect to save on electricity bills after installing solar panels depends on various factors such as location, system size, and electricity usage. Despite this variability, a rough estimation demonstrates that solar panels can generate substantial long-term savings for homeowners.

Solar Tax Benefits and Incentives

Here comes the exciting part! Besides the federal tax credit mentioned earlier, several states and utilities have renewable energy policies that enhance the return on investment for solar customers.

Net Energy Metering (NEM) for Solar Power Systems

Most solar systems generate surplus solar energy that gets automatically fed into the power grid. Thanks to net metering policies, numerous states and utilities offer credits to ratepayers for this energy. As per these policies, solar customers receive a reduction in their monthly electricity bill based on the amount of energy their solar system contributed to the grid.

The specifics of this incentive vary by state and, in some cases, even by utilities operating within the state. Certain states mandate utilities to credit customers at retail rates, where each kilowatt-hour of solar energy fed into the grid earns customers a kilowatt-hour of grid energy at the retail rate. Meanwhile, other states require utilities to credit solar customers at lower wholesale energy rates. Nonetheless, any net metering policy results in a reduction in your customers’ remaining utility bills.

Discounts or Refunds on Solar Energy Systems

Various utility companies offer attractive incentives to encourage customers to switch to solar power. For instance, Ameren Missouri provides an upfront payment of $0.25 per watt for customers’ solar panel installation. This translates to a considerable sum of $1,000 to $2,000 for an average 5–8-kilowatt solar system.

Tax Credit for Solar Energy at the Federal Level

Although previously mentioned, it’s worth highlighting again – solar customers can avail of a tax credit of 30% on their solar system’s cost if it’s installed before 2032 ends. Depending on the customer’s location, this could translate to savings of more than $3,000 on upfront installation expenses.

Assessing the Value and Benefits of Solar Energy?

Thanks to the current federal tax credit and other incentives, solar panel installations are now paying for themselves in just 7 years for most Americans. This means that solar customers have at least 18 more years to enjoy the savings generated by their solar panels under the typical 25-year warranty period. For instance, suppose a customer pays $12,600 (after applying for the 30% tax credit) for an $18,000 solar panel installation. If their average monthly electric bill is comparable to the national average of $121, the payback period would be a little over 8 years. For the remaining 17 years of the panels’ lifespan, customers could save almost $1,500 per year or nearly $25,000 over the 17 years.

Furthermore, those in regions with plenty of sunshine, high electric rates, and solar incentives will experience much greater savings. For example, owners in California could save up to $90,000 over the panels’ 25-year lifespan.

In addition, solar panel systems continue to function at 80% or higher, even after the 25-year warranty period expires. Even if homeowners sell their houses, they can still benefit from the increase in property value provided by solar panels, which has a national median value of over $9,000.

What Are Some Strategies for Reducing My Solar Energy Costs?

If you’ve observed the typical payments received by Australians for exporting electricity to the grid and noticed that you’re falling behind, it might be the right time to alter your energy consumption practices. Here are some useful suggestions:

Ensure that the rates on your plan are affordable: Although there are several deals available in the market for solar-powered households, some companies may conceal high rates behind a substantial feed-in tariff. Keep in mind that you will still be charged for electricity when your solar panels are not functioning, hence opt for a plan with lower rates.

Examine your feed-in tariff: If your solar panels are producing surplus energy to be exported to the grid, it’s advisable to ensure that you receive a favorable feed-in tariff. Explore our guide on feed-in tariffs to identify what is considered advantageous in your area.

Think about the possibility of installing solar storage: Solar storage functions by utilizing the energy produced by your solar panels during the day, and at night time. As a result, you rely less on the grid and should consequently incur lower electricity expenses. Keep in mind that solar batteries require a substantial initial investment, hence only consider installing them if you’re confident that you’ll eventually recoup the cost.

Sustain your solar panels: Your solar installer should clarify that solar panels need maintenance to maintain their efficiency. It is recommended to discuss with your specialist the frequency at which this maintenance should be performed.

Practice energy efficiency: Even the world’s top-rated solar panels won’t benefit a household that lacks energy efficiency. To conserve solar energy, it is essential to use energy-efficient appliances, limit heating and cooling, and switch off lights when leaving a room.

What Is the Average Amount of Savings for Households That Use Solar Panels?

  • The savings from using solar panels to generate electricity vary depending on several factors, including state electricity rates, average sun exposure, household usage, and local incentives.
  • On average, a residential solar panel system generates 7.15 kW of power, which equates to a daily production of 32.2 kWh and a monthly output of approximately 965 kWh, assuming 4.5 peak sun hours per day.
  • According to 2021 statistics, the average monthly electricity bill in the U.S. was $121.01, with an average monthly usage of 886 kWh.
  • A 7.15 kW solar panel system would produce more electricity than the average homeowner’s usage, potentially resulting in savings of $121.01 per month.
  • For states with an average monthly electricity usage below 965 kWh, a 7.15 kW solar panel system would cover their entire electricity usage, resulting in estimated monthly savings equal to their average electricity bill.
  • For states with an average monthly usage above 965 kWh, estimated savings can be calculated by multiplying the monthly power output of the solar panel system by the average electricity rate in that state.
  • Investing in a solar panel system can provide long-term financial benefits and contribute to reducing the carbon footprint, making it a valuable option for homeowners looking to save on their energy bills while also making a positive impact on the environment.

 Variables That Impact the Magnitude of Savings Achieved

It’s worth noting that aside from your physical location, other variables can influence the extent of the decrease you can anticipate in your electricity expenses:

1. Position

The quantity of solar energy that can be harnessed is directly proportional to the amount of direct sunlight available in your area. This measurement, also known as “peak sun hours,” represents the average number of hours per day when the sun is shining. If a region has six sun hours per day, a solar array in that area will capture twice as much energy as an array in a location with only three sun hours.

Solar panel output, and therefore your potential savings, can also be influenced by the temperature in your area. Higher temperatures can cause a decrease in solar panel efficiency. Generally speaking, solar panels tend to perform better in cooler climates.

2. System Size

The size of your solar array is directly related to the amount of money you can save. Purchasing a single solar panel will not significantly impact your electricity bill, whereas installing a complete rooftop array will have a much greater effect, especially when taking into account the savings over the lifespan of the array.

3. Energy Usage

The amount of savings you can receive from solar power is directly related to the amount of energy consumed by you and your family. If your energy and electricity usage is minimal, the savings may not be substantial. However, for the average family with typical energy usage and rates, significant savings can be expected over time on their electricity bills.

4. The Price of Electricity Per Unit

Individuals with higher electricity rates will experience a more substantial decrease in their electricity bill. For instance, in states such as Hawai’i, where electricity costs exceed 33 cents per kWh, the potential for savings is enormous! Each solar panel in Hawai’i can provide over three times the savings compared to states such as Louisiana and Oklahoma, where the average electricity rate is around 11 cents per kWh.

5. Rewards for Encouraging a Particular Behavior or Action

There are multiple federal and state incentives available that can help you save money on the purchase and installation of a residential solar system. These incentives include tax credits, rebates, and net metering programs, which can significantly reduce your electricity bill.

Net metering is a program that allows homeowners with grid-tied solar panel systems to receive credit for any excess electricity they send back to the grid. Under this system, utility companies track both the amount of excess electricity generated by the solar panel system and sent to the grid, as well as the amount of electricity consumed by the homeowner from the grid. If the solar power system generates more electricity than is consumed, the excess electricity is credited to the homeowner or business and applied against future bills. This can result in significant savings on monthly electricity bills, especially in locations with many hours of peak sunlight.


In addition, the Federal Solar Tax Credit can significantly reduce the initial installation and purchase costs of a solar system by thousands of dollars. Furthermore, local and state agencies offer additional rebates and credits to further lower the upfront costs.

6. Quality of Solar Panels

The quality of your solar panels plays a crucial role in their energy production and potential savings. To ensure optimal performance, it’s essential to purchase solar panels only from reputable manufacturers. Although cheaper panels may seem like a cost-effective solution upfront, they often result in long-term losses. Even high-quality solar panels require some maintenance to function at peak efficiency. Regular cleaning to remove dirt, debris, ice, and snow accumulation is crucial. It’s also important to ensure that trees and bushes don’t cast shadows on the panels, as impeded sunlight can significantly reduce their production. Regularly checking for damages is equally essential, as having a single damaged panel in your array can significantly reduce the output of the entire system.

Finally, it’s crucial to orient your panels optimally to capture sunlight. You can use tilting brackets or solar trackers to maximize your panels’ efficiency as the sun’s trajectory changes throughout the year.

How to Estimate Your Potential Savings with Solar Panels

Calculating the savings that come with installing solar panels can be a complex process due to several factors that come into play. To estimate your potential savings, you can follow the steps below:

  • Determine your household’s average monthly energy consumption in kilowatt-hours (kWh) by examining recent electric bills.
  • Find out the average cost per kWh of electricity in your area. This information can be obtained from your electric bill or a table provided by your utility company. This rate can serve as a benchmark for estimating your potential savings.
  • Research the cost of installing a solar panel system for your home. The cost of installation will vary based on several factors, including your home’s size, energy usage, and other variables. It’s worth noting that some homes may still need energy from the grid, even with several solar panels. However, if you live off-grid or in a tiny house, you can power your entire home with a Power Kit and an appropriately-sized solar array. For larger homes, a whole-home generator may be a viable off-grid energy solution.
  • Estimate the amount of electricity a solar panel system would generate based on your location, panel orientation and tilt, and other variables.
  • Calculate your estimated monthly savings by subtracting the cost of the electricity generated by your solar panel system from your current monthly energy bill. This estimate may not be exact, so it’s essential to leave some margin of error to account for incentives, financing costs, and changes in electricity rates over time.
  • Take into consideration the long-term savings potential of solar panels, which can provide savings for over 25 years, depending on the system and maintenance.
  • To maximize your savings, consider installing a whole home generator solution. EcoFlow’s off-grid systems combine one or more DELTA Pro portable power stations with solar panels to maximize the system’s energy output. Using a power station allows you to store energy for power outages and provide expansion options for even more future savings.

Frequently Asked Questions

How much will a 5kW solar system save me?

By taking this figure and multiplying it with your power cost, you can determine that by investing approximately $6,000-$8,000 in a 5kW solar system, you can potentially save more than $500 per quarter. This translates to a significant gain of $54,300 over 25 years on your electricity bills!

What happens to solar panels after 25 years?

A National Renewable Energy Laboratory (NREL) study has revealed that solar panels experience an average degradation rate of 0.50%. This implies that even after 25 years, you can still anticipate your solar system to generate around 89% of its initial output.

How many solar panels does it take to power a house?

To completely offset utility bills using solar power, an average home typically requires around 17 to 21 solar panels. The exact number of panels needed varies depending on factors such as your geographic location and the specifications of each panel.

Is 5kW solar enough to run a house?

To sum up, for a home with an average annual energy consumption of 3,000 to 4,000 kWh, a 5kW solar system may be adequate. Nonetheless, it is crucial to take into account your household’s energy requirements as well as the climate conditions in your locality before reaching a decision.