Do solar panels save money?
The answer is yes — but it may take a while
If you pay an electric bill, installing solar panels can help you lower your utility power costs. Years, maybe even decades, of reduced or eliminated electricity bills can add up to more than your solar panels cost in the first place, and that’s not even counting other benefits, like potentially increasing your home value when you decide to sell.
However, these benefits aren’t always that simple, so you should be aware of how solar savings work before you put down your hard-earned money on a set of solar panels.
Whether you’re seriously considering a renewable energy installation or just doing a bit of research, this guide will highlight everything you need to know about solar panel savings.
Key insights
- Solar panels can completely negate your electricity bill, and you may even make money each month selling power back to your utility company.
- On average, solar panels should pay for themselves in savings within about 11 1/2 years.
- You might be paying off your solar panels at the same time, though, which can limit the impact of your savings until your solar panels are paid off.
- The amount solar panels will save you varies significantly based on your location, the number of panels you buy, the local price of electricity and your total project costs.
How much do solar panels cost you?
On average, solar panel systems cost about $16,715 in the United States after applying the 30% federal tax credit. (Prices vary by installation based on the size of the system, the seller, the labor involved, permitting and other factors.)
However, that’s just if you’re paying cash. To avoid paying the full price of their solar panels upfront, many homeowners choose to finance their systems through their installers or third-party companies. Financing often means you just replace your electricity bill with a different monthly payment until the solar panels are paid off, and the interest and fees on a solar loan can increase the overall cost of going solar.
Even though solar panels can last 25 to 30 years, it’s a good idea to keep your loan term short to save on interest.
A $16,715 solar loan with a 5.5% annual percentage rate (APR) over 20 years would require you to make an approximately $115 monthly payment. That increases the total cost of your loan to almost $28,000. On the upside, if you shorten the loan term to 10 years, you’ll pay more each month (about $180) but less overall (around $22,000).
» READ THE FULL ARTICLE: How much do solar panels cost?
How much do solar panels save you?
The amount you can save by going solar depends on how much you spend on electricity normally.
Scott Crunick, a solar advocate with Apollo Energy, explained to us in an interview, “If you’ve got net metering, your electricity bills are a balance of your solar production and your electricity consumption. This can mean low and zero-dollar utility bills, especially in the summer.”
Imagine that your solar panels generate a total of 900 kilowatt-hours (kWh) of electricity during the month of April. If you were to use 1,000 kWh of electricity in the same time period, your April electricity bill would only be for 100 kWh of electricity and some unavoidable fees from your energy provider.
Now, let’s say you only use 800 kWh of electricity in May while generating 900 kWh of solar power. You won't have to pay for any utility energy that month, and the excess 100 kWh of power you generated may carry over to your next monthly bill in June.
» MORE: Are solar panels worth it?
Estimated solar savings by state
Solar panel ROI differs depending on your situation and choice of system, but we’ve outlined some estimated solar costs by state below along with a calculation of how much those systems could save you.
| Location | Average cost after tax credit* | Typical system size | Estimated payback period** | Estimated net savings*** |
|---|---|---|---|---|
| Alabama | $19,723 | 11.5 kW | 11 years | $28,590 |
| Alaska | $10,122 | 6 kW | 7 years | $34,500 |
| Arizona | $21,011 | 11.5 kW | 12 years | $23,891 |
| Arkansas | $19,558 | 11 kW | 13 years | $15,567 |
| California | $11,466 | 4.5 kW | 8 years | $30,000 |
| Colorado | $14,123 | 7.5 kW | 12 years | $14,479 |
| Connecticut | $14,700 | 7.5 kW | 8 years | $42,705 |
| Delaware | $17,157 | 9.5 kW | 12 years | $29,016 |
| Florida | $20,367 | 11.5 kW | 12 years | $21,500 |
| Georgia | $19,635 | 11 kW | 12 years | $23,182 |
| Hawaii | $10,280 | 5.5 kW | 6 years | $49,459 |
| Idaho | $18,200 | 10 kW | 14 years | $11,478 |
| Illinois | $14,333 | 7.5 kW | 12 years | $16,585 |
| Indiana | $17,822 | 9.5 kW | 12 years | $21,994 |
| Iowa | $17,451 | 9 kW | 12 years | $17,572 |
| Kansas | $16,317 | 9 kW | 11 years | $21,455 |
| Kentucky | $18,018 | 11 kW | 12 years | $20,247 |
| Louisiana | $22,488 | 12.5 kW | 14 years | $13,646 |
| Maine | $11,886 | 5.7 kW | 10 years | $25,880 |
| Maryland | $19,390 | 10 kW | 12 years | $21,395 |
| Massachusetts | $13,377 | 6.5 kW | 8 years | $33,013 |
| Michigan | $13,769 | 7 kW | 10 years | $23,652 |
| Minnesota | $15,904 | 8 kW | 12 years | $17,546 |
| Mississippi | $21,252 | 11.5 kW | 13 years | $20,147 |
| Missouri | $19,037 | 10.5 kW | 13 years | $18,292 |
| Montana | $16,002 | 9 kW | 13 years | $15,189 |
| Nebraska | $20,801 | 10.5 kW | 14 years | $13,421 |
| Nevada | $17,640 | 10 kW | 12 years | $18,319 |
| New Hampshire | $13,241 | 6.5 kW | 9 years | $28,409 |
| New Jersey | $13,573 | 7 kW | 10 years | $23,806 |
| New Mexico | $13,132 | 7 kW | 12 years | $15,413 |
| New York | $13,423 | 6.5 kW | 10 years | $24,387 |
| North Carolina | $13,815 | 6 kW | 13 years | $20,035 |
| North Dakota | $18,634 | 11 kW | 13 years | $26,028 |
| Ohio | $16,128 | 9.5 kW | 12 years | $19,272 |
| Oklahoma | $20,174 | 11 kW | 14 years | $14,190 |
| Oregon | $17,290 | 9.5 kW | 14 years | $23,058 |
| Pennsylvania | $15,173 | 8.5 kW | 10 years | $23,634 |
| Rhode Island | $11,928 | 6 kW | 8 years | $34,519 |
| South Carolina | $20,944 | 11 kW | 12 years | $24,561 |
| South Dakota | $17,566 | 10.5 kW | 12 years | $22,923 |
| Tennessee | $20,916 | 12 kW | 13 years | $19,688 |
| Texas | $21,654 | 8.5 kW | 13 years | $21,350 |
| Utah | $15,008 | 8 kW | 14 years | $10,202 |
| Vermont | $12,054 | 6 kW | 9 years | $26,468 |
| Virginia | $21,175 | 11 kW | 12 years | $21,692 |
| Washington | $18,830 | 10 kW | 16 years | $10,846 |
| West Virginia | $20,328 | 11 kW | 13 years | $19,893 |
| Wisconsin | $12,740 | 7 kW | 10 years | $21,005 |
| Wyoming | $16,191 | 9 kW | 13 years | $14,959 |
Bear in mind that these estimates are for those who pay in cash. If you finance your solar panels, interest and fees will eat into your long-term savings, though there’s a good chance you’ll still save money overall.
Think of it this way. According to the U.S. Energy Information Administration, the average monthly electric bill in 2022 was $137. That’s between the two loan payments we mentioned earlier ($115 and $180), so you’d either be slightly reducing or slightly increasing your monthly energy costs until your loan is paid off. (This assumes that energy costs won’t go up and the average solar panel system is enough to completely neutralize the average electric bill.)
If we take the higher $180 monthly payment, you’d spend $43 per month more on your solar panels than you would have on your electricity bills. That’s actually a loss of $5,160 over the first 10 years with your panels. However, once your system is paid off, you start to save $137 every month until your solar panels wear out around the 25-year mark. That would save you $24,660 over the next 15 years, bringing your net savings to $19,500.
Do people really save money with solar panels?
The benefits of solar panels aren’t just hypothetical.
Christopher, a ConsumerAffairs reviewer from Missouri, told us: “I'm happy about going solar. I'm producing more electricity than I'm using. So it's working out well. I even got an electric bill for $0 this month.”
I'm happy about going solar. I'm producing more electricity than I'm using. ... I even got an electric bill for $0 this month.”
Likewise, Mark in Arizona said: “One of my neighbors told me about the savings with solar energy and I got interested. It was a combination of being a little more environmentally aware and really putting a dent in the electric bill. And now, I'm very satisfied that I went with it. I had a very good experience enrolling with Vivint and my electric bill has decreased significantly.”
On the other side of the coin, it’s important to remember that not every solar panel system is a match for every situation. James, another reviewer from Arizona, wrote, “My system is way too small to take away nearly any of my energy bill, and the price I paid I’ll never recoup.”
How to estimate your solar savings
If you want to know how much you personally can save by going solar, try estimating your solar savings with these four steps.
Step 1: Calculate how much you spend on electricity.
It’s also important to bear in mind that you may spend more on electricity in the future if utility prices go up or if your energy demands increase, but those increases are harder to calculate.
Step 2: Design your system, and calculate your savings potential.
- Determine how many panels can fit on your roof.
- Estimate those solar panels’ annual production in kilowatt-hours based on their total wattage, your location’s peak sun hours and other local factors, like shade.
- Compare your solar power potential to your annual electricity consumption. For example, if your solar panels generate more energy than your property consumes, you can offset 100% of your utility power usage.
- Calculate your potential yearly savings based on your energy offset and avoided costs. Let’s say your solar panels can offset 100% of your utility electricity use, which helps you avoid 11,000 kWh in annual energy spending. If electricity rates in your area average 17 cents per kilowatt-hour, your solar panels could save you $1,870 per year (11,000 kWh x 17 cents).
Step 3: Determine the final price of going solar, including incentives.
Before signing any contract, be sure to understand whether your installer has included the federal tax credit in their final price and if there may be any additional “hidden” costs later on for project expenses like taxes and permitting.
Step 4: Subtract your cost from your potential savings.
FAQ
How much do solar panels save you per month?
The amount of money solar panels save you per month depends on the amount of electricity generated by your system as well as the price of electricity and the value of solar power in your area. Large enough solar energy systems can completely eliminate your electric bill.
Just be aware that financing your solar panel purchase can significantly limit your actual monthly savings until the loan is paid off.
What is the average payback period for solar panels?
The time it takes for a solar panel system to pay for itself varies widely, but the average payback period for solar panels is between 10 and 13 years in the United States.
How long do solar panels last?
Today, most solar panels for homes and businesses are expected to last for 25 to 30 years — maybe more.
Solar panels slowly lose efficiency over time, which is why they're typically sold with guarantees for at least 20 years of significant energy generation.
» MORE: How long do solar panels last?
Bottom line
In short, solar panels can, in fact, save you money. How much you save usually depends on the size of your solar panel system and the amount you spend on utility electricity. Just be aware that the majority of your savings may take awhile to have an impact on your wallet, depending on how you pay for your solar panels.
If you are considering going solar, here are some guidelines to help ensure that your system generates worthwhile savings:
- Your property gets ample direct sunlight, either on your roof or in an open space on the ground.
- You have high electricity bills, especially in the summer months.
- You can afford a large enough solar panel system to offset a significant portion of your electricity use.
- There are net metering or net billing policies in your area that will compensate you for solar energy sent out to the grid.
Ultimately, the best way to calculate whether solar panels will save you money is with an assessment based on the unique variables of your property, and it may be worth getting multiple opinions.
“We started looking into solar energy years ago because we thought that it'd be a bit of cost-saving. … We did look at a couple of other different solar companies but we didn't care for their salesmen at the time or how they did their presentation,” explained Jason, a ConsumerAffairs reviewer in California. However, once Jason found the right solar energy company, things fell into place. “The installation went well and quick. And right now, our electricity is a lot less expensive.”
» FIND THE RIGHT COMPANY FOR YOU: Best Solar Energy Companies
We started looking into solar energy years ago because we thought that it'd be a bit of cost-saving. … And right now, our electricity is a lot less expensive.”
Article sources
- U.S. Energy Information Administration, “ U.S. residential electricity bills increased 5% in 2022, after adjusting for inflation .” Accessed Aug. 28, 2023.
You’re signed up
We’ll start sending you the news you need delivered straight to you. We value your privacy. Unsubscribe easily.