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In addition to reducing your carbon footprint, residential solar panels help you save money on your utility bill.
Local rebates and incentives can make solar panel installation easier and strengthen return on investment. However, since energy usage and costs vary around our country, and even from home to home:
- Statistics on how much solar energy will save an average house is almost meaningless (although for those looking for solar savings stats, see the table below)
- Calculating how much money solar panels will save you requires knowledge of your power usage, local electricity rates, estimated solar production and any federal, state and local solar incentives (such as the 26% federal solar tax credit) that affects the upfront cost of a solar system where you live.
Below we have included a link to a solar savings calculator which computes how many solar panels you need to power your home, tells you how much they will cost, and shows your solar payback period including both monthly and lifetime solar savings.
Your return on investment is shown alongside local rebates and the federal tax credit. It was originally developed with funding from the Department of Energy.
We have included it below because it’s the only solar savings calculator that uses the specific electric rates of your utility to properly compute savings. Most others just assume a national electricity cost and produce very inaccurate results.
How much do solar panels save the average home?
For folks who like statistics:
The average annual electricity consumption for a U.S. residential utility customer is 10,972 kilowatt-hours (kWh) per year, or an average of 914 kWh per month.
Multiply that by the national average electricity rate as of June 2020 ($0.13 per kWh) and you’ll find that the typical American family has electricity bills totaling $1,450 a year.
This means that if enough solar panels were to be installed to cover the average electricity usage across the country, average solar panel system savings for any home in America in 2020 would be about $1,450 per year.
However, what we all really want to know is:
- How much are the solar savings per month?
- How much do these energy cost savings add up to over a 25-year period?
In the table below, we list these figures for a typical home in each state.
Are solar power savings real? And what is avoided cost?
When we talk about solar savings, we are talking about avoided energy costs. That’s the amount you would have spent on utility electricity had you not installed a solar power system on your home to provide the same power.
And yes, these energy bill savings are very real. Because it’s highly likely you will continue to need to consume electricity at your home, solar savings are considered a very bankable investment return.
The first step to working out solar savings is to understand how much electricity you use now, how much that costs you, and how much electricity you are likely to use in the future.
Here is a list of the average savings that are likely to be achieved by an average US homeowner in each of the top 50 solar cities in America, given they installed a 6kW solar power system on their home (the typical size of a residential solar energy system in 2020).
Average monthly and lifetime solar savings by state and city
|City||State||SPR cost||Annual production of a 6 kW system||Average monthly savings Year 1||25-year bill savings||Top-rated solar companies in your city|
|New York||New York||0.19||6882||$108.97||$47,548||View companies|
|Los Angeles||California||0.19||9066||$143.55||$62,638||View companies|
|San Antonio||Texas||0.11||8094||$79.24||$32,376||View companies|
|San Diego||California||0.19||9024||$142.88||$62,348||View companies|
|San Jose||California||0.19||8435||$133.55||$58,278||View companies|
|San Francisco||California||0.19||8922||$141.27||$61,643||View companies|
|Fort Worth||Texas||0.11||8544||$78.32||$34,176||View companies|
|Charlotte||North Carolina||0.11||7962||$72.99||$31,848||View companies|
|El Paso||Texas||0.11||9660||$88.55||$38,640||View companies|
|Washington||District of Columbia||0.13||7620||$82.55||$36,022||View companies|
|Oklahoma City||Oklahoma||0.10||8430||$70.25||$30,655||View companies|
|Las Vegas||Nevada||0.12||9672||$96.72||$42,205||View companies|
|Albuquerque||New Mexico||0.13||9528||$103.22||$45,041||View companies|
|Kansas City||Missouri||0.11||8004||$73.37||$32,016||View companies|
|Long Beach||California||0.19||9012||$142.69||$62,265||View companies|
|Colorado Springs||Colorado||0.12||9270||$92.70||$40,451||View companies|
|Raleigh||North Carolina||0.11||8130||$74.53||$32,520||View companies|
|Virginia Beach||Virginia||0.12||8052||$80.52||$35,136||View companies|
|New Orleans||Louisiana||0.10||7278||$60.65||$26,465||View companies|
- The “Cost of utility company power” in the table above reflects an average of existing rate plans from the largest utility in each state.
- Forecast solar production of a 6kW system assumes installation at an optimal tilt and azimuth, with typical insolation conditions based on the data from the National Renewable Energy Laboratory and no external shading.
- 25-year savings forecast includes an expected inflation in the cost of utility power of 3% per year.
- The solar system is purchased in cash and owned, so the full value of avoided utility payments is held by the homeowner (as opposed to a solar lease).
How to find out how much solar panels cost and if they’re worth it where you live
Another benefit to using our calculator is our accurate and live solar installation costs, which are reported directly from partner installers. You’ll be able to see how an ideal PV system looks on your roof, find out your avoided cost of electricity, and see which system size pairs well with your energy consumption.
To gauge whether the cost of solar panels is worth the expense, be sure to look at lifetime savings estimates and get multiple installation quotes to make sure they’re in line with reported averages.
As of August 2020, the average installed cost per watt of installed solar is $3.08. For a 6kW system, that would amount to just over $18,000.
Even if you’re not planning on staying in your home for the 25-year lifespan of your photovoltaic system, you can count on your home selling faster, for more money, and recouping your installation cost.
How reliable are solar savings estimates?
Your solar installation is a long-term clean energy investment. Calculating the savings you can expect from installing solar panels for your home over the long haul is crucial when determining whether or not to go solar.
Forecasting residential solar savings can be more difficult than it first appears, and forecasts are inherently uncertain. We here at SolarReviews are passionate about solar and renewable energies and hope that you all decide to make the investment for your home and for our planet.
However, we are also committed to consumer education and giving people valid information on which to make choices. We believe it is important that you are aware of the limitations of estimates of future solar savings when deciding to purchase solar.
What makes forecasting solar savings more difficult than other estimates?
Solar is a very long-lasting product with a minimum system life of at least 25 years. It is difficult to predict anything with certainty going out 25 years.
Solar savings forecasts are challenging to make for two main reasons:
- The need for long-term accuracy of solar production estimates in kilowatt-hours (kWh) tailored to your location.
- Accurate economic value of that production after 10, 20, and 25 years (at least).
The solar energy production side of solar savings forecasts is relatively predictable and solar panels production in each climatic area is well-known and understood.
A lot of great work has been done by the National Renewable Energy Laboratories, and their PVWatts solar production calculator is considered highly accurate.
What is more difficult is forecasting the economic value of solar out as far as 25 years. The need to get this figure right to provide potential consumers with accurate figures about their savings, investment return, and payback period for solar is paramount.
Slight variances in this inflation rate can have large effects on these numbers. The assumed rate of utility inflation is a crucial ingredient in generating accurate solar savings forecasts.
What is a reasonable assumption for utility electricity price escalation and its effect on solar profitability over the next 25 years?
Image source: Institute for Energy Research
The Institute for Energy Research published a report showing the average price of residential electricity in America actually rose by 34% from 2005 until 2015. So in annualized terms, this equates to a simple rise of 3.4% per year, or a compound rise of 2.7% per year.
But, is this a realistic assumption we can use to justify the assertion that utility prices will continue to rise at these rates?
I think it is, and here’s why.
During the same period as covered by the image above, the Institute for Energy Research also reported that gas prices, the fuel used to create a lot of our electricity, actually fell 60%. If gas prices had stayed flat over this period then utility power price inflation would have risen at more like 5%.
For this reason, I am quite comfortable about solar companies using an assumed electricity price inflation rate of 3.5% for the coming 25 years, although I acknowledge it’s an educated guess at best.
There is certainly also a case to be made that utility rate inflation may actually be higher. Governments are increasingly becoming aware of the urgency of tackling climate change and are beginning to put in place more and more policies to subsidize renewable energy more than fossil fuel. Transition costs will probably be shouldered by ratepayers, adding to higher electricity prices for us all.
However, the more electricity costs, the better the savings look for those of us looking to install solar panels.
Other helpful content relating to home solar panel savings:
- The solar payback period for your home
- Solar panel cost data 2020
- Best solar installers near me
- The best solar battery for your home
- For an average-sized 6kW solar system installed anywhere in the country, solar panels will save about $1,500 annually.
- These savings are very real, and their relative strength depends on the availability of local city and state incentives.
- You can find reliable solar panel costs near you by using our calculator, which is built using real estimates.
- Uncertainty around utility cost inflation is the largest unknown when it comes to making solar estimates. However, the production value of solar is certain and can be well-relied on.
- Utility price escalations have occurred consistently each year, and we expect they will continue for the next 25 years. That’s the same timeframe of the expected useful life of your solar system.