How much money do solar panels save in 2024?

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 $83,000 on bills over the next three decades. With lower electric bills, or a system that doesn't cover 100% of your electricity needs, your savings will be less. But that doesn't mean solar isn't worth it. Most solar shoppers save between $28,000 and $120,000 on electricity over the lifetime of their solar panel system.

We'll explain how to save money with solar, and how to calculate your estimated 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.

How much do solar panels cost?

Solar is an up-front investment. After you pay for the equipment and installation, your system will produce free electricity for years to come. But you may still have minimal electricity costs if your panels don't offset 100% of your usage. 

The cost of your system primarily depends on its size, which is determined by your electricity use. To estimate how much you'll pay for solar, multiply the size of your system (in watts) by the average cost per watt in your area––$2.75/W across the U.S., according to EnergySage data. Right now, an 11 kilowatt (kW) solar panel system (the average quoted size on EnergySage) costs about $20,948 after the federal tax credit. This is much lower than it was just 10 years ago. 

The federal solar tax credit allows you to apply 30% of your solar system's cost as a credit to your federal tax bill. Many states also provide local incentives, which help further reduce costs. And, 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 to the grid, helping you save more over time.

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. According to the U.S. Energy Information Administration, the average U.S. household uses 10,791 kilowatt-hours (kWh) of electricity annually. Multiply that by the national average electricity rate, $0.17 per kWh as of April 2024, and you'll find that the average American family spends around $1,834 per year, or $154 each month.

Also, keep in mind that electricity prices are constantly rising due to inflation. Over the past decade, national electricity costs have increased by about 32%, or 2.8% every year. 

Annual utility rate inflation is one of the biggest 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

*Assumes an annual electricity price increase of 2.8% based on the 10-year average inflation rate. 

Whether or not your system completely offsets your electricity needs depends on its size. 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 $50,000 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: 10,791 kWh per year (national average)

• State's average current electricity rate, according to the EIA

• Electricity inflation rate: 2.8% (10-year average)

• Percent needs met by solar panels: 100%

• State's average system size

• Cash purchase and ownership of the solar panels––savings will be lower with a solar loan or a lease/power purchase agreement (PPA).

• Solar lifetime: 25 years (most perform just fine for 30 years or longer, but are covered under warranty for 25 years)

Solar panel savings by state

*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

For reference, a typical vehicle emits 4.6 metric tons of carbon dioxide every year. This means that a 5 kW (5,000 W) solar panel system easily offsets the emissions produced by one fossil fuel automobile in one year.

As long as your roof is a good fit, solar panels are probably worth it. The Department of Energy breaks down how high your annual rate of return would need to be with other investments to match your solar savings. Spoiler: They'd need to be quite high!

By installing a solar panel system, you'll save on electric bills and reduce your carbon emissions. And if you have access to great incentives, like net metering or local rebates, or if you spend a lot on electricity, your savings will be high. We're talking upwards of $100,000 over 25 years in some cases. Either way, solar is a pretty risk-free investment, so it's worth it to start exploring your options.