How Much Money Do Solar Panels Save on Your Energy Bill?
Solar panels can save you thousands in the long term
![A single family home with solar panels on the roof](https://media.angi.com/s3fs-public/single-family-home-solar-panels-1362872948.jpg?impolicy=leadImage)
![A single family home with solar panels on the roof](https://media.angi.com/s3fs-public/single-family-home-solar-panels-1362872948.jpg?impolicy=leadImage)
Highlights
The average solar owner saves about $34,500 over 25 years.
Savings vary due to state, climate, local grid rates, and more.
It takes five to 15 years for solar panels to pay for themselves.
The average upfront cost to install solar panels is $27,100.
Installing solar panels can reduce your home’s carbon footprint—and your monthly energy bill. But how much money do solar panels save? While it can be tricky to pin down exact numbers, certain key factors can help you make an estimate. For example, homeowners have to weigh savings against the cost of installation, and potential savings will vary by home size, location, energy usage, and more.
How Much Do Solar Panels Save on Energy Bills?
The average solar owner saves about $1,380 per year on their energy bills. That adds up to $34,500 over the 25-year warranty of most solar panels. Savings are highly individualized for each household, and your savings may vary between $10,000 and $90,000. Many factors can affect your savings, like roof size, local climate, and solar incentives in your area.
Upfront Costs to Buy and Install Solar Panels
In the United States, the average upfront cost to buy a solar panel system and have it installed on a home ranges from $18,000 to $35,000. These costs vary by state and several other factors specific to individual households. Smaller systems may cost as little as $4,500, while the largest high-end systems may cost $50,000 or more.
Keep in mind that most solar owners will pay far less due to the Federal Tax Credit for renewable energy systems available in the United States between 2022 and 2032.
Cost to Add an Optional Solar Battery System
Solar panels only produce power when there’s sunlight. You can opt to install a solar battery to store excess energy, which your system can use at night, on cloudy days, and during power outages. A single emergency-use battery can cost about $200, while a long-lasting, high-efficiency lithium-ion system can add up to $14,000 to your upfront cost.
Saving on Solar Panels Through Tax Breaks and Incentives
![Construction worker installing solar panels](https://media.angi.com/s3fs-public/men_carrying_panel_1285799611_1500x844.jpeg?impolicy=leadImage)
The upfront cost to install solar panels can seem daunting. To help offset those costs, homeowners adding solar panels to a home in the United States can take advantage of many federal and state rebate programs. To find rebates you may qualify for in your area, check out the Database of State Incentives for Renewables & Efficiency.
Federal Tax Credit
With the introduction of the Inflation Reduction Act in 2022, homeowners can now claim a Federal Tax Credit of up to 30% for residential solar panel installation through 2032. In some states, this adds up to savings of $3,000 or more.
Net Metering
Solar panel systems can produce excess energy your home doesn’t use even after charging a solar battery. Many states and utility companies will let you sell that energy to them and feed it into the grid automatically, lowering your energy bills. This practice is called net metering, with policies and prices that vary significantly by state and company.
Other Solar Panel Savings Factors
Solar panel costs are highly individualized. A good solar installer will review your past energy bills and use special software to lay out the ideal setup for your home’s roof. They’ll consider the following factors:
Roof Size: The more roof you have, the more solar panels you can fit for more savings.
Roof Material: Certain roof types may require specific equipment for solar installation.
Solar Panel Type: Panel prices vary by type and manufacturer.
Climate: Solar panels work anywhere but are most efficient in sunny southern areas.
Home Location: Nearby trees or buildings that cast shade can limit solar production.
Energy Usage: Your home’s size and your family’s habits affect how much energy you need your solar system to produce to avoid paying for power from the grid.
Local Grid Rates: The higher the utility rates in your area, the more solar can save you.
Savings By Location
While the average homeowner will save roughly $34,500 over the 25-year warranty period of most solar panels, the exact amount you’ll save will depend on your location due to the cost of electricity.
For example, in California, where the average electricity rate is $0.30 per kWh, homeowners can see savings of up to $90,300 over 25 years. In other states like Washington, where the average cost of electricity is only $0.11 per kWh, that average savings proportionately drops to about $20,600 over 25 years. To get a better idea of what your savings could be, speak with a local solar panel installer.
Is Solar Panel Installation Worth the Cost?
Factoring in potential energy savings, tax credits, and other incentives, solar panels pay for themselves in about 13 years on average. Since most solar systems have a warranty of 25 years, that’s an additional 12 years to save on your energy bills. If you plan to sell your home in that span, solar panels can increase your home’s value by more than 4%.
To put the numbers into perspective, consider the average cost of $26,000 to install a solar panel system. With the 30% tax credit applied, it's about $18,200. According to the U.S. Energy Information Administration, the average monthly electric bill is $115, or $1,380 annually. If your solar system fully covers those costs over 25 years, that amounts to $34,500 in savings.
Average Solar System Installation Cost | 30% Federal Tax Credit on Solar System Installation | Average Cost With Federal Tax Credit Applied |
---|---|---|
$26,000 | $7,800 | $18,200 |
Solar System Warranty | Average Annual Household Electricity Expenditure | Total Electricity Savings Over 25-year Warranty Period |
---|---|---|
25 years | $1,380 | $34,500 |
You’ll save even more if your area gets a lot of sun, or if you have higher local utility rates. Plus, most panels still produce energy well past the end of their 25-year warranty period.
![5 ways to estimate potential solar savings, including calculating yearly energy expense by reviewing past bills](https://media.angi.com/s3fs-public/potential-solar-savings.png?impolicy=infographic)
Disadvantages of Solar Panel Installation
Solar panels aren't for everyone. You’ll see savings on your first bill after installation, and the long-term savings can add up. However, it can take anywhere from five to 15 years to pay off your initial investment.
For many, the idea of reducing their home's carbon footprint makes that wait worthwhile. However, solar panel manufacturing creates a considerable amount of greenhouse gases. While the renewable energy that solar panels produce offsets these emissions within four years of use, recycling options are limited when they reach the end of their lifespan.