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The rising cost of electricity from traditional sources, combined with government incentives to go green, has made the idea of installing solar panels more attractive to many homeowners.
How Much Money Does Solar Panels Save
But the true cost of solar panels, and whether they’ll save you money, depends on a few key factors.
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According to the latest information from the Center for Sustainable Energy, the average cost of a solar panel installation and system combined is between $15,000 and $25,000.
Electricity rates vary by location. The national average is about 15 cents per kilowatt-hour, according to EIA data from 2022 to the present.
Before you take that step, learn how your utility bill, location, and incentives can affect your wallet over time. Here are five steps to determine if you’ll save more than you spend on solar panels.
Solar panels generate their own electricity, so they can significantly, if not eliminate, your monthly electricity bill. The higher your bill, the more likely you are to benefit from a conversion. Be aware, however, that electricity charges and usage (the main charges on your statement) are fluid.
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“If the utility’s electricity price fluctuates, so will the amount of savings,” said Garrett Nelson, deputy director of the DOE’s Office of Solar Energy Technologies. “Similarly, if energy consumption changes, the amount of savings will vary.”
More solar power means more energy generation and greater potential for solar savings. Certain states, such as Arizona and California, have longer hours of sunshine per day on average.
The direction your home faces toward the sun, the amount of shade it gets, and the type of roof it has can also affect the output of your solar system. You can use the SolarReviews calculator to estimate the efficiency of the panels in your home.
The brunt of the cost of solar panels is the installation and purchase of the actual panels.
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Minimal long-term costs make up for upfront costs. “Most systems don’t require much maintenance and are designed to last 20 years or more with little change in power generation,” Nelson said.
When figuring out the total price, consider how much energy you regularly consume—your usage is listed on your monthly utility bill—and what size system will produce the amount you need. Some tools, such as the SolarReviews calculator, can estimate system size for you.
According to CSE, the average cost of a residential 5 kW system is $3 to $5 per watt by installation, which leads to a range of $15,000 to $25,000. That cost is before any tax credits or incentives.
If you know your current energy usage, you can figure out how much you’ll need to pay for solar panels.
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Then compare buying solar panels like you would any other big-ticket item, such as a car or a TV, says Vikram Aggarwal, CEO of solar marketplace EnergySage. Some companies reduce installation costs through rebates and other programs.
Aggarwal recommends getting quotes from three to five contractors. EnergySage pulls together solar company customer reviews, certifications, Better Business Bureau profiles and other information to help you find a reputable supplier.
A federal law passed in 2022 encourages consumers to improve clean energy, such as installing rooftop solar. A major update to existing energy-related tax credits originally set to expire at the end of 2023, the Residential Clean Energy Credit allows taxpayers who install solar energy (and other approved clean energy equipment) to recoup 30 percent of the cost in the form of a federal tax credit.
What this means: A solar installation costing $15,000 will generate a $4,500 credit (30 percent of $15,000), which you can use to reduce any federal taxes you owe during tax time. However, the credit is non-refundable, which means that any money remaining after you’ve paid your full tax bill won’t be paid to you. But you can use the remainder of the credit to pay taxes owed for subsequent tax years.
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The credit applies to eligible equipment installed after December 31, 2021, and is valid until 2032 at the 30% rate. Then gradually decrease.
Depending on your state, you may receive additional incentives such as cash back, property tax exemptions, fee reductions and expedited permits. In some states, homeowners with solar panels can sell excess electricity to their local utility. Find the credits available in your state by checking our database of state incentives for renewable energy and energy efficiency.
Changes in government trade policy can also affect prices. Various tariffs have been imposed on imported solar cells and panels over the past decade, affecting cost and supply. For example, the tariffs resulted in an increase of 16 cents per watt for the average consumer in 2018, which translates to an overall increase of $960 for a 6-kilowatt system, according to EnergySage.
If you live in an area with high energy prices and decent solar ratings, and you can afford the initial investment, it’s worth installing solar panels on your home while enjoying the 30% tax deduction — for environment and benefit your wallet. But don’t expect to eliminate your electric bill overnight.
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If you decide to buy solar panels, do your research and look for great deals. If you’re looking to spread the cost, consider financing with a solar loan. Remember, you don’t have to buy solar panels—you can also lease them. Leases offer lower upfront costs, but since you don’t own the panels, they won’t increase your home’s value, and you may not be eligible for incentives.
Going solar isn’t the only possible way to save money. Learn more about what you can do to lower your bills.
About the author: Lauren Schwahn at . covers consumer credit and debt. Her work has been featured in USA Today and the Associated Press. read more
Tommy Tindall is .He covers smart spending and ways to plan for a prosperous financial future. read more
The Economics Of Solar Power
Tracking Your Monthly Expenses: The First Step to Financial Success Read moreHow to Lower Your Bills: 38 Ways to Save Kelsey SheehyRead moreOkay, it’s true, how much do solar panels cost? Might be a useful question. But, in practice, this question is largely unimportant today. Whether it’s through a $0 down loan or a 3rd party ownership model that lets you lease a solar system instead of buying one, most residents and businesses with decent roof or ground space with solar panels should have the opportunity to go solar without buying an entire Solar panel system on the front of the system.
The real question—the real way going solar will affect your finances—is how much it will save you, and how often or when it will start saving you money.
I recently created the short infographic below to highlight 20-year savings from going solar in some of the most populous states in the country, as well as Hawaii, which has the highest average savings per project.
It’s worth noting that these savings are based on 2011 research. Since then, the cost of solar has dropped significantly, so the savings should be even greater (on average). Unfortunately, I don’t see any more recent research on this issue. The specific data points for these states—the average 20-year savings from going solar—are as follows:
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These numbers are included in a cool solar infographic I shared last week. However, the map showing these numbers is the 3rd of 4 numbers. I’ve taken this key map and inserted it below so that if you don’t live in one of those four states, you can see the state with the most savings population for your particular state, or Hawaii.
These savings are huge. Even the national average (also in 2011, when solar panels were much more expensive) was over $20,000! How much does a solar panel… save me? That’s the question to ask. (Of course, you can request a quote on solar costs to get a savings estimate, or even do a follow-up site visit to get a more accurate estimate, and it will give you an estimate of how much solar panels your home or business will cost. )
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How Much Money Do Solar Panels Save On Your Electricity Bill?
Zach tries to help society help himself one word at a time. he spends most of his time here
As its director, editor-in-chief and chief executive officer. Zach is a globally recognized expert in electric vehicles, solar and energy storage. He has presented cleantech at conferences in India, UAE, Ukraine, Poland, Germany, Netherlands, USA, Canada and Curacao. Zach is a long-term investor in Tesla [TSLA], Nio [NIO], Xpeng [XPEV], Ford [F], ChargePoint [CHPT], Amazon
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