Residential Energy Bills with Solar Power: For Better or Worse?

how much energy does a solar panel save

Solar panels convert the abundant sun’s energy into useful electricity. The principles are well known since they have been around since the 1800s, but with new breakthroughs and significant solar panels cost reduction, solar technology is seeing an advent. Installing solar panels is the way to go, as the demand for green energy rises and more people understand climate change. But how much do solar panels reduce your energy bill

Before answering that question, several factors have to be taken into consideration. Although solar technology is coming close to plug-and-play solutions, designing a good solar system demands some calculations and different factors are taken into consideration. To maximize your solar savings, good solar installers will be able to work your home location, energy usage and electric rates into the equation. 

Factors to Consider First

There are several factors to consider before you install solar panels. How much money a solar installation can save you depends on your home location, orientation, your energy needs or energy usage, energy costs and some other factors, such as the efficiency of the solar power system, system size, solar tax incentives etc. 

In any case, installing just a single panel can offset a part of your electric bill. Having more than one solar panel is the ideal case, as even a small 5kW system can offset at least two-thirds of your electric bills and solar savings only accumulate for at least two decades after the solar system has been installed. 

Home Location

Your home location is of paramount importance in determining how many solar panels you need and how much solar panels save in your area. The orientation of your house, the tilt of the roof and any nearby vegetation can have a significant impact on solar energy produced, so being mindful is important. 

First of all, the location of your household can make or break a good solar system. The further to the north you are, the less sunlight you receive. To overcome this obstacle, you can install more solar panels to cover your energy needs. On the other hand, you can also opt for high-efficiency solar panels. The extra cost for higher efficiency is offset by the federal solar tax credit and the solar panels installed to take up less space on your roof. 

Your home location is also determined at what tilt you should instal solar panels. To make the most renewable energy, you should understand how tilt can impact energy production. Good solar systems can take all of these into consideration. Most solar panels work best if simply fixed onto your rooftop. The smaller the tilt, the more energy is produced during summer. The steeper the tilt, the more energy is produced in the wintertime. 

Yet another thing to consider is the orientation of your house. This is probably the most important aspect of your home location to consider. Solar panels should face south, and the closer to the south they are, the more energy they will be able to produce. Solar cells work the best when they are exposed to 90-degree angle sunshine, and pointing them to the south will ensure you can cover your electricity needs and even have some excess energy. 

Any nearby tall vegetation, such as trees can reduce the efficiency of solar panel systems. Solar panel technology can produce more energy and reduce most of your utility bills when there is no tall vegetation around your house. When they are shaded, photovoltaic cells can stop producing electricity and in some solar systems can even act as a consumer of electricity. Ensuring that there is as little shade as possible will ensure you can save with solar panels what you’ve invested. 

Energy Usage

Residential solar makes the most sense when it can cover as much of your energy bills as possible. An ideally designed solar system will be able to offset 100% of your energy consumption but to design that system, you need to know a few key factors about your energy usage. You should understand your monthly energy usage, annual energy usage, as well as how different appliances and seasons can influence your energy use. 

Your annual energy use is the total amount of electricity you use in a year. To find out about your total electricity spent and how fast saving money can help pay off your solar system, check out your utility bills. They should tell you what your energy usage is per month. Summing these numbers will give you an idea of how much energy your solar system should produce to offset all of the expenses. 

The more energy you use per year, the bigger your PV system should be. An average residential solar system in the USA is between 1kW and 4kW in size, but you may need a system as large as 10kW to produce your own energy and bring down that power bill. 

You can reduce the solar system size by being more efficient with your electricity use. Switching light bulbs to LEDs and controlling your AC in a more moderate way can help you save as much as 30% of your electricity bill. Now that your consumption is lower, so will the initial costs of your solar system be. 

Local electricity rates

Local electricity rates in your area can also determine whether you will save money and how fast. In general, the higher your utility costs, the more you can save. The cost of solar may be high, but these upfront costs can pay off in as little as a couple of years. Check with your local utility company what your electricity rate is. 

Average Prices of Solar Companies Nearby

The average price of a solar system installed varies greatly in the USA. The national average of around $18,500 for a 6kW system is a good guidance price for an average solar panel installation. Installation costs make up around 10% of the initial investment. 

A better solution is to follow the price per Watt of solar panels installed. In the USA, the price per Watt of solar DC is between $2.50 to $3.50. Understanding your energy needs and the solar size should give you an approximate cost. Always remember that to maximize your clean energy production, you should always let a professional design your solar array. 

Average Savings for Homeowners by State

Solar PV systems can save significant amounts of money over a longer period of time. With a return of maximum 13% on the investment, this is a great way to stash your money, since you will be able to see savings for decades to come. Here are the average Savings for solar homeowners by USA states: 

State6kWh System PriceElectricity Rate Per 1kWh 1 Year Savings20 Year Savings
Alabama$ 10,878.00$0.21$2,294.88$45,897.60
Alaska$ 10,700.00$0.12$1,332.60$26,652.00
Arizona$ 11,722.00$0.09$1,014.00$20,280.00
Arkansas$ 11,677.00$0.12$1,259.40$25,188.00
California$11,899.00 $0.21 $2,306.76 $46,135.20
Colorado$11,144.00 $0.12 $1,306.80 $26,136.00
Connecticut$12,698.00 $0.21 $2,291.64 $45,832.80
Washington D.C.$12,787.00 $0.12 $1,319.64 $26,392.80
Delaware$11,766.00 $0.12 $1,266.96 $25,339.20
Florida$11,455.00 $0.12 $1,254.00 $25,080.00
Georgia$10,345.00 $0.11 $1,177.56 $23,551.20
Hawaii$11,855.00 $0.31 $3,288.36 $65,767.20
Idaho$11,189.00 $0.11 $1,170.00 $23,400.00
Illinois$11,411.00 $0.10 $1,081.80 $21,636.00
Indiana$11,056.00 $0.12 $1,323.96 $26,479.20
Iowa$11,233.00 $0.12 $1,318.56 $26,371.20
Kansas$10,612.00 $0.12 $1,277.64 $25,552.80
Louisiana$10,567.00 $0.10 $1,031.16 $20,623.20
Maine$12,743.00 $0.22 $2,402.52 $48,050.40
Maryland$12,166.00 $0.13 $1,357.32 $27,146.40
Massachusetts$12,743.00 $0.17 $1,776.12 $35,522.40
Michigan$11,810.00 $0.17 $1,821.24 $36,424.80
Minnesota$12,166.00 $0.12 $1,343.40 $26,868.00
Mississippi$11,722.00 $0.09 $1,009.68 $20,193.60
Missouri$11,500.00 $0.11 $1,171.08 $23,421.60
Montana$10,745.00 $0.11 $1,153.92 $23,078.40
Nebraska$12,565.00 $0.11 $1,140.96 $22,819.20
Nevada$11,588.00 $0.09 $1,016.16 $20,323.20
New Hampshire$12,565.00 $0.09 $1,012.92 $20,258.40
New Jersey$12,343.00 $0.19 $2,037.60 $40,752.00
New Mexico$10,834.00 $0.16 $1,741.56 $34,831.20
New York$12,698.00 $0.13 $1,348.68 $26,973.60
North Carolina$11,056.00 $0.12 $1,241.04 $24,820.80
North Dakota$10,745.00 $0.18 $1,966.56 $39,331.20
Ohio$11,100.00 $0.12 $1,273.44 $25,468.80
Oklahoma$11,633.00 $0.09 $960.12 $19,202.40
Oregon$11,100.00 $0.11 $1,185.12 $23,702.40
Pennsylvania$10,567.00 $0.13 $1,409.04 $28,180.80
Rhode Island$11,944.00 $0.23 $2,519.88 $50,397.60
South Carolina$11,633.00 $0.12 $1,290.60 $25,812.00
South Dakota$10,612.00 $0.11 $1,182.96 $23,659.20
Tennessee$11,056.00 $0.10 $1,115.16 $22,303.20
Texas$12,299.00 $0.11 $1,226.04 $24,520.80
Utah$11,810.00 $0.10 $1,080.72 $21,614.40
Vermont$12,654.00 $0.11 $1,189.44 $23,788.80
Virginia$11,810.00 $0.18 $1,978.44 $39,568.80
Washington$12,299.00 $0.10 $1,050.60 $21,012.00
West Virginia$11,722.00 $0.14 $1,512.36 $30,247.20
Wisconsin$11,544.00 $0.11 $1,205.52 $24,110.40
Wyoming$11,411.00 $0.10 $1,127.04 $22,540.80

Carbon Footprint Reduction

It is no secret that solar PV can reduce your carbon emissions. The energy that comes from the sun is clean, abundant and does not pollute the environment. Here is the carbon footprint reduction for a California-mounted solar PV system of various sizes: 

Solar System Capacity Annual Energy Production (kWh) Carbon Emission Reduction per Year (lbs of CO2)
1 kW16422627.2
2 kW32845254.4
3 kW49267881.6
4 kW656810508.8
5 kW821013136
6 kW985215763.2
7 kW1149418390.4
8 kW1313621017.6
9 kW1477823644.8
10 kW1642026272

Solar Energy System Average Cost

Every solar panel system consists of a multitude of elements that all work together to keep your household running on clean, renewable energy. Although solar panels are the most prominent part of every solar PV system, they are not the only component of this system. There is more under the hood. 

To function properly, each solar PV system needs the panels, the inverter, the racking and a solar battery storage unit (optional). Although you do not need a solar battery, it can help you go off-grid, but with a price tag that not many people can afford. 

Besides the panels, every solar array needs an inverter. The inverter does the job of converting the DC (Direct Current) produced by your solar array into AC (Alternating Current) that your appliances can use and that you can send back to the grid. An average inverter adds $1,000 to $1,500 to the price of your solar array. 

The racking is also an important component in a solar array. Also called a photovoltaic mounting system, the racking is used to safely fic solar panels to your rooftop. Without it, the panels would not be supported and would easily get blown away by the wind. Racking usually takes around 3% of the total price of your solar array. So, for a 10kW solar array, you would pay around $300 for the racking itself. 

A solar battery storage unit is an optional element of a solar array. What it does is that it stores the excess energy you produce during the day and lets you use it when there is no more sunshine. This way, you can go completely off-grid. Tesla Powerwall 2 costs around $8,000, while a Powerwall+ (with an integrated solar inverter) costs around $8,500. 

Solar Energy Financing Options

The price of solar has been in a steady decline for several decades now. The average price per watt of solar power installed has dropped by 80% over the last decade and this trend is likely to continue. While it may be true that the price of solar is still somewhat high, the federal tax credit, state solar and the potential savings drive the price even further down. 

With the historic minimum price of $2.50 to $3.50 per Watt, now is the ideal time to use significant cost savings to reduce your monthly bills. Solar systems are not only cost-effective but the savings you can make with your panels and high utility rates make them more of an investment. To best utilize your environmental benefits at a reduced upfront cost, consider solar purchase, solar leasing or even a power purchase agreement

Solar Purchase

Solar purchase is the most expensive option for going solar. The prices discussed so far all refer to purchasing solar from solar companies. With owned solar panels, your costs are the highest, but the savings are as well and over a 20 year period, the panels will have paid themselves off as well as made you some extra cash for future investments. The return on investment with solar panels is higher than savings in a bank or investment into stocks and bonds, that is how much money solar panels save. 

Solar Leasing

If the money solar panels save for you is not enough to make you go for that solar purchase, you can consider solar leasing. Some electric companies or utility companies offer this option. In solar leasing, you do not own the panels themselves, but you rather pay a fixed monthly amount to install solar on your rooftop and can benefit from the electricity it produces. 

Power Purchase Agreements

Power Purchase Agreements or Solar PPA are a great way to reduce your power bill. Under this contract, your PPA provider handles installing solar panels, and your get to enjoy the benefits of solar savings for a period of 20-25 years. Your power bill would be at its highest during the summer, and lowest during the winter, which is a perfect arrangement for those who need extra cash in the wintertime. Solar panels save the environment and you enjoy the benefits of a reduced electricity bill. 

Solar Tax Credit, Rebates, and Incentives

Residential solar projects are eligible for significant solar tax credits, rebates and incentives. All these solar incentives make solar panel systems trendy investment opportunities and the clean energy source is subject to tax breaks. 

The Federal Investment Tax Credit (Federal ITC) is the best tax credit there is. You are eligible to get up to 26% of your initial investment cost back as tax credits. The ITC rate is 26% in 2020, 2021 and 2022, 22% in 2023, and 10% in 2024 and later. 

Local and state incentives are also available if you want to boost your solar savings. On top of lower electricity bills, your state may offer a sales tax exemption, your local municipality may offer the same incentive and you will be eligible for a property tax exemption in case you install solar. The property tax exemption excludes the added value of your property from the property tax. 

There are even further solar benefits to enjoy. In some areas, you may be eligible for one-time solar awards. That is the case with Wisconsin, where Focus on Energy can give you back around $500 for any solar project. Ask around to find out more about solar awards in your area. 

Net metering is not a solar incentive per se, but it brings many solar benefits: it enables you to reduce your electricity bills, save money on your solar PV system, and can faster offset the initial cost of your solar project. In net metering, you send excess electricity to the grid when you produce more than you consume. Then, you take that same amount of energy back during nights or wintertime, at no extra cost to you. This allows for a smaller solar system installation. 

Will You Still Have an Electric Bill with Solar Panels?

Unless you decide to go off-grid and purchase a solar battery, yes you will still get your electricity bills. If you own solar, you will be able to save money by paying only a part of your electricity bill. If your energy generation is equal to energy use, you will pay only the fixed utility costs, with no electric charge. 


How are solar hours calculated?

Solar hours or peak solar hours are defined as the number of hours in which solar irradiation reaches the intensity of 1000 W/m² per hour. In the morning and the evening, when the intensity of solar radiation is lower, each hour of sunlight is calculated as a fraction of that hour. For example, if the solar irradiance is 400 W/m² in the morning, that hour is counted as only 0.4 hours at 11000 W/m². 

How do you calculate if solar is worth it?

Solar is definitely worth it, whichever way you do the calculation. To best calculate which solar system would pay off the fastest for you, calculate your annual energy needs, divide that amount by the number of sunny hours your area receives per year and you’ve got yourself the size of the solar system you need. This system will cover around 100% of your energy needs. 

How long do solar panels take to pay themselves off?

On average, a solar panel system takes between 7 and 13 years to pay off. This depends on sunlight exposure and the national average electricity rate or even the electricity rate with your utility company. To calculate how much do solar panels take to pay off in your case, divide the price of going solar by annual savings. 

What is a good solar number?

Solar number or solar number score is a technology that analyses the entire rooftop of a household to determine how much of that surface area is suitable for a solar installation. To do so, the equation takes into consideration the roof pitch, orientation, size and shading. While the maximum solar number is 100, any solar number above 70 means that solar is a good investment for that particular house. 


In understanding how many solar panels reduce electricity bills, several factors have to be taken into consideration. The home location, energy usage, electricity price and the size of the system all have to be taken into consideration. For any property that scores at least 70 on the sun number score scale, solar is a worthy investment and with a constant decline in solar prices, it is becoming more accessible for every household. 

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