How Solar Panels Save You Money: A Complete Breakdown
Discover the real numbers behind solar savings, from reduced electricity bills to increased home value and tax incentives.
Going solar is one of the smartest financial decisions a homeowner can make, but many people are unsure about the actual numbers. Let us break down exactly how solar panels put money back in your pocket over the life of your system.
The Monthly Savings
The most immediate benefit of solar is the reduction in your monthly electricity bill. The average American household spends about $150 per month on electricity. With a properly sized solar system, most homeowners eliminate 70 to 90 percent of that bill.
For a typical 8 kW residential system, the math looks like this: your system generates approximately 10,000 to 12,000 kWh per year, depending on your location and roof orientation. At the national average electricity rate of $0.15 per kWh, that translates to $1,500 to $1,800 in annual savings.
Over the 25 to 30 year lifespan of modern solar panels, those savings compound dramatically. Factor in that utility rates increase an average of 2 to 3 percent per year, and your total savings over the system lifetime can exceed $50,000.
The Federal Tax Credit
The federal Investment Tax Credit (ITC) is one of the most significant solar incentives available. Through 2032, you can deduct 30 percent of the total cost of your solar system from your federal taxes. On a $25,000 system, that is a $7,500 tax credit.
This is a dollar-for-dollar reduction in your tax liability, not just a deduction. If your tax liability is less than the credit amount in the year of installation, the remaining credit rolls over to subsequent tax years.
Increased Home Value
Multiple studies have shown that solar panels increase property values. According to the National Renewable Energy Laboratory, home values increase by approximately $20 for every dollar saved on annual electricity bills. For a system that saves $1,800 per year, that is a $36,000 increase in home value.
The Zillow Group found that homes with solar panels sell for an average of 4.1 percent more than comparable homes without solar. In a strong housing market, this premium can be even higher.
Net Metering Credits
Most states offer net metering programs that allow you to sell excess solar energy back to the grid. When your panels produce more electricity than you use during the day, the surplus flows to the grid and you receive credits on your utility bill.
These credits offset the electricity you draw from the grid at night or during cloudy periods, effectively spinning your meter backward. In some states, you can earn full retail rate credits, while others offer a reduced rate.
The Payback Period
With all incentives considered, most homeowners see a return on their solar investment in 6 to 10 years. After that payback period, every kilowatt-hour your system produces is essentially free electricity. Given that panels are warranted for 25 years and often produce power well beyond that, you are looking at 15 to 20 years of pure savings.
Making the Decision
The best way to understand your specific savings potential is to get a personalized quote. Our savings calculator takes into account your location, electricity usage, roof characteristics, and available incentives to provide an accurate projection of your return on investment.