How Much Do Solar Panels Save?

With the average grid electricity price jumping 18% in just the last two years, many homeowners are now turning to solar power to shield themselves from ever-increasing utility rates. But exactly how much money do solar panels save? In this article, we'll explore how going solar saves you money and the variables that impact your overall savings. * *

How much money do solar panels save?

Over the 25-year warranty, solar panels can save tens of thousands of dollars by offsetting your utility bill with a lower cost for solar power. When you install solar panels on your roof, you are essentially replacing part or all of your electricity bill with monthly payments on a solar system. And with the cost of solar plummeting over the last 40 years, the monthly payments for solar panels are typically far less than paying for grid electricity. Generally, if your electricity costs are higher than your solar costs, you’re going to see savings by switching to solar. How Much Do Solar Panels Save?

Let’s look at how much you are currently paying for your electricity.

Cost per kWh of solar vs grid electricity

The easiest way to compare the cost of solar versus grid electricity is by breaking down the cost of each kilowatt-hour (kWh) -- known as the levelized cost of electricity. Without solar panels, your levelized cost of electricity is simply the rate your utility charges. The map below shows the average utility rate in each state. By comparison, the average cost of home solar electricity purchased on solar.com is around 8 cents per kWh -- although it varies based on the size, complexity, and location of the project. Keep in mind, grid electricity prices continue to rise over time. Typically, utility rates rise at an average rate of 3% per year. However, in recent years, we've seen double-digit rate increases in a single year and we're not exactly expecting prices to go back down in the foreseeable future. Going solar not only lowers your electricity costs, it stabilizes them for 25 years and shields you from utility rate hikes.

What else affects how much money solar panels save you?

Your utility electricity rate and the price per kWh of your solar system are the two biggest factors in determining how much you can save with solar panels. But these are not the only factors. Let's explore some of the things that affect how much money solar panels can save you.

Federal and local solar incentives

One way to save more money by going solar is to claim local and federal incentives. In 2026, homeowners can still benefit from a federal tax credit through Third-Party Owned (TPO) solar. There are a few forms of TPO solar that are eligible for a business-claimed tax credit. Learn more in our TPO resource center below:

There are also local incentives offered through states, cities, and even utilities. For example, New York state offers a 25% tax credit that can further reduce the cost of solar panels, and increase the savings. Related: Solar Incentives by State

Financing method

Another crucial variable is how you finance your solar system. Paying cash for your solar system offers the most savings because you won't pay interest on a loan. But not everybody has $25,000 laying around, which is why many homeowners choose to finance their solar system with a loan. Solar loans can provide immediate energy cost savings by replacing your electricity bill payments with lower solar loan payments. However, in the long run, the interest reduces how much you can save with solar panels.

Time

The payback period of going solar is typically around 7-10 years, leaving well over 15 years to accumulate savings while the panels are still under warranty. But solar panels don't explode into dust once the warranty is up. They still produce electricity, albeit at a lower rate as they naturally degrade over time. So, the longer you own the solar panels -- and the house they're installed on -- the longer you can accumulate savings.

Solar system offset

Offset measures how much electricity a solar system produces compared to household energy consumption. For example, a system with 100% offset with produce as much electricity as a household uses and completely offset your utility electricity bill. Shooting for 100% offset, or slightly more, is common and often provides the greatest energy cost savings. However, solar panels can still save you money by offsetting 50% or 75% of your electricity usage. * *

Sun exposure

Another major variable that affects savings is the amount of sun your solar panels get, known as solar irradiance. Essentially, the more sun your solar panels get, the more money they can save you. While sun exposure largely depends on location, it's also affected by shading from trees and other obstructions. how much can solar panels save

Net metering policies

Another factor in how much solar panels can save you is your utility's net metering policy. Net metering is a billing structure that compensates solar owners for the excess electricity they push onto the grid. This structure allows solar owners to offset their utility costs even when the sun isn't shining. In most cases, 1 kWh of electricity pushed onto the grid offsets 1 kWh of electricity pulled off the grid. However, energy utilities are making a nationwide push to weaken net metering by paying less than retail prices for solar exports. Most notably, California's NEM 3.0 reduces the export rates by over 75%. It's worth noting that even with this reduction, California homeowners can still save tens of thousands of dollars with solar panels under NEM 3.0.

How much do solar panels save? It's up to you!

With electricity prices surging, going solar is a no-brainer in terms of saving money. Solar panels save you money by replacing your electricity bill with lower monthly solar payments. Over time the 25-plus year life of a solar system, often adds up to tens or hundreds of thousands of dollars in energy cost savings. There are a handful of variables that can affect solar savings, but perhaps the most important is time. The sooner you go solar, the sooner you can hit your payback period and start accumulating savings! Start your solar project with multiple bids from vetted installers.