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How to Calculate the Energy a Solar Panel Saves

By Teri Dormer

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By now, you’ve probably heard that solar panels for your home are really an investment in reducing your overall solar energy cost. But that doesn’t help answer the question of how to calculate the energy a solar panel saves if you install solar panels in the first place.

In reality, you need firm numbers if you’re going to be able to understand how much money solar panels cost upfront and to avoid making mistakes in your buying journey that could negate the savings you’ve heard so much about. So how much do solar panels save? Let’s find out.

How to Calculate the Energy a Solar Panel Saves

It’s essential to recognize that solar panels can help save you money on your monthly electricity bill, but they won’t eliminate it. Your solar energy cost is one thing, but you need to understand how much your electricity bill fluctuates based on the time of year and your consumption rates.

The real savings you get from installing solar panels in your home can only be determined against the current cost of electricity wherever you live.

How Much Do Solar Panels Save?

While the cost of electricity varies from area to area, the national average in 2019 was roughly $0.13 per kilowatt-hour. In California, the cost per kilowatt-hour can be as high as $0.17 and $0.19 in Massachusetts.

But there are several variables to consider to determine what your solar energy cost will be and how to understand how much money solar panels can save you over time. Here are three other variables that will factor into how much money you can save with solar panels: 

Sun Coverage

It might seem like a no-brainer, but the simple truth is that solar panels need access to the sun to operate at their best capacity. If you live in an area where there are regular cloud cover and rain – or even if there’s a big tree in the yard that often blocks the sun – solar panels might not save you as much as you’re expecting because they won’t be used to their full capacity.

Solar Panel Costs

For all the talk of solar energy costs and savings, you can’t forget the upfront cost associated with solar panels. While you’ll likely have a number of options here (including financing solutions), you can’t exempt the cost of solar panels if you’re trying to calculate your savings. 

Extra Savings You Qualify For

When it comes to renewable energy, there are government and tax incentives you’ll want to consider as a part of your buying strategy.

The current federal tax credit for solar panels allows homeowners to deduct 26% of installation costs from their taxes (decreasing to 22% in 2021 and expiring at the end of that year). Your city and state may offer additional incentives you need to know about in order to determine what your actual savings are.

Average Electric Bill With Solar Panels

The cost to purchase and install solar panels may be high, but the easiest place to calculate your solar energy cost and savings will be on your electric bill.

By most estimations, the average monthly electric bill with solar panels will decrease by $100 depending on the cost of electricity in your state. In just one year, that savings adds up to $1,200 – increasing to $12,000 in 10 years and savings up to $24,000 in 20 years. In states where electricity is more expensive, the savings can be even higher.

Should I Install Solar Panels?

If you’re interested in renewable energy and decreasing your reliance on conventional electricity, solar panels offer an excellent solution for annexing the use of crude oil, natural gas, and coal.

Still, most families are focused on whether or not solar energy makes financial sense in addition to its environmental impact. The hype suggests solar panels can equal huge savings, but the reality of your solar energy costs can be much more nuanced than that.

If you’re trying to decide if you should install solar panels or not, you have to consider all of the costs and all of the savings together.

It doesn’t take a tremendous amount of research to highlight the incredible upfront costs that can be associated with solar panels. Even if you finance them over time, solar panels can cost between $15,000 and $30,000 to install based on the size of your home.

On the other hand, if you live in a state with above-average prices for electricity and you can take advantage of the tax incentives for buying or installing solar panels, the upfront expense may seem less overwhelming.

Either way, you’ll probably see immediate savings in your average electric bill with solar panels, and that’s something to write home about!