Residential Solar System Savings in 20 years

Adrienne SorensenSeptember 11, 20188150

Residential Solar System Savings in 20 years

There are also factors like hours of direct sunlight, size and angle of roof, but your local electricity rates play the biggest role. There is a large variance too but the more the utilities charge, the larger the savings over a lifetime.

Calculation of Annual Savings

The first step to understanding how much solar can save you is to calculate how much you are currently spending on electricity every year. For the purpose of this article we are going to use some averages, and the average annual electricity use for a U.S. household is 11,000 kilowatt-hours (kWh).


Multiply that by the national average electricity rate of $0.1301 per kWh, and you’ll find that the typical American family is spending over $1,430 a year on electricity alone (it’s $1,431.10). While a couple living in a condo in The San Francisco Bay Area are going to use less electricity than a family living in a four-bedroom house, in Arizona, for the sake of this article we will average everything out. This is also without any hidden charges from individual utilities, or a spike in rates because a hurricane destroys an area that we use to drill for and process oil.


The only cost for solar is the upfront cost for installation, but after that, you never have to deal with rate increase again. When you generate your own energy from solar panels, you take control of energy costs so you are no longer have to deal with these variable utility rates.


Even if electricity rates never go up again, installing solar panels will save you thousands of dollars over the course of its lifetime, which is why we are forgoing the interest of 2.2 percent. Who knows there might be a technological breakthrough that allows rates to stay the same forever, it’s not likely at all, but it is possible on the grand scheme of things.

The only real cost for going solar is the up-front investment. After that the main cost could be from the utility if your solar panels do not completely cover your electricity costs. Most people go solar because they don’t want any more utility costs, so unless there are huge spikes in energy use, most residential solar installations completely cover the energy used with a little left over to sell back to the utilities.


To provide a semi accurate account of how much a household can save over 20 years, you have to multiply the number of kWh used in a year and the cost of power from the utility. Then you have to subtract the amount of the solar panel installation. Again each household is different, and electricity rates in each state vary too, so let’s keep going with the averages.

Calculation on Average Family Needs


Average american family uses 11,000 kWh per year.


Average solar panel system is 6 kilowatts.


If we average out the cost of installing a 6 kilowatt solar panel system in the top 10 solar states we get $12,588


Note that the national average electricity rate of $0.1301 per kWh. 


11,000 kwh multiplied by 20 (years) = 220,000 kWh


220,000 (kWh) x $0.1301 = $28,622


$28,622 is what the average person in America will pay for electricity in the next 20 years, if there are no rate hikes, or natural disasters.


Now if you subtract the upfront installation cost from that total, you get the average money saved.

$28,622 - 12,588 = $16,034

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