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How Much Can Solar Panels Save You Over Time?

Jason RothmanApril 30, 20186770

How much will a home solar system save you in 20 years?

Here’s a question. How much will installing solar panels save you over 20 years? It seems simple enough but everyone has unique utility costs and electricity needs. Yes everyone who is interested in solar power, is interested in how much money it saves, but they are unsure of the upfront costs and wonder if it is worth it.

The simple answer to those questions is yes it will save you money over the lifetime of the solar panels, and generally it will save you lots of money, but the biggest variable is the rate charged for electricity.

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.
 

Let's do a detailed calculation of your yearly 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.

We are also going to forgo adding interest to the rate we use over time, but over the past decade  national electricity costs have increased at an average rate of 2.2 percent per year. 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. We are also not going to talk about net-metering because some utilities do not participate in these programs, although net metering is a great thing.
 

Paying solar in cash is an amazing investment

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.
 

Detailed calculation based on average family needs

The average American family uses 11,000 kWh per year.

The 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 (this is after a 30 percent Federal Tax Credit is applied).

Lastly we remember 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
 

What will you buy with an extra $16,000?

16.034 is a lot of money. It’s more money than most Americans have lying around, and there are a lot of things you could buy for that same money. You could buy a car, or half of nice car. You could go on an elaborate Las Vegas vacation three times, or one really elaborate trip to Vegas once. You could invest it in a low-cost mutual fund and make money, or you could save the money, turn it into $1 bills, fill a small pool, and swim on the money. The point is there are a million things you could do with more than $16,000.

Thank you for reading and we hope this detailed guide helps you make an informed decision when purchasing a new solar system. For more information relating to going solar don’t forget to visit our solar blog section for more handy guides.

At HahaSmart, we can also save you 25 percent off the cost of parts potentially saving you even more than $16,000. Dealing directly with manufacturers and cutting out the middleman, we are able to pass the savings onto you. Visit our price checker tool to see for yourself.

Solar system price checker

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