Costs & savings
How much do solar panels really save?
The honest answer to 'how much do solar panels save?' is: it depends — and the range is wide. A system that saves one household $2,400 a year might save another just $600. The difference isn't the panels; it's the local economics. Here's how to estimate your own number instead of trusting an ad.
8 min read · Updated June 10, 2026
The savings formula
First-year savings come down to how much energy your system produces and what that energy is worth to you:
- Estimate annual production: system size (kW) × your local yield (kWh per kW per year).
- Split it into self-consumed energy (worth your full retail rate) and exported energy (worth your utility's export credit).
- Multiply each portion by its rate and add them together.
For example, a 7 kW system in a state producing 1,400 kWh/kW makes about 9,800 kWh a year. If you use 45% of it directly at a 20¢ retail rate and export the rest at 65% of retail, that's roughly $1,600 in the first year.
Why self-consumption matters so much
Under full-retail net metering, exported and self-used energy are worth the same, so this distinction barely matters. But as more utilities move to net billing and avoided-cost export, the energy you use as it's produced is worth far more than the energy you send back.
That's why running appliances during the day, shifting loads, or adding a battery can meaningfully raise savings in states with poor export credit — you're converting cheap exports into full-price self-consumption.
First-year vs lifetime savings
First-year savings are only the starting point. Over 25 years, two forces pull in opposite directions: electricity prices tend to rise (increasing your savings each year), while panels degrade slightly (reducing output by roughly half a percent per year).
Historically, rate escalation outweighs degradation, so annual savings usually grow over time. A system saving $1,600 in year one might average well over $2,000 a year across its life. Subtract maintenance and a likely mid-life inverter replacement to get the net figure.
Worth knowing
What eats into savings
- Low electricity rates — the biggest reason solar underperforms.
- Below-retail export credit on the energy you send back.
- Overpaying per watt, which delays the break-even point.
- Shading, a poor roof orientation, or an oversized system.
- Lease or PPA escalators that raise your payment faster than your savings grow.
All figures on this site are estimates, not tax or financial advice. Verify current incentives and confirm tax questions with a qualified professional before making a decision.