Installing solar panels on your home can be a smart investment, not only for the environment, but also for your wallet. One of the most significant motives homeowners have on their mind when getting solar panels is the financial saving.
But just how much can you expect to save each month? The average monthly bill with solar panels in place may pleasantly surprise you.
Additional advantage of switching to solar power is the energy independence you gain by reducing your dependence on fossil fuels and the utility companies. Solar system allows you to have more control over your energy usage and payments you make every month.
How much is the average monthly electric bill with solar panels?
The monthly bill with solar panels in the United States varies greatly, depending on a number of factors. These are: the size of the solar system, the amount of sunlight your solar panels receive throughout the day, and the cost of electricity in the area.
On average, a solar system can reduce a household's electric bill by 50 to 90 percent.
The size of your solar system determines how much you can expect to save each month. The larger the system, the more electricity it will generate, and the more you will save on your electric bill. A typical solar system for a family house ranges from 3 to 10 kilowatts (kW) with an average cost of $18,840 to $64,560, based on the size and the quality of the equipment.
Another important factor is the amount of sunlight (solar irradiation) your area receives. Generally, states in the Southwest (e.g. Arizona and California), receive the most sunlight and have the highest potential for solar energy production.
The cost of electricity in your area also plays a role in total savings. In states with higher electricity rates homeowners save more on their electric bill each month than in states with lower electricity rates.
What changes to expect: electric bill before and after solar panels?
You can expect to see several changes in your electric bills before and after installing solar panels.
Before switching to solar energy, you as a customer of a utility company typically pay a monthly bill based on the amount of electricity you consume from the grid. The bill consists of charges for the used electricity, as well as any applicable taxes and fees.
After installing solar panels, you will still receive a monthly bill, but the charges will be different. The bill will now include a “net metering” charge. It is the difference between the electricity generated by your solar panels and the electricity consumed. If the solar panels generate more power than your house consumes, the net metering charge will be zero or even negative. You will be given credits to use later when there is not enough solar energy coming in.
The bill also includes a separate charge for any electricity that is consumed from the grid in addition to the electricity generated by the solar panels. This system is common and is known as “grid-tied.” It is valued for being less risky than stand alone systems. Your home stays connected to the grid. Your house still uses the grid power during the night or in case of low sun conditions. When the sun is abundant, the excess solar power goes to the grid in exchange for credits, and thus reducing the bill.
In many cases, the net metering charge and the separate charge for grid electricity are lower than the charges for electricity before installing solar panels, resulting in a significant reduction in your electric bill.
We definitely recommend to schedule a consultation with a solar installation company or your utility company to get an estimate for your specific situation.
Further reading: Best Solar Panels for Homes in 2023
Locations where I can expect the biggest savings on the electricity bill
It should come as no surprise that some states offer more favorable conditions for solar power than others.
States with the highest electricity rates tend to have the largest savings on electric bills from solar panels. For example, Hawaii has the highest electricity rates in the United States, at an average of $0.44 per kilowatt-hour (kWh), while California’s average is $0.26 per kWh, and New York’s average is $0.24 per kWh [1]. In these states, homeowners can see significant savings on their electric bills after switching to solar energy.
States with the most sunlight also offer great benefits. The most favorable locations are Arizona, Nevada, and New Mexico. These states receive more than 5 kWh of sunlight per square meter per day, which is ideal for solar panel installation [2].
Additionally, states that offer the best incentives and rebates for solar panel installation like California and Massachusetts make solar investment rewarding for homeowners.
What are the locations with the lowest savings on the electricity bill?
States with lower electricity rates and less sunlight tend to have lower savings from solar power. For example, states in the Midwest and South (Indiana, Kentucky, and Mississippi) have lower electricity rates, with an average of around $0.14 per kilowatt-hour (kWh) [1] and receive less than 4 kWh per square meter per day [2].
But the cost of electricity is not the only factor that affects the numbers on the electric bill, the cost of the solar panels, their installation, and the lifespan the solar equipment also play a role. However, even if the savings on electric bills are lower in some areas, the installation of solar panels can still be cost-effective and beneficial in the long run.
Some advantages of switching to solar energy that you should consider before you rule this opportunity out are:
- Government incentives: Many governments offer incentives and financial support to homeowners who install solar panels on their property. Incentives can be in the form of tax credits, rebates, or grants.
- Increase property value: A solar system increases the value of your home by making it more energy-efficient and attractive to potential buyers.
- Increased property appeal: A solar panel installation can add aesthetic appeal to the property and make it stand out in a neighborhood. This can be a good selling point when the time comes to resell the property.
- Compliance with regulations and standards: Some states and municipalities have regulations and standards that mandate or encourage the use of renewable energy sources in construction and building operations.
How much will my electric bill be with solar panels?
On average, homeowners can expect to save between $50 to $150 per month on their electric bill with a solar system. However, with the federal solar tax credit and state incentives, the savings are even greater. The Federal Investment Tax Credit (ITC) allows homeowners to claim a credit of 30 percent of the cost of their solar panel system on their federal tax return.
Additionally, many states offer rebates, grants, and property tax exemptions for those willing to switch to solar energy.
Why we do not list more specific numbers?
It is difficult to estimate exactly how much your electric bill will be with solar panels without knowing specific details about your home, location and the size of your solar system.
However, we can give you some general information that may help you understand how solar panels affect your electric bill.
The electricity generated by your solar system will first be used to power your home, reducing the amount of electricity that you need to purchase from the grid. Any excess electricity that is generated by your solar panel system will be sent back to the grid, and you will be credited for this electricity on your electric bill. This is known as net metering and is used in most grid-tied systems.
With net metering, you will be billed for the “net” amount of electricity that you consume, which is the difference between the electricity that you generate with your solar panel system and the electricity that you consume from the grid. If your solar panel system generates more electricity than you consume, you will have a net metering credit on your electric bill, which can be applied to future months.
So, if we add some average numbers for the savings on electric bills with solar panels in the United States, here are the results: homeowners can see a reduction of 50 to 90 percent on their electric bills. According to the National Renewable Energy Laboratory, the average home in the United States consumes about 900 kWh of electricity per month. With a typical solar system, which ranges from 5 kW to 8 kW, a home will generate between 375 kWh to 600 kWh of electricity per month.
This leads to a reduction in the amount of electricity that is needed to purchase from the grid and results in savings.
The cost of solar panels has also gone down in recent years, making this local source of renewable energy more affordable. According to the U.S. Department of Energy, the average cost of a solar panel system in 2023 was $2.86 per watt, and the price is still going down.
How much do solar panels save on electricity bills?
The amount that solar panels save on electricity bills in the United States can vary greatly.
As mentioned previously, an average saving is within a range of 50 to 90 percent with solar panels. This can be significant savings especially if you live in states where electricity rates are high. For example, if your monthly electricity bill is $150 before installing solar panels, and you are able to cut that bill in half, you would save $900 a year.
Why is my electric bill so high when I have solar panels?
There can be several reasons why you don’t see the bill changing even though you switched to solar panels.
Some reasons are:
- Insufficient solar system size: If your solar system is not large enough to meet all of your electricity needs, you will still need to purchase electricity from the grid to make up the difference. This can result in a higher electric bill than you expected.
- High electricity usage: If you have a large household or use a lot of electricity during peak hours, your solar system may not be able to generate enough electricity to meet all of your needs, especially on cloudy days.
- Not enough sunlight: If your home does not receive enough sunlight, your solar system may not generate as much electricity as it could. This can result in a higher electric bill. Make sure you check the Global Solar Atlas to get a better idea of what to expect in your specific location.
- System malfunction: If your solar system is not functioning properly, it will not generate as much electricity as it should. This can also result in a higher electric bill.
- Non-optimal solar panel orientation or shading issues: If solar panels are not facing in the direction that receives the most sunlight or have shading issues from nearby buildings or trees, they will not have an expected output.
- No net-metering agreement: If your utility company doesn’t have a net metering agreement, you will not be credited for any excess electricity that your solar panel system generates. This means that you will still be charged for all of the electricity that you consume, even if your solar panel system generates some of it.
The solar system will not eliminate your electric bill completely, but it should significantly reduce it.
If you are experiencing high electric bills, it’s best to contact your solar installation company or your utility company to see if there are any issues. Or to see if there are any other options available for you to better optimize the setup.
Further reading: Should I get solar panels now in 2023 or wait?
[2] https://globalsolaratlas.info/map