How Solar Panels Can Slash Your Electricity Bills and Save You Money?

Written by: UGREEN



Time to read 12 min

As electricity bills continue to rise, many of us find it challenging to keep up with the increasing costs, impacting our monthly budget. However, there is hope in the form of solar panels, a renewable energy solution that can significantly slash your electricity bills and save you money in the long run.

This article explores the benefits of solar panels and how much do solar panels save on electricity bills. By delving into the details of potential savings and average monthly electric bill with solar panels, we hope to provide valuable insights for those considering adopting solar.

How Much Is the Average Electricity Bill?

The average electricity bill is a crucial aspect of household expenses, reflecting the cost of electricity consumed over a monthly period. The state of residence plays a significant role, where varying electricity rates, taxes, regulations, and power sources contribute to diverse billing amounts. States embracing renewable energy sources typically offer lower rates than those reliant on fossil fuels.

Sourced from the U.S. EIA, in the first three months of 2023, the average U.S. residential monthly electricity bill was 5% higher than the last year, i.e., $133.


Average Rate (cents/kWh)

Average Bill ($/month)

























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Type of Consumer

Residential consumers using electricity for household purposes face different rates than commercial and industrial consumers. Commercial users running businesses like offices and stores typically pay more than industrial consumers due to higher consumption.

Sourced from EIA, the table below provides a comprehensive view of the average electricity rates and bills for different types of consumers in the U.S. as of July 2023.

Type Of Consumer

Average rate (cents/kWh)

Average Bill ($/month)











Energy Usage

Several factors influence energy usage, such as appliance efficiency, home size, insulation, thermostat settings, and lifestyle habits. Opting for energy-efficient appliances, LED bulbs, and smart thermostats can generate substantial savings. 

As per EIA, a U.S. residential customer's average monthly electricity consumption was 893 kWh in 2020. The table below showcases the average monthly electricity consumption by the state for residential customers in 2020.


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How Much Do Solar Panels Save the Average Household?

If you wonder how much do solar panels save on electricity bills, this is for you! Solar panels are a cost-effective solution to cut electricity bills and lower your carbon impact. Savings vary based on panel size, efficiency, location, rates, and incentives.

Average Monthly Electric Bill with Solar Panels: Considering Size and Efficiency of Your Solar System

The system size, measured in kilowatts, signifies its maximum power output under optimal conditions. Meanwhile, system efficiency refers to the percentage of sunlight converted into electricity by solar panels. By following this, you can learn how much do solar panels save on electricity bills. More extensive and top-notch systems can generate more electricity, resulting in more significant savings.

The average residential solar system size in the U.S. is approximately 6 kW. However, you can opt for a smaller or larger system based on your requirements. Conversely, efficiency depends on panel quality, type, roof orientation, and tilt.

According to Forbes, typical solar panel efficiency in the U.S. was primarily 15%. But due to the incorporation of innovative technologies, it's now between 15% to 22% based on brand and model. Some ultra-efficient solar panels can even reach around 23%.

To estimate your solar system’s electricity production, a formula is used: Electricity production (kWh) = System size (kW) x System Efficiency (%) x Sun hours. Sun hours indicate the average daily hours of peak sunlight in your location. By multiplying these, you can calculate your daily electricity generation.

Average Monthly Electric Bill with Solar Panels: Considering Electricity Consumption and Rate

Your electricity consumption refers to the amount of electricity you use within a specific period, typically measured in kilowatt-hours (kWh). On the other hand, the electricity rate signifies the price you pay for each kWh of electricity, often measured in cents per kWh.

These two factors directly influence your monthly electricity bill and the potential savings achievable with solar panels. You can determine how much do solar panels save on electricity bills and consumption by checking your utility bill or using online calculators.

Similarly, your electricity rate is influenced by your state, utility company, time of use, and market conditions. As of July 2023, the average residential electricity rate in the U.S. was 15.85 cents per kWh.

To estimate your electricity bill without solar panels, a straightforward formula is used:  Electricity bill ($) = Electricity consumption (kWh) x Electricity Rate (cents/kWh).

To determine how much do solar panels save on electricity bills, comparing your electricity production to your consumption is essential. If your output equals or exceeds your consumption, you can offset your entire electricity bill by 100% with solar panels. However, if your production falls short of your consumption, you can still offset a portion of your bill based on the percentage of production compared to consumption.

The offset percentage is calculated by dividing your electricity production (in kWh) by electricity consumption (in kWh) and multiplying it by 100. By doing this, you can find the answer to "How much do solar panels save on electricity bills." For instance, if you generate 6 kWh of electricity daily and consume 893 kWh per month, your percentage of offset would be:

Percentage of offset (%) = (6 x 30)/893 x 100 = 20.15%

This means using solar panels can reduce your monthly bill by 20.15%. To estimate your potential savings, you can use this formula:

Electricity savings ($) = Electricity Bill ($) x Percentage of offset (%)

For example, if your monthly bill amounts to $141.51 and your percentage of offset is 20.15%, your estimated savings would be:
Electricity savings ($) = 141.51 x 0.2015 = $28.51 monthly.

How Much Will Your Solar Panels Save the Environment?

Solar panels offer a dual benefit – not just for your finances but also for the planet. In this section, you can learn how much do solar panels save on electricity bills and the environment. Transitioning to solar energy can curb your carbon footprint, boost air quality, and combat climate change.

Carbon Footprint Reduction

The footprint represents the greenhouse gas emissions you contribute to the atmosphere, such as carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O), which lead to global warming. The electricity sector is a significant contributor to greenhouse gas emissions in the U.S., accounting for 25% of the total emissions, mainly from burning fossil fuels.

In contrast, solar panels harness clean and renewable energy from the sun, emitting no harmful substances or greenhouse gases. By adopting solar power, you can reduce your reliance on grid electricity, lowering your carbon footprint.

To calculate the CO2 emissions avoided by going solar, use this formula:
CO2 avoided (lbs) = Electricity generated by Solar (kWh) x Emissions factor of grid (lbs/kWh)

The energy mix used to produce electricity in your region determines the grid's emission factor. For instance, coal has a high emission factor of about 2.21 lbs/kWh, while natural gas has a lower factor of around 1.22 lbs/kWh. Renewable sources like wind, hydro, and solar boast negligible emissions factors. The U.S. average emission factor is roughly 1.13 lbs/kWh, but this value can fluctuate depending on regional energy policies and resources.

Suppose you reside in California and have a 6 kW solar system producing 7,800 kWh of electricity annually. Given California's low grid emission factor of about 0.32 lbs/kWh, you can prevent approximately 5 tons of CO2 emissions per year by adopting solar systems.

CO2 avoided (lbs) = 7,800 x 0.32 – 2,496

Air Quality Improvement

Air pollution remains a critical global issue, affecting millions and leading to severe health problems. Exposure to pollutants like particulate matter (PM), nitrogen oxides (NOx), sulfur dioxide (SO2), ozone (O3), and mercury (Hg) can result in respiratory issues, cardiovascular diseases, cancer, and even premature death. According to WHO, air pollution is responsible for approximately 7 million deaths yearly.

By generating clean, emission-free electricity from the sun, solar panels substantially reduce the release of PM, NOx, SO2, O3, and Hg into the air. The extent of air pollutant reduction achieved by adopting solar energy depends on the electricity generation capacity of your solar system and the emission factor of your local grid, which reflects the amounts of pollutants released per kilowatt-hour (kWh) of electricity produced.

To estimate the quantity of air pollution, you can prevent by using solar, utilize this formula:  Air pollutants avoided (lbs) = Electricity generated by solar (kWh) x Emissions factor of grid (lbs/kWh)

Climate Change Mitigation

The accumulation of greenhouse gases in the atmosphere traps heat and disrupts the Earth’s climate system. The repercussions of climate change are already visible, manifested through rising temperatures, melting ice caps, elevated sea levels, extreme weather events, biodiversity loss, food insecurity, water scarcity, and human displacements.

By generating clean and renewable energy from the sun, solar panels effectively diminish the release of carbon dioxide and other greenhouse substances in the air, thereby reinforcing the Earth's natural carbon cycle.

To estimate the degree of global warming, you can prevent by going solar, use this formula: Global warming prevented (⁰F) = CO2 avoided (lbs/year) x Global warming potential (⁰F/lb)

Global warming signifies how much heat a greenhouse gas can trap in the atmosphere over a specific time frame compared to CO2. By definition, the global warming potential of CO2 is 1.

To assess the global warming prevented by going solar throughout the lifetime   of your solar system (30 years), you can use this formula: Global warming prevented (⁰F) = CO2 avoided (lbs/year) x Global warming potential (⁰F/lb) x Lifetime (years)

How To Lower Your Electric Bill with Solar Panels?

Once you have solar panels installed, you will just have to pay the average monthly electric bill with solar panels that, are much lower-than-normal. Here is how this happens:

  • ●Solar panels generate free electricity from the sun, lowering your reliance on the grid and daytime electricity costs.
  • ●Net metering allows you to earn credits by sending excess electricity back to the grid, which you can use when your solar panels are not producing enough.
  • ●Solar energy during peak hours can reduce demand charges and lower your electric bill.
  • ●Installing solar panels can increase your home's value and make it more appealing to potential buyers, offering long-term benefits if you decide to sell your home.

Factors That Influence Average Monthly Electric Bill with Solar Panels

Some of the factors that influence the amount of savings and the average monthly electric bill with solar panels are:

Size and Efficiency of Your Solar System: This is crucial for the average monthly electric bill with solar panels. The larger, the more efficient your solar system, the more electricity it can produce, leading to higher potential savings.

Electricity Consumption and Rate: Higher electricity consumption and rates result in higher bills, but solar panels can offset a portion of these costs, giving rise to savings. The average monthly electric bill with solar panels will depend on this factor too.

Location and Climate: Your site affects the sunlight your solar system receives. Overall, impacting your savings is how the climate influences your electricity needs for heating, and your environment influences your electricity needs for heating and cooling.

Incentives and Rebates: Financial benefits offered by federal, state, local, or utility entities can minimize the upfront costs of setting up solar panels and increase savings.

How to Estimate Your Potential Savings with Solar Panels?

The average monthly electric bill with solar panels is a lot. Estimating your potential savings with solar panels involves several steps that can help you get a rough idea of how much do solar panels save on electricity bills. Follow these steps to assess the benefits of going solar:

Step 01: Find your monthly electricity consumption and bill (kWh & $) using your utility bill or an online calculator.

Step 02: Determine how much electricity your solar system can generate using a solar calculator based on location, roof size, system, and efficiency.

Step 03: Calculate the offset percentage by comparing your electricity production to consumption. If your system produces more, you can offset 100%; if less, you cancel a percentage.

Step 04: Calculate your electricity savings by multiplying your bill by the offset percentage. For instance, if your bill is $100 and the offset is 50%, you can save $50/month.

Step 05: Consider available incentives and rebates to boost your savings further. These entities offer financial benefits like tax credits, net metering, and (SRECs) solar renewable energy certificates.

Will I Have An Electric Bill With Solar Panels?

Even with solar panels, it’s possible to have an electric bill due to various factors:

Grid Connection

Most solar panel systems are grid-tied, allowing you to draw electricity from the grid when needed. You'll have to use grid electricity if your solar system can't meet your demand, or during cloudy days or at night.

Fixed Charge

Some utility companies impose a fixed fee for grid connection, regardless of your electricity usage of solar production. This fee covers grid maintenance and reliable service. Though it varies, it typically ranges from $5 to $25 per month, appearing on your bill.

Demand Charge

Certain companies charge a demand fee based on your peak electricity usage during a billing period, irrespective of your overall consumption or solar production. This fee accounts for providing sufficient capacity for peak demand and usually ranges from $3 to $15 per kW per month.

Minimum Bill

This ensures the recovery of fixed costs and profitability, usually from $10 to $50 per month, reflected on your bill.

What Is the Average Payback Period (ROI) for Solar Panels?

The average payback period, or return on investment (ROI), for solar panels refers to the time it takes for the energy savings from going solar to surpass the initial cost of the solar system. Typically, residential solar panels have an average payback period of 6-12 years. However, individual payback periods vary depending on various factors.

Factors influencing the payback period include the size and efficiency of the solar system, electricity consumption, rate, location, climate, and available incentives.

FAQs about average monthly electric bill with solar panels

How Many Solar Panels Does It Take to Power A House?

The number of solar panels needed to power a house varies based on factors such as house size, consumption, location, and solar panel type. On average, it takes about 28 to 32 solar panels for a 2,500 sq ft home, but this can vary from 13 to 19 based on sunlight and energy needs.

Do You Really Save Money With Solar Panels?

Yes, solar panels can save you money by reducing grid electricity purchases and earning income through selling excess electricity back to the grid.

How Much Electricity Does A Solar Panel Produce Per Month?

A 300-watt solar panel can produce around 1.2 kWh of electricity daily or approximately 36 kWh monthly. However, this number can vary depending on the weather conditions, the angle and orientation of the panel, and the presence of shading or dirt.

Is Solar Cheaper Than Regular Electric?

Yes, solar power is generally cheaper than regular electricity. It offers cost savings, lower maintenance, and protection from rising electricity prices. Installing solar panels is a cost-effective and environmentally friendly choice. By now, you must have found the answer to how much do solar panels save on electricity bills, exploring the details of the average monthly electric bill with solar panels.

Why Is My Electric Bill So High with Solar Panels?

Your electric bill may still be high with solar panels due to insufficient electricity production to meet your needs, fixed fees from the utility company, or lower rates for excess electricity sent back to the grid. Possible reasons include increased consumption, production loss, poor installation, faulty equipment, or utility charges.

Can I Make Money with Solar Panels by Selling Electricity Back to the Grid?

You can make money with solar panels by selling electricity to the grid through buy-back tariffs or net metering programs. These programs pay you for the excess electricity you produce and feed into the grid, which can help offset your future electricity bills. This can be another answer to “How much do solar panels save on electricity bills?”