Variance in energy usage and energy cost around our great country mean that an average number is of little use. However, folks like statistics and so.
The average annual electricity consumption for a U.S. residential utility customer is 10,766 kilowatt hours (kWh) per annum, an average of 897 kWh per month. Multiply that by the national average electricity rate as of November 2017 ($0.1301 per kWh) and you'll find that the typical American family is spending over $1,401 a year on electricity. This means that if each home was to install enough solar panels to cover their electricity bill then on average the savings from installing a residential solar system in America in 2018 would run to $1,401 per year.
Are solar savings real and what is avoided cost?
When we talk solar savings we are talking avoided cost. That is, the amount you would have spent on utility electricity had you not installed a solar power system on your home to provide the same power. And yes....these savings are very real. In fact, the extremely high likelihood that you will continue to need to consume electricity at your house means that solar savings are considered a very bankable investment return.
However, the first step to working out solar savings is to first understand how much electricity you use now, how much that costs you and how much electricity you are likely to use in the future.
How much will solar panels save you?
The savings you can expect from installing solar panels for your home will vary depending on your location, the utility you are with, the specific utility rate plan you are on, the suitability of your roof for optimal solar energy generation and the cost of installing residential solar panels in your city.
Most of the online calculators that purport to show you these savings trivialize issues for the sake of making their online solar savings calculators usable by consumers with little effort. However, the solar savings calculator on Solar-Estimate is probably the most accurate solar savings calculator you can use online without getting a detailed analysis done by a professional solar company. The way this site works is that you enter your details and it produces a detailed online savings estimate and cash flow forecast (generally 70-90% accurate). It then asks a local solar company to review what you have put in and provide a more accurate solar quote and savings assessment.
Here is a list of the average saving that are likely to be achieved by an average US homeowner in each of the top 50 solar cities in America if they installed a 6kW solar power system on their home (a typical size of residential solar system in 2018.
Average monthly and lifetime solar savings by state and city in 2018
|City||State||Average cost of Utility power $/kWh||Annual Production of a 6 kW system||Savings Month 1||25 year profit (savings less cost)||Top rated solar companies in your city|
|New York||New York||0.13||6882||$73.41||$23,670.01||View companies|
|Los Angeles||California||0.17||9066||$128.44||$41,413.16||View companies|
|San Antonio||Texas||0.10||8094||$67.45||$21,748.88||View companies|
|San Diego||California||0.17||9024||$127.84||$41,221.30||View companies|
|San Jose||California||0.17||8694||$123.17||$39,713.88||View companies|
|San Francisco||California||0.17||8922||$126.40||$40,755.37||View companies|
|Fort Worth||Texas||0.10||8544||$71.20||$22,958.05||View companies|
|Charlotte||North Carolina||0.11||7962||$72.99||$23,533.61||View companies|
|El Paso||Texas||0.10||9660||$80.50||$25,956.78||View companies|
|Washington||District of Columbia||0.12||7620||$76.20||$24,570.27||View companies|
|Oklahoma City||Oklahoma||0.10||8430||$70.25||$22,651.73||View companies|
|Las Vegas||Nevada||0.13||9672||$104.78||$33,785.73||View companies|
|Albuquerque||New Mexico||0.13||9528||$103.22||$33,282.72||View companies|
|Kansas City||Missouri||0.08||8004||$53.36||$17,205.64||View companies|
|Long Beach||California||0.17||9012||$127.67||$41,166.49||View companies|
|Colorado Springs||Colorado||0.10||9270||$79.34||$25,581.38||View companies|
|Raleigh||North Carolina||0.11||8130||$74.53||$24,030.18||View companies|
|Virginia Beach||Virginia||0.10||8052||$67.10||$21,636.03||View companies|
|New Orleans||Louisiana||0.09||7278||$54.59||$17,600.63||View companies|
- Cost of utility power is an average of existing rate plans taken from the most commonly chosen utility provider in that state.
- Forecast solar production of a 6kWp system assumes installation at an optimal tilt and azimuth, with typical insolation conditions based on the TMY2 data set and no external shading.
- 25-year savings forecast includes an expected inflation in cost of utility power of 3% per annum.
- The solar system is purchased for cash and owned, so the full value of avoided utility payments is held by the homeowner.
How reliable are solar savings estimates?
Solar is a long term investment and so calculating the long-term savings that you can expect from installing solar panels for your home is crucial when determining whether or not to go solar.
Forecasting residential solar savings can be more difficult that it first appears and forecasts are inherently uncertain. We here at SolarReviews are passionate about solar and renewable energies and hope that you all decide to make the investment for your home and for our planet.
However, we are also committed to consumer education and giving people valid information on which to make choices. We believe it is important that you are aware of the limitations of estimates of future solar savings when deciding to purchase solar.
What makes forecasting solar savings more difficult than other estimates?
Solar is a very long lasting product with minimum system life of at least 25 years. It is difficult to predict anything with certainty going out 25 years.
What makes this more difficult is that when calculating dollar savings we need to be accurate both as to the solar production in kilowatt hours (kwh) and also what the economic value of that production will be going out 10, 20 and 25 years (at least).
The solar energy production side of solar savings forecasts are relatively predictable and solar panels production in each climatic area is relatively well known and understood. A lot of great work has been done by the National Renewable Energy Laboratories and their PVWatts solar production calculator is considered highly accurate.
What is more difficult is forecasting the economic value of solar out as far as 25 years. The need to get this figure right to provide potential consumers with accurate figures about their savings, investment return and payback period for solar is paramount as slight variances in this inflation rate have large effects on these numbers. The assumed rate of utility inflation is a crucial ingredient in generating accurate solar savings forecasts.
What is a reasonable assumption for utility electricity price escalation and its effect on solar profitability over the next 25 years?
Image source: Institute For Energy Research
The Institute of Energy Research published research showing that the average price of residential electricity in America from 2005 until 2015 actually rose by 34%. So in annualized terms, this equates to a simple rise of 3.4% per year or a compound rise of 2.7% per year.
But is this a realistic assumption we can use to justify the assertion that utility prices will continue to rise at these rates. I think it is.. and here is why. During the same period as covered by the image above the Institute of Energy Research also reported that gas prices, the fuel used to create a lot of our electricity, actually fell 60%. If gas prices had stayed flat over this period then utility power price inflation would have run at more like 5%. For this reason, I am quite comfortable about solar companies using an assumed electricity price inflation rate of 3.5 % for the coming 25 years, although I acknowledge it is an educated guess at best.
There is certainly also a case to be made for the proposition that utility rate inflation may actually be higher than this as governments increasingly become aware of the urgency of tackling climate change and put in place more and more policies to subsidize renewable energy. The latest climate reporting from the four most respected meteorological agencies in the world, including NASA and the Japanese Environment Ministry show that the globe has already warmed by around 1.8 degrees Fahrenheit since 1980, or about .7%. It is thought a global warming of 4% will lead to an extinction of human life on earth. There seems to be a bit of a media disinterest in climate change at the moment but the urgency of the issue will come back more and more into the public consciousness as we start to see more and more physical manifestations of climate change.