Solar Panel Savings Calculator

Solar panel savings are estimated by calculating annual electricity generation and comparing it to grid electricity costs. The core formula is:

Annual Savings = Annual Generation (kWh) × Electricity Rate ($/kWh)

Annual Generation depends on system size, location, and panel efficiency:

Annual Generation (kWh) = System Size (kW) × Peak Sun Hours/Day × 365 × System Efficiency

System Efficiency accounts for inverter losses (~96%), temperature derating (~90%), soiling (~97%), and wiring (~98%):

Overall System Efficiency ≈ 0.96 × 0.90 × 0.97 × 0.98 ≈ 0.82 (82%)

Worked example, a 6 kW system at 5.5 peak sun hours a day:

• Gross generation: 6 kW × 5.5 h × 365 = 12,045 kWh/year
• After the 82% system derate: 12,045 × 0.82 = 9,877 kWh/year
• At $0.16/kWh: annual savings = $1,580
• System cost at $3.00/watt: $18,000, less a 30% credit = $12,600 net
• Payback = $12,600 / $1,580 = 8.0 years

The derate is the step people skip, and skipping it makes a system look about 22% better than it is. Panel nameplate ratings are measured under laboratory conditions that a roof never sees.

US Peak Sun Hours by Region:

• Phoenix, AZ: 5.5–6.0 h
• Denver, CO: 4.8–5.2 h
• Dallas, TX: 4.5–5.0 h
• New York, NY: 4.0–4.5 h
• Seattle, WA: 3.0–3.5 h

Long-term: most panels carry a 25-year warranty guaranteeing at least 80% of original output at the end of it, which works out to roughly half a percent lost each year. This page applies that decay rather than assuming flat output, so the 25-year figure is about 6% lower than a naive multiplication gives.

Three things that change the answer more than any of the above

Net metering. If your utility credits exported power at the full retail rate, a system sized above your own use still earns. If it credits at wholesale, or not at all, every surplus kilowatt-hour is nearly worthless and sizing above your consumption is money thrown away. Find out which before you size the system, because it is the single biggest variable and it is set by policy rather than by physics.

Financing. A cash purchase and a financed one are different investments. Solar loans commonly run long enough that interest adds thousands, and it is routine for financing to double the payback period. The figure this page gives assumes you paid outright.

How long you stay. Solar adds value to a house, but rarely the full undepreciated balance, and leased systems can actively complicate a sale. If there is a real chance of moving inside eight years, that matters more than the sun hours.