How to Calculate Cost Per kWh for Solar Panels

Calculate Your Solar Energy Savings

Updated 2 months ago

How to Calculate Cost Per kWh for Solar Panels

Understanding the cost-effectiveness of solar panels involves calculating the cost per kWh (kilowatt-hour). It’s essential for homeowners considering the switch to solar power to grasp how this figure is determined and what it means for their savings and return on investment.

Calculating the cost per kWh for solar requires considering various factors, such as initial installation costs, system size, energy production, and the lifespan of your solar installation.

Before diving into calculations, let’s clarify what kWh means. A kilowatt-hour is a measure of electrical energy equivalent to a power consumption of 1,000 watts for 1 hour. It’s the standard unit used by electricity providers to charge for energy usage.

Initial Costs and System Size

The initial cost of a solar installation can be daunting, but it's an essential factor in your long-term energy savings. When considering initial costs, include not only the solar panels but also inverters, mounting hardware, permits, and installation labor.

To start your calculation, you’ll need to determine the system size in kilowatts (kW). This is the maximum power your solar system can produce under ideal conditions. Solar installation companies generally recommend system sizes based on your past energy usage, which can be found on your electricity bills.

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Solar Energy Production

The energy production of your system is influenced by the sunlight hours in your location, the efficiency of the solar panels, and the tilt and orientation of the panels. You can get an estimate of the annual energy production in kWh from your solar installer.

These numbers can vary due to weather patterns or potential shading over time, so an energy production estimate is never an exact prediction.

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Life Expectancy of Solar Panels

The average lifespan of solar panels is usually around 25 to 30 years. This longevity plays a crucial role in your total cost of ownership and the kWh calculation.

Calculating the Cost Per kWh

Now, let’s get into the actual calculation. Divide your total initial installation cost by the total kWh you expect your system to produce over its lifespan.

For example:

Total Solar System Cost: $20,000
Expected Lifetime Production: 200,000 kWh
Cost Per kWh = $20,000 / 200,000 kWh = $0.10 per kWh

This simple formula gives you a basic idea of cost per kWh from solar panels.

Calculate Your Solar Savings

Comparing to Your Current Electric Bill

Take your calculated cost per kWh for solar and compare it with the rate you’re currently paying to your electric company. This comparison puts into perspective the savings potential of going solar.

Don't forget to consider potential tax credits and incentives – they can significantly lower your solar installation cost and, consequently, your cost per kWh.

Other Factors to Consider

Beyond simple calculations, various factors can affect the final cost per kWh, such as:

  • Degradation rate of solar panels over time.
  • Maintenance costs over the lifespan of solar panels.
  • Possible increases in energy prices from the grid.
  • Solar incentives and rebates available in your area.

Taking these additional elements into account can provide a more accurate estimate of your solar investment's return.

Formulating Your Solar Strategy

Every homeowner's situation is unique, and so is the decision to invest in solar energy. Detailed calculations on cost per kWh can guide you in making a savvy investment.

By understanding the nuances of these calculations, you can make informed decisions about system size, types of panels, and whether to proceed with solar installation.


Calculating the cost per kWh for your solar panels is a vital step in understanding the financial impact of switching to solar energy. Through this process, you can gain a clear picture of your potential energy savings and ROI.

Remember that while the initial investment might seem high, the long-term savings, environmental benefits, and independence from fluctuating energy prices often make solar an excellent choice for homeowners.

Are you ready to uncover your potential savings and take the next step towards green energy? Our calculator can help you estimate your solar installation cost and savings. Simply enter your zip code below, and let's get started on your solar journey.

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