Year-one savings come from multiplying estimated annual production (1,300 kWh per installed kW) by your electricity rate, shown as a ±15% range. A 6 kW system at the 2025 national-average residential rate of 17.30 cents/kWh saves an estimated $1,147–$1,551 in year one. Run over 25 years with 0.5%/yr panel degradation and a 3% annual rate increase, that same system saves roughly $39,100–$52,900 lifetime.
How year-one savings gets calculated
This calculator starts from a flat production assumption — 1,300 kWh of output per installed kW per year, a national average that doesn't adjust for your specific climate or roof orientation — multiplied by the electricity rate you enter. It then presents that figure as a range, ±15% around the midpoint, to reflect the real variation production and billing introduce that a single point estimate would hide.
The electricity rate you enter moves this more than system size
Because year-one savings is a straight multiplication of production by rate, the rate you enter is doing as much work as your system size — and rates vary enormously by state. The EIA's 2025 state data (covering all customer classes, not residential alone) shows the highest average price in Hawaii at 35.72 cents/kWh and the lowest in North Dakota at 8.20 cents/kWh — better than a 4-to-1 spread. Two identical 6 kW systems, one in each state, would produce identical energy but wildly different dollar savings, because this calculator (correctly) prices the electricity displaced, not the electricity produced.
This is also why a single national average — 17.30 cents/kWh for 2025 — is a reasonable default for a rough estimate but a poor substitute for your actual utility rate, which appears on your electric bill and is the number this tool should really be run with.
How the 25-year projection compounds two opposing trends
The lifetime figure is not year-one savings times 25 — it runs a year-by-year loop for 25 years where production degrades by 0.5% annually (the standard panel-degradation assumption) while the electricity rate you enter compounds upward at whatever annual increase percentage you supply. Those two trends pull in opposite directions: degradation slowly reduces the kWh produced, while rate escalation increases the value of each kWh that is produced, and historically the second effect has outweighed the first.
A higher rate-increase assumption pushes this number up faster than degradation pulls it down, because escalation compounds on a growing base (the rate) while degradation compounds on a shrinking one (production) — over 25 years the asymmetry favors savings. That is a real mathematical property of the model, not a guarantee about future utility pricing, which this calculator cannot predict.
What percent-of-bill offset actually measures
Percent offset compares your year-one solar savings to your current annual electric cost — in the worked example above, $1,349 of savings against $1,800 of current annual cost, or about 75%. It is capped at 100% in this calculator: a system that would generate more value than your current bill still shows as fully offsetting it, since anything beyond that depends on your utility's net metering rules for exported power, which this tool does not model.
What isn't in this number
This tool estimates the value of electricity your system offsets — it does not subtract the system's installed cost, so it is not a net-savings or payback figure. For net cost and break-even timing, use the solar panel payback period calculator. It also assumes no federal tax credit, since Section 25D expired for property placed in service after December 31, 2025, and it does not model financing costs if the system was purchased with a loan rather than cash.
The estimate also treats every kWh of production as worth your full entered rate. In practice, that is only strictly true under full retail net metering; utilities that credit exported solar at a lower avoided-cost rate rather than the retail rate would produce real savings somewhat below this calculator's figure for any month where production exceeds same-month usage.
Methodology
Production (1,300 kWh/kW/year), the ±15% range, the 0.995 annual degradation factor, and the 25-year loop are the literal constants and logic in this calculator's own module. The worked example's electricity rate is the EIA's verified 2025 full-year national average residential price; the state-range figures cited are EIA's 2025 all-customer-type data, not residential-only. No number is estimated beyond running the module's own arithmetic.
Sources
- IRS — Residential Clean Energy Credit (Section 25D) — accessed 2026-09-05
- U.S. Energy Information Administration — Electricity Monthly Update — accessed 2026-09-05
- U.S. Energy Information Administration — Electricity prices and factors affecting electricity prices — accessed 2026-09-05