How to calculate your solar system offset

Solar offset tells you how much of your home's electricity your panels are expected to cover over a year. It is one number that ties system size, your bills, and your goals together. Here is how to calculate it and what actually drives the answer.

The basic formula

Offset is simple arithmetic:

Offset % = (annual PV production ÷ annual home usage) × 100

If your home uses 12,000 kWh a year and the array is modeled to produce 11,400 kWh, your offset is about 95%. Both numbers must be annual so that summer sun and winter heating average out.

Step 1: Find annual usage

Pull twelve months of utility bills and total the kilowatt-hours. A full year matters because a home that runs AC in July and electric heat in January looks very different month to month. If you expect a new load — an EV charger or a heat pump — add an estimate of that usage before sizing.

Step 2: Estimate annual production

Production depends on system size, location, tilt, azimuth, and losses. A common first-pass method is:

kWh/year ≈ system kW × peak sun hours × 365 × derate

A 7 kW system in a 4.5 peak-sun-hour area with a 0.80 derate produces roughly 7 × 4.5 × 365 × 0.80 ≈ 9,200 kWh. Our guide on estimating production in kWh walks through where those numbers come from and how tilt and azimuth move the total.

Step 3: Divide and interpret

Once you have both annual figures, divide production by usage. But the "right" offset depends on more than the math.

Why 100% isn't always the target

• Utility rules. Some utilities cap system size at a percentage of historical usage or limit net-metering credit, so oversizing wastes money.
• Rate structure. Under net billing or time-of-use rates, exported kWh may be worth less than what you pay, which changes the ideal size.
• Future load. Planning for an EV or electrification argues for sizing above today's usage.
• Roof reality. Available area, shading, and orientation may cap production below 100% no matter what.

A worked example

A 90% offset still eliminates most of the bill; the remaining 10% is covered by the grid. Whether to push higher depends on your rate and roof, not on hitting a round number.

Offset vs. self-consumption

Offset is an annual, netted number — it does not say when the energy is made versus used. Your array may overproduce at noon and draw from the grid at night, yet still hit 100% offset over the year because the surplus and the shortfall cancel out. That accounting works cleanly under full retail net metering. Under net billing or time-of-use rates, the timing matters: a kilowatt-hour exported midday may be credited at less than the evening retail rate, so two systems with identical offset can produce very different bills. When you evaluate a design, look at both the offset and how the production lines up with your daily usage.

Where offset fits in permitting

Offset is a design and sales metric, not a code requirement — an AHJ cares about the electrical and structural details, not your production target. But the same system size that sets your offset also drives the interconnection math and conductor sizing that a plan reviewer checks. Always confirm net-metering and sizing caps with your utility, and remember a licensed electrician or PE must review and stamp the final design.

Educational reference, reviewed 2026-07. A design aid, not a substitute for a licensed electrician or PE. Confirm the enforced NEC edition and local amendments with your AHJ.