Solar panels work by absorbing sunlight, generating direct current (DC) energy and then converting it to usable alternating current (AC) energy. The AC energy runs from an inverter to the home’s electrical panel (breaker box) and is distributed accordingly. Electricity flows throughout the home, powering energy-dependent items like the HVAC system, water heater, appliances, etc. Any excess electricity produced by solar panels can be sent to your utility company for credit.