Solar panels generate “free” electricity, but there are still costs associated with installing them. Prices vary based on a few key factors: efficiency, capacity and your location.
After solar tax credits, the cost for a solar panel system on an average-size house in the U.S. ranges from $11,144 to $14,696, according to EnergySage. If you need a few panels for a small DIY project, expect to pay around $200 to $250 per panel (around $1 per watt).
How much does it cost to install solar panels?
The average cost to install solar panels in the United States is about $12,000 after federal tax incentives. On the low end, you can install a smaller system for around $5,000, while a high-priced Tier 1 solar panel system can cost $40,000 or more.
There are additional costs that go into an installation project beyond the price of panels. In fact, only about a quarter of the installation costs are actually for the panels. Labor costs, operational costs and additional equipment, such as inverters and control circuitry, make up the rest of the price.
Solar energy companies install the solar panels, provide maintenance and offer warranties on both the panels and the work. These additional services aren’t free, but they are often worth it. A few additional factors affect the price of solar panel installation.
- Federal and state incentives
- Through 2022, the solar tax credit is good for 26% of the system costs. In 2023, the credit goes down to 22%, and you likely won’t be able to claim the federal solar tax credit at all in 2024 unless Congress extends the credit again. However, commercial solar panel tax credits are supposed to stay at 10%.
In addition to federal solar tax credits, many state incentives also reduce the financial burden for homeowners who want to go solar. You may also be eligible for municipal programs and rebates that lower the cost even more.
- Electricity needs
- Solar panel costs average between $2.51 and $3.31 per watt. According to Solar Action Alliance, installers who buy in wholesale pay closer to 85 cents per watt. Solar panels are rated by kilowatt (kW). One kW equals 1,000 watts. After tax credits, a 2-kW system averages $4,381. Expect to pay around $11,000 for a 5-kW system, and a 10-kW system costs around $22,000.
- Choice of panels
- Not all solar panels are created equal. Of the three types of solar panels available, monocrystalline and polycrystalline are most commonly used to power homes. Panels made with monocrystalline are usually more efficient, but they’re also more expensive than polycrystalline panels. If you have limited roof space, you might need to get more efficient (and more expensive) panels. For more information, read about how to find the best solar panels.
- Where you live
- Your location also affects the cost of going solar. To figure out how many photovoltaic (PV) panels your system needs, multiply your average hourly energy requirement by peak sunlight hours in your area, then divide by a panel’s wattage. We suggest establishing a range with high-wattage and low-wattage examples.
Most American homes end up needing around 30 panels to supply 100% of their energy needs. The average cost of solar panels also depends on the size of your system. Most roof solar panels are about 5½ feet tall by 3 feet wide, so consider the size of your roof.
- Purchasing options
- Like buying a new car, you can pay for solar panels outright, but most people don’t. Solar panels have a high upfront cost, but homeowners and business owners can use loans, solar leases or power purchase agreements (PPA). Read our solar financing guide for more information about companies that can help you finance your solar purchase and make the solar panel cost easier for you to manage.
How are solar panels installed?
In a sense, all the research you’re doing now is the hardest part of installing solar panels on your home. The time between when you get a quote from a solar energy company to solar panel installation can be anywhere between one and four months. The whole process can be described in six steps:
- Purchase your solar panel equipment.
The two most important pieces of equipment in any residential solar power system are the panels and inverters. Your installer will likely make recommendations about both, but most people find that understanding how solar panels work makes it easier to decide which solar panels are the best for them.
Consider hiring a good electrical engineering consultant to look over the proposed system prior to purchase as well. This will help ensure that you get the right system for your needs.
- A solar installation engineer will visit your property.
After you sign a contract, the first sign of progress in your solar panel installation is meeting an engineer at your home. They will make sure that your roof can support solar panels' weight and check your circuit breaker or electrical panel. Once an engineer determines that your home is structurally sound enough to support solar panel installation, it’s time to start filling out forms.
- Fill out paperwork.
Your installer should handle most of the complicated paperwork — federal and state tax incentives and rebates, PACE and other clean energy financing initiatives and solar renewable energy certificates (SRECs) — but you should be aware of what is getting filed where. In addition to helping you apply for state and federal incentives, your installer should also be knowledgeable about local building permits and restrictions and may even fill out this paperwork for you. Once all your paperwork is filed and approved, your installer orders the equipment you selected when you signed your contract, and you’re added to a solar panel installer’s queue.
- Let the pros do all the heavy lifting.
The actual solar panel installation takes only a few days at most. First, a solar panel installer preps the roof of your home to make sure everything is still intact from the engineer’s visit. Next, electrical wiring is installed that connects your panels to your power system. Racking is then attached to your roof to support the panels, which go on top of the racking. Finally, inverters and control circuitry, which convert solar power into usable electricity, are connected to the panels.
- One last check.
Someone from your local government must check and approve your installer’s work before you can connect your new panels to the grid. At this point, the inspector looks for faulty wiring or violations of electrical and roof setback codes.
- Flip the switch.
Finally, your local electric company sends a representative to officially connect your new solar panel system to their grid.
How many solar panels do I need?
Your energy needs determine how many panels you need, which affects the overall price of your solar system installation. To eliminate your electric bill entirely, you must generate 100% of the electricity your home needs. Most homeowners need between 25 and 35 panels to achieve complete energy independence.
Average households need
in electrical power
A solar panel typically produces about one kilowatt-hour (kWh) per day, so if your daily kWh usage is 30, you would need 30 solar panels to generate all of your energy needs. If you need to generate extra energy to heat a pool or run the air conditioning for most of the year, this adds to your energy costs.
To estimate the amount of energy you’ll need, you need to know your average kilowatt-hours (kWh). This number should be on your utility bill as “kWh used.” To get your monthly average, look at bills for the past year, add up the stated kWh used and divide by 12.
Next, divide your monthly kWh average by 30 to calculate your daily average. For instance, if your average monthly kWh is 900, then your average daily kWh is 30.
Some solar power calculations are based on a satellite photo of your roof and offer an estimate of how much electricity you can generate. Other calculators use your regional solar irradiation to create the estimate, while others use the size of your roof or your typical electricity consumption with no other factors included. Solar calculations may or may not include federal, state and local incentives that, if you’re eligible, can create significant savings.
For a more accurate calculation, try to factor in times when there is not as much solar power available, like when it’s cloudy or in the evening. There are two main ways to account for this:
- Battery backups can be used to bank power when it’s available and supply the required power when the sun isn’t shining. There are many different types of solar batteries available, so do some research to find the right one for your home.
- Buyback agreements can help offset the cost of buying electricity from the utility company when your system isn’t producing enough power. If your solar energy system provides more electrical power than your home uses when the sun is shining, the utility company will pay you for that extra power at what’s called “avoided cost.” This rate is usually a little less than half of the cost the utility company charges for power.
These additional calculations can be difficult, but they are necessary if you want the optimum solar power system for your home.
Solar panel costs by state
Solar panel costs in the U.S. typically include equipment and installation services. Visit the Solar Energy Industries Association website to learn about local incentives and tax credits in your area. It’s usually in your best interest to take advantage of state clean energy programs when you can — it lowers your upfront costs and shortens your payback period. According to our analysis, Washington is the greenest state, followed by Oregon and New Hampshire.
|State||Starting cost for 6-kW system*||Average cost per watt**||2020 federal tax credit value (26%)||2021 federal tax credit value (22%|
|District of Columbia||$15,720||$2.88||$4,087||$3,458|
* Before tax credits, according to EnergySage and Solar Reviews
**According to Solar Reviews
How much do solar panels save?
Switching to a solar energy system could potentially cut your energy bill by 75%. The savings you and your family see will depend greatly on where you live, what the climate is like and your particular energy needs. For instance, an average homeowner in Portland, Oregon, will see total savings of $38,000, whereas a homeowner in Los Angeles could save as much as $90,000 over 20 years.
Many solar energy companies provide a free calculator tool to help you easily estimate the cost and savings of installing solar panels on your home. Different solar calculators may estimate electricity costs in different ways. Numbers can be based on the national average, regional averages or other information you provide.
The average American electric bill is between $100 and $200 per month, and the average yearly energy cost is about $1,500. Depending on how much you pay out-of-pocket for the solar panel system, it could take five to 15 years to break even. To calculate how long it will take you to break even on savings versus the cost of your solar panels, first subtract your incentives and rebates from your costs. Divide that number by the amount you are saving on utility bills per year.
Taking into account the federal tax credit for installing solar panels, most Americans’ solar panels start paying for themselves within seven years. Thanks to an extension from Congress, the solar investment tax credit is 26% for systems installed through 2022, but it is scheduled to decrease to 22% for systems installed in 2023 and expire at the start of 2024.
Even if your solar panels generate 100% of your electricity needs, you may still receive a utility bill. However, instead of asking for payments, you will get net metering credits for the month.
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