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Why is solar so expensive in 2023?

Written by Lisa Iscrupe /

Edited by Hannah Hillson

Last updated 08/15/2023

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Key Points

  • The price of solar includes soft and hard costs, including design services, local permitting, panels, installation labor, components, and maintenance.
  • Solar incentives and rebates such as the Residential Clean Energy Credit make solar less expensive.
  • Buying options for solar panels include cash, financing, leasing, or a Power Purchase Agreement (PPA).

Solar costs FAQs

  • Calculate your payback period by dividing the total system cost or quote by your average annual electricity bill (average monthly bill times 12 months). If you apply for the 30% federal tax credit, multiply the total cost by 70%.  

    Payback period in years: Total cost ÷ annual electricity cost = number of years

    Payback period with tax credit: (Total cost x .7) ÷ annual electricity cost = number of years

  • The average payback period is 6–10 years. Solar panel return on investment is based on total cost and your average monthly electricity bill. Suppose you have a lower total cost and a higher monthly electricity bill. In that case, your payback period will be shorter than someone with a higher total system cost and a lower monthly electricity bill. 

  • You can pay for solar panels in various ways, such as:

    • Cash
    Power Purchase Agreement (PPA)

    Cash and financing are the only options that let you claim the 30% Residential Clean Energy Credit. Leasing and PPAs may be less money down but you will have a minimal return on investment.

  • Solar financing means paying for a solar system by borrowing money from a bank or other lending institution. Financing options include a solar loan, a home equity loan, or a home equity line of credit (HELOC). Financing takes the total cost of the solar system and breaks it into monthly payments with interest. A down payment may be required depending on the financing terms. 

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