Table of ContentsAverage national cost of residential solar panels What determines the cost of solar panels? Cost of solar maintenance How to pay for solar panels Federal solar tax credit Solar incentives by state Are solar panels worth the investment? Solar energy by state
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- The cost of solar panels has dropped by 90% in the last decade.
- Your location, energy usage, and the type of solar you want are factors that determine the total cost of solar.
- The average cost of PV solar panels in 2022 ranges between $11,300 and $25,000 for the average 5-kilowatt residential solar system.
- While the up-front costs of solar panels in the U.S. can still be high, there are federal and local incentive programs that can help reduce them.
- Solar panels are some of the best investments you can make to cut your utility bills, slash your carbon footprint, and boost your home value.
Rising prices of power generation sources, such as natural gas, coal, and heating oil, are driving up electricity rates. The good news is that solar panel prices are continuing to fall every year. It increasingly makes economic sense to invest in them. Between December 2021 and January 2022, SaveOnEnergy partnered with CNET to survey 258 people interested in solar panels. According to the study, financial savings and environmental reasons were the top motivations for the survey participants to go solar.
Over the past decade, prices of solar panels have dropped by 90%. With solar costs at an all-time low, many residential energy consumers have made the switch to power their homes with clean solar energy. According to the Energy Information Agency (EIA), solar has seen an annual growth rate of about 32% in the last 10 years. The average photovoltaic (PV) solar panel cost in 2022 is between $11,300 and more than $25,000 for the average 5-kilowatt (kW), or 5,000 watts, residential solar system in the U.S. after applying tax credits and other incentives. There is a big cost range because it depends on the size of the solar system and the type of solar panels you want. The cost includes solar panels, installation, permitting, inspection, and interconnection.
How much do solar panels cost? And what’s the best way to pay for home solar panels? SaveOnEnergy® can help you answer these questions and more
Average national cost of residential solar panels
The average gross cost of installing residential solar systems in the U.S. in 2022 was $15,000-$25,000 before applying the solar federal tax credit, also known as the Investment Tax Credit (ITC). There are also local incentive programs that can help you reduce the up-front cost of installing solar.
The current ITC of 26% and state and local incentives will cut the total cost of your solar system and help you maximize your savings. While the ITC applies to all states, any additional rebates and tax credits will vary from state to state. Some states may not have any additional incentives. Keep in mind that state-based solar incentive programs also have different expiration dates.
Terms and conditions of solar financing and returns on investment can be more important factors when deciding about going solar than the overall up-front cost of a solar project. Local PV solar panel installers can be the best sources of information on the cost of solar systems for residential and commercial customers in your area.
What determines the cost of solar panels?
While the actual costs of solar panels and inverters have come down significantly in the past decade, the so-called “soft costs” remain high. Such costs include permitting, inspection, interconnection, marketing, sales tax, supply chain costs, and overhead. The costs of PV solar systems differ from state to state largely due to the red tape surrounding permitting, inspection, and interconnection. Even within the same state, the cost of solar panels largely depends on a number of factors. In addition, federal, state, and local financial incentive programs can also determine the final cost of a PV solar system.
- Solar system size and electricity consumption. Residential solar panel costs can vary based on the size of the system specific to your household’s needs. The larger the solar system, the higher the installation costs. Your past electricity usage can determine how much solar panels will cost for you. Your electricity consumption every month and the rate your utility charges you for the amount of kW/h used from the power grid determine your electricity bill. To find out how much electricity you consume, you can use this simple formula:
- Calculate the watts each device uses per day.
- Convert watts to kW (there are 1000 watts in one kilowatt).
- Determine the kW an appliance uses per month.
- Figure out the cost by multiplying the kW per month by your electric rate.
A system that generates 5kW of electricity could cost an average of $11,300 to $25,000. But some solar installers charge less per kW if you invest in a larger system, which can even out the total cost of solar panels. Your solar panels should generate enough electricity to meet your monthly needs. Often, panels produce excess power, which you can either store for later consumption or feed it back into the grid and get credits if your state allows it.
- Types of solar panels. There are three major types of solar panels on the market with different characteristics that determine their prices.
|Solar Panel Type||Characteristics||Cost|
|Monocrystalline||Most efficient and longest-lasting compared to other solar panels on the market||$1 to $1.50 per watt|
|Polycrystalline||Less efficient than mono panels and more efficient than thin film||$0.90 to $1 per watt|
|Thin-Film||Cheap, lightweight, flexible, and portable||$0.70 to $1 per watt|
- Installation costs. Solar panels and a solar inverter make up only about 30%, or between $3,000 and $4,000, of the total price of a solar project. The rest of the installation costs include operational, labor, permitting and inspection, and balance of the system (i.e. wiring, mounting equipment, a battery bank and charger, and switches). If you install solar panels on ground mounts and carports instead of a roof, they can require additional labor and component costs. In general, labor costs for solar installation depend on your location, experience of specific installers, and the solar system size. Be sure to research different solar installation companies in your area and get several quotes to find the right fit for you.
- Roof type, position, and condition. The type, condition, and orientation of your roof can affect the cost of solar and how much electricity your solar panels will generate. Each roof type can require varying components and amount of labor to install solar panels. For example, the installation of solar panels on an asphalt shingle roof requires the use of flashing, a thin metal material, to connect the racking equipment to the roof. A flat roof requires using a ballast mount — a metal tray weighed down with a concrete block — to attach the racking equipment. And installation of racking to a standing seam metal roof can be relatively easy because it can be clamped onto the roof’s seams without boring holes into your roof, which can also bring down labor costs.
A roof with limited space will accommodate fewer solar panels. A smaller-sized solar system will be cheaper to install compared to a larger one, but it will generate a lesser amount of electricity. The most optimal orientation for rooftop solar power generation in the U.S. is a south-facing position. A roof that is not south-faced or one that has too steep or too low of a pitch will be less efficient compared to a solar array of the same size but with the right orientation and pitch. If your roof is older or in a poor condition, you may need to factor in the cost of repairing or replacing it in addition to paying for the installation of solar panels.
- Manufacturer brand. Solar panel brands and their quality can impact your bottom line. The overall cost of PV solar panels by brands can range between $13,000 and $18,000. As you would research solar installers that are right for you, be sure to research different solar panel manufacturer brands to compare prices before committing to one.
According to the SaveOnEnergy-CNET solar study, high upfront costs are the main concern of those in the process of researching, purchasing, and leasing solar panels. Remember that while up-front costs of solar panels may seem expensive, various incentive programs can help reduce them. Savings on electricity bills spread over the long term and return on investment make it worth going solar.
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Cost of solar maintenance
Solar panels are built to last for decades with minimal maintenance. While regular panel cleaning is not required, you should not ignore them. For maximum efficiency, it is good to wash the dirt off solar panels with a garden hose if you can access them from the ground. It is also essential to pay attention to any potential problems that may arise from nearby trees or debris on top of panels since they may damage or reduce their generation capacity. If electricity output from solar panels declines for an extended period, it is good to check with your solar warranty provider and get them inspected for any structural damage.
Solar equipment warranties typically last for 10 to 15 years. A performance warranty ensures 90% solar output for the first ten years of the system’s life and 80% for 25 years after the installation date. During a warranty period, solar manufacturers will replace damaged and defective panels. If your warranty expired, you would have to pay for any repairs and replacements out of pocket. Unfortunately, you cannot fix a broken panel. The cost of an individual panel can range between $200 to $500, depending on the type and quality of a panel. The good news is that one damaged panel does not mean you must replace the whole system. Your system can function even with a damaged panel in it. Only trained solar technicians should replace a single panel or the entire system.
Rain can help keep your panels clean and boost their efficiency. If your area does not get enough rain, consider hiring professionals to clean your solar system. Solar companies offer services to conduct a yearly inspection of solar panels to ensure they are working properly. Such an inspection can cost up to $150
How to pay for solar panels
You can purchase solar panels with cash, lease them, or take out a loan to pay for them. Buying solar panels outright is the best option to begin enjoying savings on energy costs immediately. But a lack of cash should not stop you from getting solar panels since there are other financing options and incentive programs. The SaveOnEnergy-CNET survey showed that loan terms, conditions, and rates are among the top concerns of those interested in solar panels. It is wise to consult a solar installer and a bank about the most optimal financing options available to you.
If you do not have enough capital to buy solar panels, a solar loan provides you access to financing and allows you to enjoy all the energy savings afforded by solar panels. Solar loans work like a car or home improvement loan. As a homeowner, you apply for a solar loan with a financial institution, which either issues a line of credit or a lump sum. The terms and conditions of such loans, such as interest rates, collateral, and payback period, will be different from customer to customer. Typically, you pay back the loan in monthly installments. Think of it this way: as you save money on your electricity bill with solar generation, you pay it toward your loan as an investment to your home instead of paying to your utility. After the loan is paid off, you will fully own the solar panels. For most homeowners, it takes 6-10 years for solar panels to pay for themselves.
Leasing solar panels
If the cost of buying is too high or you cannot secure a loan, there is an option to lease solar panels. However, if you lease them, you will not see the same cost benefits compared to owning them. Solar renters cannot take advantage of the ITC or state-based incentives. In addition, solar panels will belong to the installer, so you will not see an increase in your property value. Solar leases typically charge a monthly payment based on how much energy they produce. So, while leasing solar panels might be enticing, the lower starting price could end up costing more in the long run.
Federal solar tax credit
One of the significant solar incentives is the ITC, which you can claim on federal income taxes for a percentage of the total price of your solar system. The current ITC rate of 26% is valid through 2022. It will go down to 22% in 2023. To be eligible for the ITC, you must meet the following critical criteria:
- You have to own the solar panels.
- The solar system has to be a new installation (i.e., the ITC does not apply for an upgrade of an old solar system).
- You must install your new solar system between January 1, 2006, and December 31, 2023, to claim the ITC in your federal tax filing.
Here is an example of how the ITC can impact the cost of your solar panels:
|Solar System Cost||5-kW (5,000 watts) x $4.00/watt||$20,000|
|Federal Tax Credit||26% x $20,000||$5,200|
|Total Cost after Tax Credit||$20,000 – $5,200||$14,800|
Solar incentives by state
In addition to the federal tax credits, there are state and local solar incentive programs that can help you further reduce the total up-front cost of your solar panels. All 50 states offer some form of solar energy incentives, such as state tax credits, corporate tax credits, grant programs, local cash rebates, performance-based incentives, and solar renewable energy certificates. Solar installers in your area would be the best resources for the most up-to-date information on local incentive programs. Here are the top five solar states that provide solar panel incentives:
- California is the national leader in solar installations. The state aims to increase solar generation further to meet its 100% clean energy goal by 2045. The state’s major incentive program is net metering, which credits solar panel owners’ bills for any excess electricity they generate.
- Texas is catching up with California in the number of solar installations. There are numerous incentive programs in the Lone Star State, including utility-based net metering, rebate programs, and tax abatements for green buildings. They make solar an attractive energy source for homeowners and businesses.
- Florida exempts solar panels from sales tax, provides a property tax abatement for solar systems, and offers a net metering program. As the solar market in Florida grows, counties and local municipalities may offer additional solar incentive programs on top of the federal tax credit and state programs.
- North Carolina offers net metering, a state property tax exemption, and low-interest loans for energy upgrades such as solar panels. A 2017 state law allows residential solar leasing. Some municipalities and utilities also provide additional incentives.
- Arizona provides a solar equipment sales tax exemption and a residential energy tax credit. To take advantage of the state tax credit, you can claim 25% of the cost of your solar equipment, up to $1,000, through your personal income taxes.
Are solar panels worth the investment?
So, are solar panels worth it? The answer is a resounding yes as long as they work well for your home and meet your energy needs.
While the upfront cost is high, federal and local incentives, monthly energy bill savings, and the increase in property value will offset the long-term investment.