Embracing solar power means reducing both your reliance on traditional utility companies and your environmental footprint, but the high upfront cost of solar panels can be a big deterrent for some homeowners.
If you're considering solar, you may have questions like: How much does it cost to install a solar energy system? What are some of the factors that can impact pricing? What else should home- and business owners know about going solar? In this article, we'll touch on each of these important topics, with the goal of helping you make a fully informed, financially responsible decision about solar energy.
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How Much Do Solar Panels Cost to Install?
To begin with, let's take a look at the basic price range for solar panel installation. According to the most recent U.S. Solar Market Insight report, in the first quarter of 2021, the national average price of a residential solar system was $2.94 per watt, which would mean a 5 kWh system would cost $14,700 and a 10 kWh system would cost $29,400.
The exact price you'll pay for solar panels will depend on a number of factors, including your geographic location, the size of your home and more.
Now, you might rightly wonder: What exactly are you paying for? The solar panels themselves usually make up just about a quarter of the total cost. Remaining expenses include labor, maintenance and additional parts and components (such as inverters).
What Factors Determine Solar Pricing?
As mentioned, there are a few key things that can lead to variation in solar system installation costs. Analyzing these can help you determine whether solar panels are worth it for your home. Let's take a look at them in greater detail.
Your Electrical Needs
The solar panels themselves will be rated for a particular wattage, which reflects the amount of energy they can absorb for storage and ultimately for power generation. You will actually pay according to wattage, which means that the greater your household energy needs, the more you'll have to spend to get the correct number of solar panels.
So, how do you determine how much energy you need for your home? The best way to figure this out is through a consultation with a solar installer. (We recommend shopping smart by requesting free consultations with two or three top solar companies in your area.)
Your installer will evaluate your home energy needs based on total square footage, the number of people who live in your home, the number of appliances and power-draining devices that you have connected and more. It can then recommend the ideal solar panel system size to accommodate your energy usage.
Type of Panels and Other Components
Variation in manufacturing can also affect the cost of solar panels. There are three basic types of solar panels, two of which are commonly used residentially: monocrystalline and polycrystalline panels. Of these two, monocrystalline options tend to be more energy-efficient and thus may provide you with greater savings in the long run. They are also a bit pricier on the front end. With that said, homeowners with a smaller roof surface area may benefit from getting the most efficient solar panels, even if the initial cost is a bit steeper.
Other components you'll need to purchase include inverters, wiring, charge controllers, mounts and more. The quality of these materials can affect your total solar system cost. For example, if you spring for the best solar batteries, they may add a few thousand dollars to your investment.
Another factor that can have a big impact on solar pricing? Your geographic area. Solar installation tends to be most cost-effective in parts of the country that get a lot of sun exposure, and thus a lot of photovoltaic light. This basically means that solar panels can operate more efficiently, and in many cases means that fewer total panels are needed. Those who live in states like California, Florida and Arizona — or really any areas of the Sun Belt or Southwest — will likely get the most out of their home solar power systems.
Both state and federal governments have established incentive programs to encourage homeowners to buy solar panels. There is currently a 26% federal solar tax credit, called an Investment Tax Credit (ITC), available for homeowners who install residential solar panels between 2020 and 2022. It is scheduled to reduce to 22% in 2023 and may not be extended thereafter.
Local incentives vary by state, but most of the best solar panel installers will help you identify and apply for these programs so you don't miss out on savings.
There are plenty of other factors that can impact solar panel installation costs. Different vendors are going to offer different levels of customization, expertise and consumer protections (including guarantees and warranties). The bottom line? It is wise to shop around a bit, determine the average cost of solar panels in your area and evaluate the value of services offered by a few solar installation companies.
Solar Panel Price Vs. Return on Investment
Clearly, your upfront solar panel installation cost may be a little steep. Now, let's look at the flipside: How much money will you actually save? And will your energy savings be enough to offset the initial cost of your solar energy system?
It is not unreasonable to think that you can cut your monthly utility bills by as much as 75% or more by switching to solar energy. Of course, the specific dollar amount will depend on where you live, the size of your home and the number of people in your household.
One way to look at it: The average household energy bill is somewhere between $100 and $200 monthly. It would probably take about 15 years for your energy savings to cancel out the cost of solar panel installation. In other words, within a decade and a half or so, your solar system might pay for itself. Factor in savings from tax rebates and other incentives, and most solar systems pay for themselves in closer to seven or eight years.
Note that most solar energy companies offer free solar calculators, which help you arrive at a ballpark for monthly energy savings. While these calculators are imprecise, they can certainly give you a general sense of the financial benefits you will experience when you convert to solar energy.
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Frequently Asked Questions About the Cost of Solar Panels
As you continue to weigh the pros and cons of solar energy, it's natural to have a few questions. The best way to resolve these is really to set up a solar consultation with a local expert, but in the meantime, here are a few general answers to some of the most common solar inquiries.
How much will it cost to maintain my solar energy system?
In general, solar systems are designed to run smoothly for decades without requiring any maintenance or upkeep. As such, you should not really need to factor maintenance into the equation for the first 20 years or so after you install your system. (And most solar companies will offer you warranties and guarantees to give peace of mind on this front.)
How will solar energy impact my property values?
Many homeowners want to know how going solar will impact the value of their homes. Going solar increases property values. In fact, the U.S. Department of Energy has reported buyers are willing to pay an average premium of about $15,000 for a home with a solar panel system. With that said, you are only going to see your property values go up if you own your solar system outright, as opposed to leasing it.
How can I finance the cost of solar panels?
Different solar installers may offer different financing plans, allowing consumers some flexibility. With that said, there are three basic options for paying for your solar energy system:
- Purchase your solar energy system outright (that is, pay in cash).
- Take out a solar loan to purchase the system, then pay it back with interest.
- Lease your system; you will pay less month-to-month but won't actually own the system yourself.
Which is better, buying or leasing my solar system?
It all depends on your motivation for going solar. If you want to maximize long-term savings and increase the value of your home, then purchasing your solar system is usually best. However, if you just want a low-maintenance way to reduce monthly energy costs and practice environmental stewardship, then leasing might be a better option. Also note that leasing can be a good option for those who do not plan on being in their home for exceptionally long.
How can I be sure my roof will accommodate a solar system?
If your roof faces south, has ample space and has little to no shade cover, it should work just fine. Even roofs that are not optimal can still be utilized with a few tweaks and adjustments. Your solar energy consultant will advise you on whether your home is a good fit for solar energy.
How long will my solar energy system last?
Solar systems are designed to be exceptionally durable. With just the most basic upkeep, most solar energy systems should continue to work and produce power for anywhere from 25 to 35 years.
Make the Best Choice About Solar Energy
Solar energy is not right for every homeowner, nor for every home. With that said, many homeowners will find that the initial cost of solar panels is more than offset by the long-term, recurring energy savings. Make sure you factor in cost, energy needs, tax incentives, home value and more as you seek to make a fully informed decision about whether to embrace solar power.