How Much Do Solar Panels Cost? [2022 Updated Guide]

In this EcoWatch guide on solar panel costs, you’ll learn:

  • What affects the cost of solar panels
  • Which states have the best solar prices
  • What the Federal Solar Tax Credit is
  • Which solar financing option is the best

This guide has helped thousands of homeowners to confidently produce clean energy by providing a thorough overview the upfront costs and the potential backend savings. Let’s get started!

Ecowatch Author Karsten Neumeister

By Karsten Neumeister, Solar Expert

Updated 5/18/2022

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Even though the average cost of solar panels has dropped 80% in the last decade, the upfront cost is still significant. When selecting the best solar company for your home installation, price is one of the largest factors.

Before we hop into things, we wanted to provide a quick glimpse into how one homeowner achieved a 16% annual ROI with his DIY solar panel system. This video also introduces some topics that we’ll cover in more detail down below.

What Are the 5 Key Factors of Cost of Solar Panels?

There are a few key factors that lead to variation in solar system installation costs. Understanding these can help you decide whether solar panels are worth the investment for your home. Let’s take a look at them in more detail.

System Size Needs

The size of your residential solar system will depend primarily on your energy needs. You can roughly estimate how many photovoltaic (PV) solar panels you’ll need based on past utility bills, your available roof space and the amount of sunlight in your area, but to get an accurate system size, you’ll need a consultation with a local solar installer.

Your installer will evaluate your home energy needs based on irradiance maps, energy bills, satellite imagery of your roof, your utility company and more. It can then recommend a custom solar panel system size to accommodate your energy needs. The larger the system, the more expensive it will be.

Type of Solar Panels and Other Equipment Costs

There are three basic types of solar panels, two of which are commonly used residentially: monocrystalline and polycrystalline panels. Monocrystalline panels tend to be more energy-efficient, which can lead to greater savings in the long run, but they’re also a bit pricier on the front end.

That being said, solar panel efficiency is the name of the game for most homeowners who aim to install a system on their roof, as they’ll likely have less space to work with than commercial solar projects or ground-mounted solar panel systems will.

Other components you may need to purchase include inverters, wiring, charge controllers, mounts, solar batteries and more. Consider how much backup power is a priority for your home – backup batteries will add some costs on the front end, but additional safety and savings on the back.

Geographic Location

Another factor that can have a big impact on solar pricing? Where you live. Unsurprisingly, solar installation tends to be most cost-effective in parts of the country that get a lot of sun exposure, and therefore more energy to convert into electricity. This basically means that solar panels will operate more efficiently and, in many cases, means that you’ll need fewer panels overall to power your home.

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. Other factors like the direction of your home and how much shade your house gets will also impact your home’s sun exposure, and therefore the efficiency of your system. Also, keep in mind that the further your company is from your home, the more expensive the overall installation will be.

Solar Incentives

solar panel costs

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.

Your solar system cost will also depend on the net metering policy of your local utility company. Most utilities vary in their buyback rates and feed-in tariffs, but policies can have a big effect on the overall value from your solar system and your solar payback period. Be sure to ask your solar installation company about how cooperative your utility provider is with solar energy installations.

State incentives, rebates, and solar tax exemptions can certainly vary based on where you live, but most solar panel installers should help you identify and apply for the programs in your area. However, it’s still a good idea to familiarize yourself with the local incentives that might be available to you.

Additional Factors of Solar Panel Installation Cost

There are plenty of other factors that can impact solar panel installation costs. These include (but are not limited to):

  • The availability of solar panels in your area
  • Your monthly electricity bill / energy usage
  • The current cost of shipping
  • The number of providers competing for your business
  • Supply chain issues
  • Local electricity rates

The bottom line? You can learn the most by shopping around. Get a few different proposals from local companies, evaluate what services you might be interested in and ask about sales or specials. Familiarize yourself with the best brands of affordable solar panels if budget is your priority.

Read More: Homeowner’s Guide to Going Solar

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How Much Do Solar Panels Cost to Install?

To answer this question, let’s take a look at the basic price range for solar panel installations. According to a recent report from the Solar Energy Industries Association, in the first quarter of 2021, the national average cost of a residential solar system was $2.94 per watt. To put this in perspective, this means that after the federal tax credit is applied, a 5-kW system would cost $10,878 and a 10-kW system would cost $21,756. An average residential solar system would sit somewhere between those figures.

Next, you might rightly wonder: What exactly am I paying for? The solar panels themselves usually make up just about a quarter of the total system cost. Remaining expenses include labor costs, solar maintenance and additional parts and equipment (such as inverters, racking, wiring, electric vehicle chargers or batteries).

Which States Have the Best Solar Prices?

One of the broadest ways to gauge the overall cost of solar is by looking at the average price of solar panels by state. Our statewide average prices are calculated using market research and data from top brands. These prices can help convey a better understanding of what solar might cost in your area.

Average Cost of Solar By State Average Cost of Solar Per Watt Average Cost of a 5kWh System After Tax Credit*
Alabama $2.45 $9,065
Alaska $2.41 $8,917
Arizona $2.61 $9,657
Arkansas $2.54 $9,386
California $2.73 $10,101
Colorado $2.69 $9,965
Connecticut $2.80 $10,360
Delaware $2.58 $9,546
Washington, DC $3.16 $11,704
Florida $2.53 $9,361
Georgia $2.55 $9,423
Hawaii $2.67 $9,879
Idaho $2.60 $9,608
Illinois $2.73 $10,113
Indiana $2.68 $9,916
Iowa $2.77 $10,237
Kansas $2.59 $9,571
Kentucky $2.34 $8,658
Louisiana $2.57 $9,521
Maine $2.83 $10,483
Maryland $2.77 $10,261
Massachusetts $2.94 $10,878
Michigan $2.81 $10,409
Minnesota $2.84 $10,508
Mississippi $2.64 $9,768
Missouri $2.59 $9,583
Montana $2.54 $9,386
Nebraska $2.83 $10,471
Nevada $2.52 $9,324
New Hampshire $2.91 $10,767
New Jersey $2.77 $10,249
New Mexico $2.68 $9,904
New York $2.95 $10,927
North Carolina $2.54 $9,398
North Dakota $2.42 $8,954
Ohio $2.56 $9,460
Oklahoma $2.62 $9,694
Oregon $2.60 $9,632
Pennsylvania $2.55 $9,447
Rhode Island $2.84 $10,508
South Carolina $2.72 $10,076
South Dakota $2.39 $8,843
Tennessee $2.49 $9,213
Texas $2.69 $9,953
Utah $2.68 $9,904
Vermont $2.87 $10,619
Virginia $2.75 $10,163
Washington $2.69 $9,965
West Virginia $2.64 $9,768
Wisconsin $2.60 $9,620
Wyoming $2.57 $9,509

*solar panel system sizes are measured in kilowatt-hours (kWh), which indicates the amount of energy they can produce per hour

Keep in mind that 5kWh is a baseline size and near the smaller end of most solar panel installations. Use this figure as a minimum.

What Solar Financing Options are Available?

Different solar installers may offer different financing plans, allowing you some flexibility. With that said, there are three standard options for paying for your solar energy system:

  1. Purchase your solar energy system outright (that is, pay in cash).
  2. Take out a solar loan to purchase the system, then pay it back with interest.
  3. Lease your solar system; you will pay less month to month but won’t actually own the system yourself.

Our solar financing guide breaks down each of these options to help you make the decision that best fits your needs.

solar panel maintenance costs

Cost of Solar Panel Maintenance

In general, solar systems are designed to run smoothly for decades without requiring much maintenance or upkeep. However, even the best systems require routine solar panel cleaning and checkups as grime, dirt and debris can accumulate over the solar cells.

Any sizable costs associated with malfunctioning panels should be covered by your panels’ warranty, but it’s not a bad idea to factor in the costs of a simple few cleanings and occasional maintenance.

How to Find the Lowest-Cost Solar Panels?

Again, the best way to assess the cost of solar is to get a quote from a certified installer near you. In addition to receiving an installation price, you can learn your estimated 25-year energy costs, how compatible your home is for solar and even compare quotes to find the best offer. The simple process of getting quotes from multiple providers can save you thousands in the long run.

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 total cost of solar is more than offset by long-term, recurring energy savings that provide a sizable return on investment. 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 make the switch to renewable energy with solar.

Read More: Explaining the plummeting cost of solar power

FAQs: Solar Panel Costs

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 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.

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Karsten Neumeister

Solar Expert

Karsten Neumeister is a solar energy specialist with a background in writing and the humanities. Before joining EcoWatch, Karsten worked in the renewable energy sector of New Orleans, focusing on solar energy policy and technology. A lover of music and the outdoors, Karsten might be found rock climbing, canoeing or writing songs when away from the workplace.