With well over one million solar installations throughout the state, California has long been a leader in the U.S. solar industry. Recent legislation mandating that all new homes in the state must be built with solar panels likely leaves residents wondering about the cost of solar panels in California.

With ample sunshine, unnaturally high energy costs, ambitious climate goals and progressive leadership, California is ripe with solar potential. The preexisting availability of local solar providers in California allows solar customers the valuable opportunity to gather a large number of competing quotes, sometimes generating several thousand dollars worth of savings in the process.

You can start getting free, no-obligation quotes from top solar companies in your area by filling out the form below.

How Much Do Solar Panels Cost in California?

As of 2021, our market research and data from top brands shows the average cost of solar panels in California is around $2.73 per watt. This means a 5-kW system would cost around $10,101 after the federal solar tax credit is applied.

Here's how that price looks when applied to other system sizes:

It may surprise some readers that the cost of solar in California isn't as low as in many other states, but keep in mind that the real value of solar comes relative to the price of energy in the state (and California's is the highest in the country). All in all, solar energy provides excellent value to California residents.

Knowing the average solar panel cost in California is $2.73 per watt, a savvy solar customer can compare quotes against this figure to ensure they receive the best value possible. You may find that popular national brands don't have the lowest prices.

What Determines Solar Panel Prices?

The cost of solar panel installations in California largely depends on a homeowner's location and energy needs. In most cases, areas with higher local electricity rates offer more value from solar panels. Here are other factors that influence installation costs.

Solar Equipment Costs

Similar to most modern technology, solar products and system costs vary greatly based on their quality, scale and included features. Some customers may be satisfied with a modest array of affordable solar panels and inverters, while others may prefer a system with premium panels, full-home backup power and an electric vehicle charger.

Solar Financing

The overall cost of solar depends significantly on whether a customer chooses to finance or purchase their system in cash. Paying upfront provides the best return on investment and fastest solar panel payback period, as there are no fees or interest charges associated with it.

The two most common solar financing options include taking out a loan and leasing solar panels. If paying with a solar loan, be careful of high interest rates and early repayment penalties and other fees. Homeowners who lease their panels or sign power purchase agreements (PPAs) enjoy little to no upfront costs, but solar leases provide the least amount of overall value.

Solar Installation Costs

With nearly 2,500 solar companies throughout California, prices can range significantly based on the installer. Larger solar providers like Sunrun offer the advantage of solar leases and quick installations. Local providers looking to get a leg up on their competition may offer lower prices to undercut the biggest names in the industry.

Solar Panel Cost After Incentives, Rebates and Tax Credits

California's progressive leadership has done good work in spurring investment in renewable energy. All homeowners are eligible for the federal solar tax credit, and the state offers several incentive programs and solar rebates aimed at further increasing access to reliable, affordable solar panels. However, given the state's ambitious climate targets and the energy burden on most of its population, it could probably do more.

Let's take a closer look at the solar incentives available to California residents.

Federal Solar Tax Credit

All California residents are eligible for the federal solar investment tax credit, or ITC, for installing PV solar panels and any other eligible solar equipment. Any reputable solar installer will assist in the process of claiming the ITC on your federal tax returns. Claiming the ITC deducts 26% of the total cost of your solar installation from the taxes you owe.

To be eligible for the solar tax credit, homeowners must own the solar energy system, either having paid for it in cash or by taking out a solar loan. Homeowners who lease solar panels are not eligible to claim the ITC.

California Net Metering Programs

Net energy metering (NEM), or net metering, allows customers to feed the surplus energy generated by their solar panels back to their local power grid in exchange for energy credits from their utility company. As most solar energy systems generate more energy than can be used during the day, this incentive provides homeowners additional savings on their electricity bills and lowers the demand for grid-supplied electricity in the region.

California currently offers a statewide net metering incentive for residents generating electricity with solar panels. Exact credit values will vary based on your utility company.

California Solar Tax Incentives and Rebate Programs

There are also a handful of California solar incentives to help lower the cost of solar for residents. Some of these include rebates, loans and property tax exemptions. Though any quality solar company will be knowledgeable about the local incentives in your area, it's always worth doing some independent research. We recommend using the DSIRE solar incentive database to find money-saving opportunities in your area.

FAQ: Average Cost of Solar Panels in California

Is it worth going solar in California?

One of the sunniest climates in the country makes California one of the best states in the U.S. for generating energy with solar power. The ample sunshine, generous net metering policies and pre-existing availability of solar installers provide a great deal of value for solar customers in California.

How much does it cost to install solar panels in California?

As of 2021, the average cost of solar panels in California is $2.73 per watt. This means a 5-kW system would cost around $10,100 after the solar tax credit. Heavy investment in renewable energy has lowered the cost of solar in the state significantly, and this cost offers great value relative to high local energy prices. The best way to assess how much solar would cost you is to consult local providers near you for free estimates.

Do solar panels increase home value in California?

Solar panels increase home value everywhere, but mostly in areas with generous net metering policies and solar rebates. As such, the areas in California where solar panels increase home value the most correspond with the areas that have the most solar-friendly policies. It's worth noting that even if your home's value increases, California has laws in place to ensure your property taxes don't rise as the result of a solar installation.

How much do solar panels cost for a 2,500-square-foot house?

Though knowing the size of a house is helpful in determining how many solar panels could fit on its roof, the energy use of the house is a more important factor in determining solar panel cost in California. The higher the energy costs in your home, the greater your cost of solar will be.

Karsten Neumeister is a writer and renewable energy specialist with a background in writing and the humanities. Before joining EcoWatch, Karsten worked in the energy sector of New Orleans, focusing on renewable 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.

While the upfront cost of a solar water heater may be higher than traditional water heaters, the solar energy you'll harness can yield great savings and environmental benefits. Heating water accounts for 18% of a home's energy use, but a solar water heater could cut your water heating bills by 50 to 80%.

In this article, we'll explain how a solar-powered hot water heater can help you tap into a free, renewable energy source, potentially saving money and doing good for the planet. With this information, you can make the best decision about whether a solar water heater is a good investment for your home's hot water needs.

Solar Water Heater Basics

A solar hot water heater's basic function is to expose water or a heat-exchanging liquid to the sun's rays, then circulate the warmed liquid back into your home for domestic use. The basic components of all solar water heaters are a storage tank and a collector to trap the sun's heat.

Collectors are a series of flat plates, tubes or tanks through which water or a heat transfer fluid passes and absorbs the sun's heat. From there, the fluid is circulated to either a water tank or heat exchange unit.

Solar water heaters are most commonly used as energy-saving devices to preheat water before entering a conventional water heater in the home. But some solar water heaters warm and store water without the use of a conventional tank, offering totally sun-powered hot water.

Types of Solar Water Heaters

Solar hot water heaters are split into two broad categories: passive and active. The primary difference between the two is that active systems require circulating pumps to move water, and passive systems rely on gravity to move water. Active systems also require electricity to operate and may use antifreeze as a heat exchanger fluid.

In the simplest of passive solar collectors, water is heated in tubes, then piped directly to a faucet when needed. Active solar collectors either use antifreeze — which is passed from the solar collector into a heat exchanger that heats potable water for storage and household use — or just heat water directly, which is then pumped to a water tank.

Active and passive systems have subcategories that are specialized for various climates, tasks, capacities and budgets. The one that's right for you will depend on factors including:

• Available space
• Availability of sunshine
• Your capacity requirements
• Building codes and regulations in your area
• Your installation budget

Let's take a look at each type of solar hot water system and how it can benefit your home.

Active Solar Water Heaters

Though more expensive than passive systems, active solar water heaters are more efficient. There are two types of active solar water heating systems:

Active Direct

In an active direct system, potable water passes directly through the heat collector and into a storage tank for use. They're best suited for mild climates where temperatures rarely go below freezing.

Active Indirect

Active indirect systems circulate a non-freezing fluid through the solar collector and into a heat exchanger, where the fluid's heat is transferred to potable water. The water is then circulated into a storage tank for domestic use. Active indirect systems are a must for cold climates where temperatures regularly dip below freezing. Without an active indirect system, pipes run the risk of freezing and bursting.

Passive Solar Water Heaters

Passive solar water heaters are the less expensive, simpler option but also tend to be less efficient than active systems. They can, however, be more reliable and last longer, so you shouldn't overlook them as an option, especially if you're on a budget.

All passive systems use pressure or gravity to circulate water, and come in two variations:

Integral Collector Storage and Batch Heaters

Integral collector storage (ICS) systems are the simplest of all solar water heating units — the heat collector also serves as the water storage tank. They're quite efficient but only work in climates with little risk of freezing temperatures. ICS systems can be as simple as a large black tank or a series of smaller copper tubes fastened to a roof. ICS units with copper tubing heat faster due to the increased surface area but lose heat faster for the same reason.

ICS systems are usually used to preheat water for conventional heaters. In such a system, when water is needed, it leaves the storage tank/collector and enters a conventional water heater in the home.

An important thing to consider with an ICS system is size and weight: Because the storage tank itself is also the collector, they're large and heavy. A structure must be strong enough to support bulky ICS systems, which may be impractical or impossible for some homes. Another drawback to an ICS system is its tendency to freeze and even burst in colder weather, making them suitable only for warmer climates or otherwise drained before cold weather hits.

Thermosyphon Water Heaters

Thermosyphon systems rely on thermal circulation. Water circulates when warm water rises and cool water descends. They feature a tank like an ICS unit but have collectors attached sloping downward from the tank to allow thermal circulation.

Thermosyphon collectors gather sunlight, sending heated water back to the tank via a closed-loop or heat pipe. While thermosyphons are more efficient than ICS systems, they can't be used where regular freeing occurs.

How Much Does a Solar Hot Water Heater Cost?

The more hot water you use, the more likely a solar water heater will pay for itself over time. Solar hot water heaters are most cost-effective for households with many members or a large hot water demand.

A typical solar water heater will cost around $9,000 before federal incentives, with higher capacity active models reaching upwards of $13,000. Small systems may cost as low as $1,500.

Prices vary dramatically based on many factors, including the materials you choose, system size, installation and maintenance costs, and more. While ICS systems are the cheapest option (around $4,000 for 60-gallon units), they won't work in all climates, so if your home sees regular temperatures below freezing, you'll have no other choice than to fork over the cash for an active indirect system, or at least use a different system only part of the year.

Weight and size of cheaper passive systems might not be appropriate for everyone. If your structure won't accommodate the weight of a passive system or you don't have the room, a more expensive active system is yet again your best option.

If you're building a new home or refinancing, you can roll the cost of a new solar hot water heater into your mortgage. Including the cost of a new solar water heater in a 30-year mortgage will cost you between $13 and $20 per month. Tack on federal incentives, and you might pay as little as $10 to $15 per month. So if you're building new or refinancing, and your conventional water heating bills are over $10 to $15 per month, you'll immediately start saving money. And the more water you use, the faster the system will pay for itself.

Aside from the cost to purchase and install the system itself, you'll need to account for annual operating costs. In a simple passive system, this could be negligible or nothing. But in most systems utilizing conventional water heaters in tandem with a solar heater, you will bear some heating costs, albeit much lower than operating a conventional heater alone.

Tax Credits for Solar Water Heaters

You don't have to shoulder the entire price of a new solar water heating system. Federal tax credits may significantly reduce the cost of installing one. Federal Residential Renewable Energy Tax Credits (also known as ITC, or Investment Tax Credits) can provide a 26 percent tax credit on solar water heaters. But there are some conditions to qualify:

• At least half of the energy generated from the property must come from the sun (photovoltaic systems).
• The new solar hot water heater must be certified by the Solar Rating and Certification Corporation (SRCC) or a similar entity endorsed by the government of the state in which the system is installed.
• The solar heating system can't be used to heat swimming pools or hot tubs — it must heat water used within the home or business.

Many states, municipalities and utilities offer their own incentives and rebates for solar water heater installation. Check out the DSIRE database for more regulatory information.

Where to Get a Solar Water Heater

Solar hot water heater components are readily available in many national chain stores, such as Home Depot. Units are also available for purchase directly from producers, with Duda Diesel and Sunbank Solar offering several great residential solar water heater options. Local installers may also offer quality solar water heaters.

For solar pool heating and small-scale use, check out the heaters below:

• Duda Solar 30 Tube Water Heater Collector: This system is the perfect choice for heating pools, hot tubs and closed-loop systems. Thirty highly efficient unpressurized tubes provide excellent sunlight absorption and are rated at up to 45,000 BTUs a day.
• Sunbank Solar 40 Gallon Solar Water Heater: This solar water heater is designed for households with one to three members. This thermosyphon system offers exceptional absorption efficiency (92-96%) and keeps hot water hot all day in an ultra-insulated built-in tank. Weighing in at just 180 pounds, it can be installed on most roofs.
• Duda Solar 200 Liter Water Heater Active Split System: This full kit comes with a stainless-steel water tank, controller and submersible water pump. It's a dual-coil system, which allows you to heat the water in the tank both with solar power and a secondary electricity or heat source.

Because so many factors influence which solar water heater you should buy, it's advisable to work with a professional when choosing and installing a larger solar water heating system.

Solar Hot Water Heaters Vs. Home Solar System

Solar water heaters are less common than they used to be. This is largely due to the drastic decline in the cost of solar panels, causing many people who would otherwise install solar water heaters to forgo them and heat their water with electricity generated from their own solar panels.

Solar water heaters take up precious real estate, and for a homeowner interested in producing their own solar-generated electricity, it may make more sense to maximize the space available and nix solar water heating altogether, buying solar panels instead.

However, if you don't have the space for solar panels, solar water heaters may still be a great fit, as they take up far less room than solar panels do. Solar water heaters can also be a great option for those living in remote locations or as an environmentally friendly add-on for existing solar electricity generation. Modern electric water heaters are incredibly efficient and, when powered with solar electricity and paired with a solar water heater, will yield significant savings for your pocketbook and cut down your greenhouse gas emissions.

For many homeowners, the decision comes down to price. Solar hot water heaters can cost upwards of $13,000. To see how much a full home solar system would cost for your home, you can get a free, no-obligation quote from a top solar company in your area by filling out the form below.

FAQ: Solar Hot Water Heater

Is a solar water heater worth it?

Whether a solar water heater is worth it all depends on where you live, your needs and preferences, and whether you plan on installing solar panels. Solar water heaters have been losing ground due largely to the surge of home solar: The folks that would install solar water heaters also want solar for electricity generation and often choose to eliminate solar water heaters that compete for valuable rooftop space.

If you have the space, a solar water heater will likely lower your water heating bills. Used in tandem with other renewable energies, a solar water heater is still a great choice for nearly any application.

What is the price of a solar water heater?

A typical solar water heater system will cost around $9,000, with higher-end models reaching upwards of $13,000. Small-scale use heaters will be much cheaper, running between $1,000 and $3,000.

What are the disadvantages of solar hot water heaters?

The biggest disadvantage of a solar water heater is that it won't work on foggy, rainy or cloudy days, nor at night. While this can be overcome with a conventional auxiliary heater, it is still a disadvantage all solar technologies share. Maintenance can be another turn-off. While generally requiring little maintenance, some solar water heaters need regular draining, cleaning and protection against corrosion.

How does a solar water heater work?

Solar water heaters circulate liquid through a solar collector — most commonly a flat-plate collector or tube collector — heating the liquid and sending it either to a tank for use or an exchanger, where the liquid is used to heat water for home use.

Christian Yonkers is a writer, photographer, filmmaker, and outdoor junkie obsessed with the intersectionality between people and planet. He partners with brands and organizations with social and environmental impact at their core, assisting them in telling stories that change the world.