How Much Do Solar Panels Cost?

Solar isn't a one-size-fits-all purchase, so you're going to have vastly different price tags between solar projects. Because solar panels are such a site-dependent purchase, it's hard to pinpoint an exact cost without doing an on-site inspection of your home. 

One thing we do know is that going solar, no matter where you are, is very expensive. 

The average 8-kilowatt residential solar panel system cost about $3 per watt in 2022, according to data from the energy consulting firm Wood Mackenzie. That's a drop of 29 cents per watt from the year before, but it still means the average system costs about $24,000 before tax credits and other incentives. And your home may not be "average."

Many other factors influence the cost of installing solar panels, including less-than-obvious ones like the complexity of your roof, Rohit Kalyanpur, CEO of the Silicon Valley-based solar company Optivolt, told CNET.

You can get some help to pay for your panels. The Inflation Reduction Act, passed by Congress in 2022, provides a 30% tax credit for solar panel systems installed through 2032.

Here's what you need to know about the costs of going solar. 

How much do solar panels cost for homes?

The cost of a solar system can vary wildly because so many factors are involved.

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Cost varies, in part, because of the size of the system, said Neil Gallagher, vice president and co-founder of Brighterway Solar, a Tampa, Florida, solar installer. The solar industry doesn't have a standard pricing structure, so the cost by the customer is based on their energy consumption.

The cost of a solar system installation can vary widely when you compare the efficiency rate of the solar panels and other installation expenses. The best solar panels can set you back anywhere from $15,000 to $50,000. 

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The 30% tax credit provided by the federal government coupled with available state and municipal government tax credits, tax exemptions, rebates and other incentives can further reduce the cost of purchasing and installing solar systems.

Here's a look at the average nationwide cost of solar panels, according to data from the Lawrence Berkeley National Laboratory, FindEnergy and the energy consulting firm Wood Mackenzie.

Solar costs are also influenced by your solar system's components. Let's break down the components of a solar panel system and what you can expect to pay. 

• Solar panels: The solar panels alone can cost between 80 cents to $1.80 per watt, depending on the type, size and application. That's not including the cost of installation and of all the other equipment needed to get them producing energy and powering your home.
• Batteries: Solar batteries are costly and can vary in price based on the capacity and quality of the battery. They store the energy accumulated from the solar panels. The price varies based on the installer, application and location. Batteries typically cost $12,000 to $22,000, according to the Department of Energy, although smaller capacity systems are available for less. In some cases, solar batteries may be more expensive than solar panels. Not all solar systems need batteries. If you're still connected to the grid, you won't need to store energy (but you still can).
• Inverter: This device converts the direct current, or DC, electricity produced by the panels and stored in the battery to alternating current, or AC, electricity, which runs all appliances. The inverters can cost between 20% and 50% of the price of the solar panels. 
• Charge controllers: These devices, which protect the battery from overcharging, can cost between 5% and 10% of the price of the solar panels. Complex charge controllers with advanced features can be more expensive.
• Labor costs: These costs can vary from state to state. Some states require specific ratios of licensed electricians to non-electricians on a solar installation crew. Licensed tradespeople typically cost more due to the insurance, benefits and workman's compensation costs. 
• Additional expenses: Factors contributing to the overall solar installation cost include system size, design, site survey, engineering, permits, power electronics, mounting hardware, telemetry systems and maintenance. These costs can differ significantly depending on the location.

How much are solar panels in my state?

Here's the average total cash price, cost per watt and system size for a solar panel system in your state, according to data from FindEnergy.com. These prices don't factor in tax credits or state incentives. Certain states don't have any FindEnergy solar data and are grayed out on the map.

The table below includes estimated solar savings after the federal solar tax credit, average electricity rates and average annual electricity bills per state, calculated using data from the US Energy Information Administration. 

Solar panel costs by type

There are three main types of solar panels: monocrystalline, polycrystalline and thin-film. Monocrystalline solar panels are the most popular choice for residential installation because they have the highest efficiency rates from 17% to 22%. The average cost for these panels is between $1 and $1.50 per watt, but prices may differ depending on location. 

Polycrystalline panels are popular for homeowners on a budget. They have a moderate efficiency rate ranging from 15% to 17%. Their cost is between 90 cents and $1 per watt. 

Thin-film solar panels, which have an efficiency rate ranging from 10% to 13%, are the least efficient solar panels on the market. They have a shorter life span and are rarely used for residential purposes. 

Factors that affect solar panel costs 

Trying to get a solar estimate without an on-site inspection of your home is tricky business. Because the location, layout and energy needs of every home are different, solar pricing for each residence is different too. Your home might need only a small 5 kW solar array. Your neighbor down the street might need a larger 8 kW array, and they might choose to install a solar battery, which is going to push their price tag even higher. 

Here are some of the biggest factors that affect the cost of going solar.

What are the additional costs to install solar panels?

As you're likely aware by now, solar is not cheap, but did you know that the price of the solar panels themselves is actually one of the cheapest things you'll pay for during your solar journey? Only 35% of your total cost to install solar goes toward the actual purchase of the solar equipment, according to the US Department of Energy.

Where is the rest of your money going? Soft costs, also known as the hidden costs of installing solar, are nonhardware costs, and they make up 65% of your total solar costs, according to the DOE. Most of your soft cost expenses go toward things like sales and marketing, labor, paperwork and overhead profits. 

Here are some of the most common soft costs you'll be charged for:

• Installation labor.
• Permits and inspections.
• Supply chain costs.
• Sales tax (unless your state exempts solar panels).
• Supply chain costs.
• Sales and marketing.
• Overhead company profit.
• Tree removal (if you have trees shading large parts of your roof).
• Insurance (if you plan on adding your solar panels to your homeowner's insurance policy).
• Maintenance.

How much do solar panels save?

There are several factors such as the direction and angle of the panels, local weather conditions (such as annual irradiance, which refers to total sunlight hours per year), system size, shading, battery capacity and efficiency and more that must be considered before you can get an accurate estimate of your potential cost savings. If your home is suitable for a solar system, you can expect to reduce your monthly electricity bill by 50% to 100%. 

By investing in a high-quality solar system, you're paying upfront to enjoy the long-term financial benefits of reduced or even eliminated electricity bills. It often takes six to 12 years for a solar panel system to pay for itself. Let's take a look at a quick example.

How to calculate the federal solar tax credit

Let's say your current monthly electricity bill is $150 and the solar system you want to invest in costs $30,000. First, we want to calculate what your system will cost after the federal 30% tax credit. Here's how that looks:

1. Net project cost = Total project cost - federal tax credit
2. Federal tax credit = 30% x $30,000 = $9,000
3. Net project cost = $30,000 - $9,000
4. Net project cost = $21,000

Now we need to calculate the payback period to know how long it will take to recover your investment after installing the solar system. 

1. Payback period = Net project cost / Annual electricity savings
2. Annual electricity savings = Monthly electric bill x 12
3. Annual electricity savings = $150 x 12 = $1,800
4. Payback period = $21,000 / $1,800
5. Payback period = 11.7 years

Based on this calculation, a $21,000 investment in a solar system will take less than 12 years to recover your initial investment. 

How long does it take to break even on solar panel costs?

Your breakeven point, also known as the solar payback period, is the amount of time it takes for you to see a return on your investment. In other words, how long it will take for your solar panels to start paying for themselves. Just like the average cost of going solar, your payback period may vary. 

Experts say an average payback period in the US is between six to 12 years. Factors affecting your solar payback period include system cost, tax credits and incentives, energy consumption, how much electricity your system generates and your electricity rates. 

Using a quick math formula can help you get a general idea of your solar payback period, but you'll want to speak with an installer to get the most accurate estimate. 

(Total solar system costs - rebates) / Electricity bill savings per year = Payback period in years

1. Start with the total cost to install solar on your home. (If you're taking out a loan, consider interest and fees.)
2. Next, subtract the value of any tax credits, incentives or rebates.
3. Now you have the net cost of your solar panel system, after discounts.
4. Next, estimate your annual electricity bill savings with solar panels. (Your solar installer or utility provider might be able to help here.)
5. Then, divide the net cost of the system by the annual bill savings.
6. The number you end up with is the number of years it will take for your solar panels to "pay for themselves."

Are solar panels worth the financial investment?

There are several factors to consider when assessing the benefits of solar panels, Kalyanpur said. First, consider the total energy produced over the system's lifetime and whether it can result in substantial savings. Other factors include state-level incentives that help to offset the costs of investing in solar panels.

Pros 

• Solar panels can reduce your carbon footprint and contribute to a greener environment.
• They can significantly lower or eliminate your electricity bill and generate financial savings.
• They can increase the value of your property.

Cons

• The upfront costs are quite expensive.
• Solar panels' efficiency and energy generation depend on weather conditions and location.
• Maintenance and replacement costs can increase the long-term costs of a solar system.

How can I pay for solar panels? 

There are various ways you can go about paying for solar panels. Here are a few of the most common:

Cash: If you can afford it, paying cash is your best option. You won't have to worry about high financing fees or interest rates, and you'll always be eligible for tax credits and incentives. Your solar payback period will likely be shorter, too.

Solar loan: Paying thousands of dollars upfront in cash isn't an option for everyone. If paying cash isn't in your budget, your installer might offer you a financing option called a solar loan. These loans are usually through a third party, so check for associated fees and interest rates. 

Other loans: A solar loan isn't your only financing option. You could consider taking out a personal loan through your bank or opening a home equity line of credit. Just be aware of the risks that come with a HELOC. If you can't pay back what you owe, you could lose your home.

Lease or power purchase agreement: If you aren't interested in solar panel ownership, consider leasing a system or entering a power purchase agreement. When you lease a system, you pay for the use of solar equipment owned by a solar company. Entering a PPA means buying solar power generated by a company-owned system at a fixed rate. This fixed rate is usually cheaper than the retail electricity rate from your local power company. Ask your solar installer about all your options.

How long does it take to install solar panels?

It can take six months or more to get solar panels installed. The actual "installation" of the panels on your roof by the installer is usually completed in three days or less. 

What really slows down the process of solar installation is everything that needs to happen before installation day. The sale of the system itself, site assessments, system design, gathering permits and supply chain issues can all drag out the solar installation timeline. Most of your time will be spent waiting around for permits and paperwork to be approved, as well as dealing with supply chain delays. 

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Correction Aug. 18: This story originally presented some statements as direct quotations that were actually paraphrases of what the individual cited had said. Those passages have now been rendered appropriately as paraphrases.