Want to say goodbye to your electric bill? Thanks to innovations in clean energy technology, you can likely meet all your electricity needs with just the sun’s energy that hits your rooftop.
But there’s a catch: Solar panels can cost you a considerable chunk of change depending on your energy needs and specifications.
The average 8-kilowatt residential solar panel system cost about $3 per watt in 2022, according to data from the research firm Wood Mackenzie. That’s a drop of 29 cents per watt from the year before, but it still means the system costs about $24,000 before tax credits and other incentives. And your home may not be average.
“The cost is influenced by factors such as roof area, suitability for installation, roof angle, pitch, material costs, and optimal orientation,” Rohit Kalyanpur, CEO of the Silicon Valley-based solar company Optivolt, told CNET.
The good news is that you can get some help paying for them. The Inflation Reduction Act, passed by Congress in 2022, provides a 30% tax credit for solar panel systems installed through 2032.
Let’s dive into how much solar panels might cost you.
How much do solar panels cost for homes?
The cost of a solar system can vary wildly because so many factors are involved.
“It really depends on the size of the system,” said Neil Gallagher, vice president and co-founder of Brighterway Solar, a Tampa, Florida, solar installer. “The industry lacks a standard pricing structure, so costs will vary based on each customer’s specific needs, including factors such as average monthly energy consumption, size of the house, and the number of energy-consuming appliances used in the home.”
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.
The 30% tax credit provided by the federal government coupled with available state and municipal governments tax credits, tax exemptions, rebates, and other incentives can further reduce the cost of purchasing and installing solar systems.
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 $0.80 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 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.
To see how much solar panels typically cost in your state, see the articles linked below:
Solar panel costs by state
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 $1.5 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 $0.90 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.
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:
- Net project cost = Total project cost – Federal tax credit
- Federal tax credit = 30% x $30,000 = $9,000
- Net project cost = $30,000 – $9,000
- 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.
- Payback period = Net project cost / Annual electricity savings
- Annual electricity savings = Monthly electric bill X 12
- Annual electricity savings = $150 x 12 = $1,800
- Payback period = $21,000 / $1,800
- 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.
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.