By Dan Simms
Updated Dec 7, 2022
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Like many homeowners, you’re probably considering adding solar energy to your home to save money on your electricity bill. The major deterrent for solar panel installation is usually the up-front cost. While solar panel systems can save you thousands of dollars on your energy bills over time, they often present high installation costs.
Thankfully, there are a few strategies that you can use to limit the cost of solar panels you install on your property as well as maximize the ongoing benefits of your system. With state and federal incentives in effect, it’s now more affordable than ever to install a solar system in your home to supplement your family’s energy needs. Depending on where you live, you might even be able to earn money through net metering if you produce more renewable energy than you use. Read on to learn everything you need to know about the average solar panel system cost and whether it’s worth the price.
Thinking of going solar? Explore some of the best solar providers below:
The national average cost of a solar power system is about $20,498. This means that the average homeowner will pay around $20,498 for a 10 kilowatt-hour (kWh) system, which is strong enough to power the majority of residential properties’ energy usage.
While $20,498 is the national average price paid by homeowners, the average cost of solar panels in your area might range between $17,538 and $23,458, depending on various factors, including your system size and the solar installation company.
According to data from the Solar Energy Industries Association (SEIA), the state you live in can greatly affect the price you pay for your solar panel system and installation. The table below summarizes some differences in solar panel and electricity costs throughout the country.
|State||Average price of electricity (cents per kilowatt-hour)||Average solar system cost (6kW system)||Average cost per watt||Average 2023 federal tax credit (6kW system)|
While the national average cost of a solar panel system is $20,498, the price you’ll end up paying for your home solar panels and system will vary depending on your homeowner and local market preferences. The total cost of your solar panel system (and the amount you save on your monthly electric bill) will vary largely depending on the following factors.
|Cost factor||How it affects your price|
|Amount of sunlight||If you live in a state that receives regular, full sunlight, your system will cost less and require fewer panels.|
|Household energy needs||Using less energy allows your solar panels to provide a greater percentage of your power needs, saving you more over time.|
|Labor and installation||Labor and installation are more costly when you have more panels.|
|Location||States with robust solar incentives have more solar company competition, lowering the price of systems.|
|Panel brand and quality||More efficient models from high-tech brands like Tesla come at a higher price point.|
|Panel type||More efficient monocrystalline panels are more expensive than polycrystalline panels.|
|Size of system||Larger systems with more panels are more expensive to install.|
The sunlight your roof space receives affects the price of solar panels you install because it influences how many panels you need. The more direct sunlight your roof gets, the better. Your roof’s shape and direction—and the state you live in—will influence the sunlight your roof receives.
In the northern hemisphere, solar panels should face south to optimize how much sunlight they can absorb during summer. Unfortunately, there’s not much you can do to improve your home’s orientation, but some companies offer adjustable panels that can help make your panel’s angle more conducive to energy production during the winter when the sun is lower in the sky.
A home in the northern part of the country might require a 12 kW or 13 kW solar panel system to produce enough energy to run the entire household. In contrast, one in the south with the same energy needs might get away with a smaller 9 kW system thanks to the more direct sunlight it receives.
If you live in a state notorious for long, sunny days (like California or Arizona), you’ll require fewer panels to meet your energy needs. As a result, you’ll pay less overall for your system and installation compared to homeowners with the same energy needs who live in areas with less direct sunlight.
Your electricity cost (and, by extension, your solar panel needs) depends on your household. Taking steps to conserve electricity lowers your electricity bills and allows your solar panels to cover a larger percentage of your household power needs. It also helps you give back to the environment.
Many homeowners do not install their own solar panels, though some models make it possible to attach your panels on your own time. The total cost of your solar panel installation may or may not include labor costs depending on your location and how you’re financing your solar panel system. Solar panel installation costs range between $15,000 and $25,000 and vary depending on the number of panels you’re installing and the installation method and mount you’re using.
Your location will affect your solar panel system cost because pricing and installation availability varies depending on where you live. Tax incentives and rebates on solar systems vary by state, and the types of local solar incentives (or penalties) put onto your system purchase will affect the final cost.
While some states offer generous incentives to help cut your energy costs using renewable solar energy, others allow local utility companies to levy harsh penalties on those using solar panels. If you live in an area where fewer solar panel companies are operating due to local laws or a lack of state incentives, the price of solar panels is likely to be higher.
Even if your roof gets many hours of sun, it won’t do you much good if you have low-quality panels that struggle to convert it into usable electricity. The brand you choose will play a major role in the total cost of your system and the amount of energy your system can produce.
Most solar installers use high-quality tier-one solar panels, but higher-end models from brands like SunPower, Tesla, and Panasonic are generally considered the most energy-efficient manufacturers, meaning they come with a shorter payback period.
The payback period is the amount of time it takes your solar system to pay for itself by saving on the cost of electricity, which means that high-efficiency models provide a greater return on investment (ROI) over time. However, they also come with a higher overall cost than less efficient models.
The bottom line regarding brand and efficiency is that you make a long-term investment when choosing higher-rated models. Solar panel systems with higher efficiency ratings can produce more energy from the same amount of sunlight compared to less efficient panels. Because of this, a 6kW system with a higher efficiency rating will cost more than a 6kW system with a lower rating during installation; however, it will save you more money over time.
There are three main types of solar panels. Monocrystalline and polycrystalline panels are the most common solar panels used for residential energy, but you might also see low-cost thin-film panels for sale.
The most obvious factor determining how much energy your solar panels produce is the number of panels. Larger systems with a greater number of panels have a larger collecting area, which means they’ll produce more electricity than a smaller system with fewer panels, all else being equal.
During installation, your solar provider will work with you to help you decide how many solar panels you need to produce enough electricity to cover your electric bills. You can also use a solar calculator to help you determine how many panels you’re likely to need to generate the energy you need to power your property.
If you have a more limited roof space or higher energy needs, consider choosing panels with a higher efficiency rating. More efficient solar panels can produce higher electricity rates but are a larger investment up-front. However, more efficient panels are also easier to install and allow you to save money on labor costs in most parts of the country.
Home size is one of the most important factors determining how much solar panels cost. In general, larger homes need larger solar systems to offset their electricity costs. In comparison, smaller homes can get away with smaller systems and still generate enough electricity to eliminate their electric bills.
|Home Size in Square Feet||Average Cost of Solar Panels|
On average, solar panels for a 1,000-square-foot home cost between $5,000 and $6,000. People who own smaller homes can purchase fewer panels since they don’t need their solar system to produce as much electricity to eliminate their monthly electric bill.
On average, you should expect to pay around $7,000–$9,000 for a solar panel system that can produce enough energy for the typical 1,500-square-foot home. Solar panels for a 1,500-square-foot home cost 1.5 times as much as panels for a 1,000-square-foot home, although this linear relationship doesn’t hold as home size increases.
A solar panel system that’s large enough to meet the electricity requirements of a 2,000-square-foot home costs slightly more than double what you need for a 1,000-square-foot home. The average cost is between $10,500 and $12,500.
You should expect to pay between $13,000 and $16,000 for solar panels that can meet the energy needs of the average 2,500-square-foot home.
Notice that as house size increases, the typical price range also increases. This is because larger homes differ more than smaller homes in energy consumption, and details about your lifestyle will affect what size solar system you need more if you live in a larger home.
Seeking some more cost information on solar panels? Get a quote from an approved provider below:
Get free quotes from House Method approved solar installers.
Finally, a 3,000-square-foot home requires a solar system that costs $17,000–$20,000, on average.
How much electricity a solar system produces depends on how much sunlight they receive, how efficiently its solar panels can convert that sunlight to electricity, and how many panels the system has.
Solar system sizes are measured in kilowatts (kW), a unit of power that measures how much energy they produce. Most residential solar installations fall between 8 kW on the low-end size and 14 kW on the high-end. The wide range covers differences in climate, energy usage, and home orientation.
Solar systems are usually sized in kW, not the number of panels. Your solar installer will discuss system sizing with you during your free quote, so don’t worry about working out your system size. Ultimately, the solar company you work with will help you choose the right size system for your home to meet its energy needs.
Solar panel system providers know that most homeowners don’t have immediate access to more than $20,000 up-front in cash. You can now cover your solar panel installation through various financing options, breaking down one large payment into smaller, more manageable chunks.
You can also take advantage of two primary types of solar incentives as a homeowner: federal and state. The federal solar investment tax credit (ITC) is available to all homeowners living in the United States, no matter where they’re located. A homeowner in Florida will have the same federal tax incentives as a homeowner in California, regardless of local laws.
Individual state credits are only available to residents of the state issuing them. State tax incentives and other solar credits may change regularly, so read up on your state’s current incentives before you begin calculating the cost of your solar panel system investment.
The first option that you have when investing in a solar panel system is to use a solar loan. Like a mortgage or a student loan, solar loans are issued for a specific purpose—to invest in a solar panel system. You cannot take out the loan and then use it for other purposes, so you’ll want to be sure that you’re prepared to take out the money and pay it back after the installation is finished. Like any other type of loan, you’ll pay the money you borrow with a solar loan back with interest over time.
However, you may qualify for tax incentives from the federal Department of Energy because you are the one who will ultimately own the panels. Once your solar loan is paid back in full, you are the owner of the solar system in the same way that your home belongs to you when you pay off your mortgage. When your solar panels are under financing, they are technically the property of the company issuing the loan, which is usually a bank or financing company.
You can also fund your solar panel purchase through a solar lease. Solar leases allow you to take advantage of the benefits of solar panel ownership without the high up-front costs. When you use a solar lease, a solar installation company will visit your property and install a solar system onto your available roof space. You then pay the solar company in exchange for using the system.
Note that these charges are not installment payments to own the system; they pay for the electricity your panels generate. The full rights to the solar system remain with the solar panel company. Depending on the company that offers the lease, you might even be responsible for paying for the upkeep and maintenance of the system, even though you do not own it. While the company will not charge you the full price of the system (some may even install panels at no immediate charge), these residential solar panels are not as great of a bargain as they may initially seem.
One type of solar lease that you might have access to is a power purchase agreement (PPA). Similar to a solar lease, a PPA allows you to save on the price of solar panels because you do not own the system the company installs. However, you also don’t need to pay for the system’s installation, maintenance, or upkeep with a PPA; these are all covered by the solar company. All you pay for is the cost of electricity you use generated from the panels, and these rates are comparable to those that you’ll pay to a utility company. PPA loans are not available in all areas—some states have even banned their use.
One of the best solar incentives in the country is the Federal Solar Investment Tax Credit (ITC), which is offered to all U.S. homeowners. The credit is for an incredible 30% of your entire system value. The average cost of going solar is around $22,000, so the typical credit value will be approximately $6,600.
This amount gets applied to the income taxes you owe for the year your system is installed. It’s important to note that you can only take this credit if you owe money on your taxes. The credit rate gets deducted from what you owe the government.
If you can’t take the full credit for the first year, you can roll over any existing credit for up to five years.
The ITC credit rate is scheduled to drop in the future, although you have plenty of time to go solar and still take the full 30%. Thanks to the Inflation Reduction Act passed in 2022, the full credit—which was previously scheduled to drop in 2022 and disappear in 2024—was extended for an entire decade.
The rate schedule is now as follows:
In addition to saving you money on federal taxes, many states now offer solar incentives to help you save on state taxes through renewable power. The specific incentives and benefits that you’ll have access to will vary depending on where you live—and different states have taken on very different attitudes towards solar energy.
For example, Idaho’s Residential Alternative Energy Tax Deduction allows you to deduct up to $20,000 from your state taxes over four years after installing a solar energy system on your property. However, if you live in Arkansas, you won’t be able to deduct any portion of your solar system costs from your taxes. Research your state’s local laws before choosing a solar system to maximize your savings when tax season rolls around.
How much money solar panels will save you depends on your local electricity rates, how much energy you use, your solar system’s size, and the amount of sunlight your panels receive throughout the year.
The following table breaks down how much you can expect to save per day, month, and year, assuming an average energy consumption of 886 kWh and an average cost of electricity of 13.7 cents per kWh.
|Average Savings on Electricity With Solar Panels|
Solar panels save the average homeowner in the United States $4.03 per day. This estimate assumes an average monthly electricity consumption of 886 kWh and an average electricity rate of 13.7 cents per kWh, so your savings may differ depending on where you live.
You should expect to save about $120 per month with solar panels, although the specific amount you save will depend on your home’s energy burden and your solar system’s size.
Annual savings on utility bills for solar customers in the United States is about $1,450, although the amount varies significantly by location.
An often overlooked benefit of solar panels is that they add significant value to your home. A report by real estate technology company Zillow indicates that solar panels increase a home’s value by approximately 4.1%, on average. For an average home price of $500,000—the average home price in the United States in the first quarter of 2022—that means an increase in value of $20,500.
Solar panels only add value to your home if you purchase them outright in cash or buy them over time through financing. Leased solar panels and PPAs don’t increase your home’s value since they’re not technically part of your home. Companies that offer leases and PPAs maintain ownership of the panels throughout the agreements and will remove them when the lease or PPA ends.
Most homeowners install solar panels on their homes to reduce the money they spend on electricity. While solar panels improve your home’s efficiency over time, they can be a major up-front investment. Thankfully, there are plenty of tips and tricks that you can use to pay less for your solar panels and save money operating them over time. Use the following methods to reduce the cost of installing and operating your solar panels.
When you bought your home, you probably didn’t put a down payment on the first property you visited. Similarly, when you buy a solar panel system, you shouldn’t jump at the first quote you receive. The easiest way to reduce the amount of money you spend on solar panels is to comparison shop—just as you would when making any other major in-home purchase.
Before you book your solar installation:
A solar battery is an add-on system that helps your solar system store excess power. Solar batteries enable your solar system to function off stored power in low-light conditions, extending the functionality of your system. When you shop for a solar installer, you may be able to negotiate a lower rate on a solar battery as a part of your installation package.
Solar panels work by supplementing your home’s electricity with solar power. Reducing the power your home uses in the first place allows your solar panels to supply a larger percentage of your home’s power, resulting in a lower electricity bill.
Consider replacing your current windows with Low-E glass to shape up your home’s energy usage. Energy-efficient windows can cut your energy costs by up to 30% by keeping your home at an ideal temperature, so you don’t need to use your air conditioner or central heating as often.
You may also want to replace older appliances with new ENERGY STAR-certified products. These appliances undergo strict third-party testing and meet efficiency standards issued by the Environmental Protection Agency (EPA). Replacing your current appliances with ENERGY STAR-rated appliances allows you to enjoy the same in-home comforts while also spending less powering them.
Not in the market for new appliances? Here are some free or cost-effective ways to increase your home’s energy efficiency:
The first main disadvantage of solar energy is the up-front cost for homeowners. The panels, the inverter needed to keep the solar panel system working safely, and the battery used to store excess power, plus the labor and installation costs, can add up to thousands of dollars. The space occupied by solar panels is another major downside to solar energy.
The average price of a residential solar panel system is $20,498 in 2022. However, the recently extended federal solar investment tax credit can lessen the financial impact of installing your system.
The payback period for a solar panel system will vary depending on the efficiency of the system. Generally, you can expect your solar panel system to pay itself back in six to 10 years.
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