Solar energy is the way of the future. It will help America reach its clean energy goals of achieving a carbon-free electricity sector by 2035 and a transition to net-zero greenhouse gas emissions by 2050.  But there is one major factor getting in the way of these goals- money. 

Many people simply can’t afford the cost of solar panels and installation. However, incentives and savings can make solar more affordable. 

So how much do solar panels and installation cost? Read on for a full guide on pricing breakdown. 

What is the Average Cost of Solar Panels and Installation?

The cost of solar panels and installation will vary depending on the company you use, your location, the type of system you choose, installation challenges, and other issues. However, the nationwide average is $20,650. Systems tend to range between $17,430 and $23,780. 

Factors that Affect the Cost of Solar Panels and Installation

Type of Solar Panel

The three most popular types of solar panels are: 

• Monocrystalline: Monocrystalline panels are made from monocrystalline solar cells or single silicon crystals designed specifically for solar panel use. They are the most efficient type of solar panel, but they are also the most expensive. A standard 6kW system can cost between $6000 and $9000. 

• Polycrystalline: Polycrystalline panels are made of cells that contain multiple silicon crystals. They are less efficient but more affordable than their monocrystalline counterparts. A 6kW system will run between $5400 and $6000. 

• Thin-Film: Thin-film solar panels are made by attaching one or more thin layers of photovoltaic material onto a glass, metal, or plastic substrate. They are the least efficient option. A 6kW system costs between $4200 and $6000. 
  
  

Labor

Labor typically costs around 25% of the system itself. So, a $6000 system can cost close to $7500 with installation. Permits and other fees add to the expense. 

The Size of the System

The size of your system will depend on your roof size and layout and your energy needs. Your monthly electric bill will give you an indication of how much energy your household requires. According to Energy Sage, the average home will require 19 panels or a 7kW system. 

Additional Equipment

Most solar systems will require a battery to store energy and an inverter that converts the variable direct current output (DC) of your solar panels into an alternating current (AC). The equipment is usually included in your solar estimate, but if you request specific brands, they may increase your expenses. 

Installation Issues

The cost of solar can go up due to installation issues. These include: 

• Roof angle and Type: Solar panels should be angled for maximum sun exposure. Tilting is not an issue if the roof is angled, but if you have a flat roof, the contractor may need to build scaffolding that increases installation costs. The type of roof you have may also require different installation methods and materials that increase expenses. 

• Roof Age: If you have an older roof, consider replacing it before the panels are installed. If you move forward with the installation before your roof repair, the contractor will need to come back and remove the panels and reinstall them later. You can save yourself this expense by having the roof repaired before your installation. 

• Structural Issues: Like roof repairs, structural issues should be addressed before your panels are installed. If you don’t deal with structural issues before your installation, you may need your panels removed and reinstalled to accommodate the repair. 

• License and Permitting Costs: Solar often requires permits that add to installation expenses. The cost of the permit will vary depending on the area you are located in. Some contractors may also require a license to work on your solar panel which will further inflate costs. 

• Tracking Systems: Some homeowners may request tracking systems that monitor the solar system’s efficiency. The cost of installation will increase the price of your system. 

Your Solar Installer

Not all solar installers are equal. Some will charge higher rates than others. A higher rate can result from high overhead costs or profit margins. They will also be contingent on the system design and equipment used. 

For example, some installers will develop a design that includes more panels which drives up the cost of the estimate. The panel size, efficiency, and the quality of equipment will also factor in. You may also pay more for extensive warranties. 

Inverters 

The type of inverter you use will also affect the cost of installation. You may choose a string inverter which converts electricity for a group of panels and could result in some energy loss. 

Microinverters are installed in each panel and minimize shading issues and energy loss. They are more efficient and more expensive than their string counterparts. 

Your Location

Location is another solar panel cost consideration. States with a high cost of living will pay more for panels to cover the installer’s overhead expenses. 

The price may also go up to cover the installer’s licensing fees. For example, California requires installers to hold a C-46 license and specialty licenses for PV and solar thermal installation. Georgia does not require installers to hold any license. 

Energy use also drives up costs. States that use a lot of energy have a higher solar demand so installers can charge more. 

According to Semper Solaris, the states with the highest solar installation rates are Hawaii and Connecticut. The lowest installation rates can be found in Georgia, Arkansas, and Alabama. 

Other Solar Costs

Solar panel installation may be expensive, but there are other costs you will encounter with ownership. They include:

• Cleaning:  If you live in an area prone to dust, heavy pollen, and wildfires, debris and dust may build up on your solar panels and prevent them from working efficiently. You may require a professional cleaning to ensure they operate at their best. 

• Insurance: If your insurance does not cover your solar panels, you may consider adding them to your policy. The policy will provide reimbursement for damage and replacement costs, but your premiums may increase. 

• Maintenance: Solar panels don’t require much maintenance, but you may order inspections every few years to inspect wiring and connections. 

• Property Tax: Most states waive additional property taxes for homeowners who install solar panels. But if your state doesn’t offer this option, you may be dealing with a tax increase. 

What Factors Lower the Cost of Solar Panel Installation? 

The factors listed above may make you wonder, is solar panel installation worth it? Fortunately, several incentives offset costs and make it a worthwhile investment. Here are some to consider. 

The Federal Solar Tax Credit

The federal solar tax credit helps homeowners save on solar panel installation by offering a reduction on the taxes they owe which equals 30% of system costs and installation. You may claim the credit for the year you install your system. If you do not owe enough in taxes to make up for the credit, it can be disbursed over a few years. However, only one credit will be awarded. 

The credit is set to continue until 2034 but it will decrease to 26% of total solar system costs in 2033 and to 22% in 2034. It is available to people who own their systems; renters are not eligible. Consult your tax professional to ensure you receive your full credit.

State Tax Credits

Some states also offer tax credits for solar installation. Arizona, Colorado, Hawaii, Massachusetts, Maryland, and New Mexico are currently offering tax credits. You may combine state and federal tax credits, but you must pay federal taxes on your state credits. 

Net Metering

Net metering involves connecting solar panels to the public utility power grid so surplus power can be transferred to the grid. Consumers are not charged for surplus power, so it helps lower their energy bills. Most states mandate net metering, and most utility companies offer the program. 

Tax Exemptions

Homeowners may receive tax exemptions for their solar panels. Their property taxes will not go up to account for the value the panels add to the home. Some states may offer additional exemptions. 

Energy Savings

Solar panels may result in energy savings that make them worth the expense. The average U.S. consumer who spends about $125 a month on their energy bill could see up to $1500 a year in savings. However, the amount you save is contingent on several factors including: 

• Your Energy Usage: if you live in a small house, don’t use a lot of energy, and make efforts to conserve, you may not save money on your solar installation. 

• Your Payback Period: You will not see a profit off your system until you pay off your panels. If it takes a long time to pay off the panels, you may not see a return for years and the panels may not be worthwhile. According to This Old House, the average solar payback period is between 6 and 10 years, and most panels last 25 – 35 years so homeowners have 15-34 years to profit from their investment. But if it takes you longer to pay off your panels, you may only see a few years of profitability. 

• Your Property Location and Position: If you live in a city that gets a lot of sunlight, and your property is well positioned to minimize obstructions, you will get more value from your solar panels. 

• Your Roof Size and Dimensions: Most solar panels are installed on rooftops. If your rooftop is small, or it has an odd layout that limits the number of panels that can be installed, your system may not pay off. 

Increase in Home Value

Solar panels will also increase your home value. U.S. Department of Energy statistics show that home value increases by $20 for every dollar you save on your utility bills. So, if you save $1500 a year on energy costs, you can add $30,000 to your home value. 

Is Solar Getting Less Expensive?

The cost of solar installation is decreasing, and it is expected to continue that trajectory. Costs now hover around $20,000, a reduction from rates that were closer to $50,000 a decade ago. Homeowners can take advantage of lower rates due to decreased material costs, and more efficient labor and permitting processes. 

Available incentives have made people more likely to invest in solar. Companies are seeing increased profitability which allows them to hire additional staff and streamline their processes. The potential for new domestic solar manufacturing facilities may reduce future supply chain issues and make panels cheaper and easier to ship. 

What Does Solar Panel Installation Involve?

• Site Evaluation: An installer will visit your home to work out a suitable solar panel design. They will inspect the roof, attic, and electrical setup to determine the complexity of the installation. This evaluation will help them estimate the total installation cost. 

• Permit Approval: Most states require a solar installation permit. Your contractor will take care of the permitting process. Some permits are issued instantly, while others can take a few days. The cost will be included in your installation. 

• Installation: Installation takes 1 to 3 days. You do not need to be home while the installation takes place, but you may want to be around to supervise. 

• Clean Up: The contractors will remove debris and leave your property clean. 

• City Inspection: After work is completed, the contractor will set up an inspection meeting with your city planner to ensure the system is up to code. It can take a few weeks for the planner to find a time to come out. 

• Utility Connection: After the planner approves the system, you must apply for a connection so the utility company can connect it to the grid. The company may also ask to inspect the system to ensure it is up to code. The process typically takes a few days. Once the system is connected, you can turn it on and start enjoying solar power. 

What are Solar Payment Options?

Various solar payment options can make systems more affordable. They include: 

• Purchasing: Homeowners who can afford to purchase their systems in full will avoid interest. They will also be eligible for the federal tax credit the next time they file. 

• Solar Loans: Consumers may apply for a loan with a bank or another type of lender to finance solar installation. Interest rates vary depending on credit score, income, and other factors. 

• Solar Leasing: Leasing is another option. Consumers will pay a monthly fee to rent their system from a provider. Unfortunately, this option tends not to produce a payoff due to ongoing costs and the fact that it will not make you eligible for tax incentives. 

• Power Purchase Agreement (PPA): A PPA allows you to pay little to nothing for your solar installation. Instead, you will make monthly payments to a utility company based on the energy the system generates. You will not own the system, so you will be ineligible for tax incentives. 

  
  

Solar panels and installation are not cheap. However, tax incentives, energy savings, and an increase in home value could offset the expense. Now that you know what’s involved, will you add solar energy to your home?