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How Much Do Solar Panels Cost?

Average Range: $18,000 to $40,000

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Solar Panel Installation Costs

The average homeowner will pay around $20,000 for solar panel installation for the common size needed to power an average 1,500 square foot home.

  • Residential solar panels are usually sized at 3kW to 8kW and can cost between $18,000 and $40,000.

The larger the solar panel system you install for your home, the lower the cost per watt will be. The cost per watt including solar panels, parts, labor costs, permits, and overhead is between $6 a watt and $8 a watt. The money you save on your electricity bills can more than earn back your initial installation cost after a few years. There are plenty of solar incentives available from both the government and local energy providers, which can significantly speed up your return on investment and give you an accurate solar panel cost.

What Factors Effect Solar Panels Cost? 

To accurately predict how much you’ll spend on a home solar panel installation, you’ll need to know:

  • Your home’s average utility costs
  • Your rooftop’s solar potential – amount of sun it receives
  • The average local cost for a solar panel system in your area
  • Local incentives and rebates you could receive.

The Department of Energy expects lower solar installation cost trends to continue and estimates that one million homes will have solar panels by 2020. Solar costs dropped dramatically when the Chinese government influenced the worldwide solar market by pouring low-cost financing into the sector which boosted solar panel manufacturing more than ten-fold.

Additional Solar Panel System Costs

There are a few things you’ll want to add in to your solar energy system’s total cost to get the most accurate price estimate. Here are a few additional factors that will

  • Labor costs – Local labor costs for solar installation will change depending on your area and the average costs solar installers charge in your area.
  • Solar mounts – The costs to install the racks that hold your residential solar panels will effect cost as well. There are a few options for solar mounting.
  • Solar inverters – A solar inverter will need to be installed to transform direct current (DC) power from the panels into the alternating current (AC) you can use in your home
  • Other costs: There may also be costs for any local permit fees, inspection fees, and taxes on the solar panels.

With the fall in solar panel prices, these “soft solar panel costs” now constitute the bulk of what you pay when you install solar on your home. Fortunately, as more people adopt solar power, soft costs have fallen as a result—a trend that’s very likely to continue in the future.

An analysis by the federal government’s National Renewable Energy Laboratory (NREL) discovered that installed prices have fallen at an average annual rate of 13% to 18%.

solar panel cost graph

How Many Solar Panels Will You Need?

To know how many solar panels you will need, you will want to determine how much electricity you use in your home. The average house in the United States uses about 900 kilowatt hours (kWh) a month—roughly 11,000 kWh a year. You can easily calculate your actual usage by looking back at your electricity bills.

  • As a general rule of thumb, a 3-kWh solar panel system will generate about 3,600 kWh to 4,800 kWh per year. A 5-kWh system produces about 6,000 to 8,000 kWh per year, and a 10-kWh system can produce about 12,000 kWh to 16,000 kWh per year.

Depending on the size of the system, the solar panels cost would be between $4,000 and $16,000. Add in another $3,000 to $10,000 for other necessary components such as racks for the panels, wiring, and inverters, and the upper range solar panel cost is now close to $26,000.

How Home’s Sunlight Exposure Changes Solar Costs

Southern states get more sun than northern states. But southern states with higher altitudes and less cloud cover—think of Arizona and New Mexico—get more energy from the sun than states such as Florida or Georgia. So, for the same size house, you would need more solar panels in Georgia than you would in Arizona.

Remember, the sun may be shining, but if it is behind a cloud, you’re not getting the same amount of solar energy absorbed by your solar PV system. This means that a solar panel in San Diego will produce more energy in a year than the same exact solar panel located in Seattle. The image below will help you determine the solar energy, known as solar insolation, in your area.

photovoltaic solar resources

What is the ROI on Solar Panels?

You can calculate the return on investment for installing solar panels by calculating your total payback. Calculate the amount you spent to install a solar panel system and then figure out the amount you will save on energy bills monthly. These two numbers show how quickly your savings will cover your initial costs. Electricity rates will vary by region, being higher in the Northeast than in the Northwest. Solar tends to be more cost effective where electricity prices are high.

Does Solar Net Metering effect ROI?

In states where net metering is in effect, consumers can sell the excess solar energy they produce back to their local utility. That lowers their electricity bill, shortening their payback period and raising their cost savings.

Financing or Leasing Solar Panels

There are several payment options that bundle solar installation costs into a consumer’s electric bill, either as a solar lease or as a power purchase agreement. Solar leases allow the homeowner to install solar panels without paying anything (or much) up front reducing the overall solar panel cost. After the panels are installed, the homeowner pays only a flat monthly fee. The fee includes the installation costs, which are spread out over time, and the cost of electricity supply.

It is worth noting that under most solar lease arrangements, the solar company usually keeps any incentives that are associated with owning the solar panels. But the consumer gains other advantages. The solar company may offer a monthly fee below the utility rate, or one that doesn’t rise as utility rates do. At the end of the contract, homeowners can renew, purchase the system, or have the solar panel equipment removed.

These type of third-party financing arrangements have a lot of benefits for consumers—the best being no large out-of-pocket investment. And the solar system becomes cash flow positive from day one. Not surprisingly, these agreements have been a big factor in driving today’s solar energy installation boom.

Solar power may be simple in concept, but in application it can be bewildering. And the best approach for one homeowner isn’t necessarily the best for another. Take the time to gather the pertinent information —about house size, local solar insolation, existing electric rates, and consumption. It’s worth it in figuring out your potential solar cost for your home.

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