How Much Do Solar Panels Cost?

An 8-kilowatt solar panel system can cost around $24,000 before tax credits and incentives. Here's how much you might pay.

Solar panels are a big investment, but they can save you even more on your electricity bill over the long run.

There's no one single price tag for solar panels. 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 quite pricey. However, solar prices have dropped significantly compared with a decade ago, and they're expected to keep falling as the industry matures.

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.

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There are many other factors that 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.

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.

Can solar panels save you money?

Interested in understanding the impact solar can have on your home? Enter some basic information below, and we’ll instantly provide a free estimate of your energy savings.

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

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

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 cost by customer 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.

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.

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.

Here's a look at the average cash price for a 5-kilowatt system per state, according to data from FindEnergy.com. This is a cash price and doesn't factor in tax credits or state incentives. Certain states don't have any FindEnergy solar data.

We've also included 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.

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.

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. But 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.

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. Soft costs 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:

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.

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:

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

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

Your breakeven point, also known as 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 takes for your solar panels to start paying for themselves. Just like the average cost of going solar, your payback period may vary.

However, 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

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

Cons

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 up front 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.

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.

Yes, it's possible they might increase your home's value. In most cases, solar panels are viewed as upgrades or home improvements. Installing solar panels could increase your home's resale value by about $15,000, according to the DOE.

Solar panels can last upwards of 25 years or more. The longevity of your solar panels depends on environmental conditions, type of panels installed and the quality of installation. Many solar companies also offer 25-year panel warranties.

There isn't a definitive "best solar state." But there are states that make going solar more affordable and accessible by providing state-level tax incentives and rebates. States with net metering and a Solar Renewable Energy Credit, or SREC, market even make it possible to earn money by selling your excess solar energy to the power grid or utility companies. States that receive more peak sunlight hours are also more beneficial for solar.

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.