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How much do solar panels cost?

Profile picture of Kathryn Parkman
by Kathryn Parkman ConsumerAffairs Research Team
solar panels on roof of home

On average, if you own your solar panel system, it will cost about $3 per watt after factoring costs for installation. If you opt instead for a power purchase agreement, the average cost goes down to just $0.16 per kWh. Solar panels generate “free” electricity, but there are still costs associated with powering your house on solar panels. A whole residential solar panel system costs $15,000–$40,000, depending on your location and energy needs.

In 2019, a federal solar tax credit lets you deduct 30 percent of the cost of installing solar panels from your taxes, which brings the average down from $17,000 to $11,900. You may also be eligible for state tax credits, rebates and other incentives so that total cost could be even less.

How much does it cost to install solar panels?

The average cost to install solar panels in the United States is $11,900 after federal tax incentives. Solar energy companies will install the solar panels, provide maintenance and offer warranties on both the panels and the work. These additional services aren’t free, but they are often worth it.

Often, a solar energy company will have a free “solar calculator” feature on its website for you to quickly estimate the cost and savings of installing solar panels on your home. Some solar panel calculations are based on a satellite photo of your roof and offer an estimate of how much electricity you can generate. Other calculators use your regional solar irradiation to create the estimate, while other calculators simply use the size of your roof or your typical electricity consumption with no other factors included.

There are a few factors that affect the cost of solar panels:

  • Electricity costs
    Different solar calculators may estimate electricity costs in different ways. Numbers can be based on the national average, regional averages or other information you provide—and each input can result in very different overall cost and savings estimates.
  • Incentives
    Solar calculations may or may not include federal, state and local incentives which, if you’re eligible, can mean big savings.
  • Financing assumptions
    Different solar cost calculators also make different assumptions regarding financing. For instance, you could make a flat-rate cash purchase, lease or apply for a loan or PACE (property assessed clean energy) financing. Your total cost will vary depending on your payment method.
  • Choice of solar panels
    Not all solar panels are created equal. Of the three types of solar panels available, monocrystalline and polycrystalline are most commonly used to power homes. Generally, panels made with monocrystalline are more efficient but also more expensive than polycrystalline panels.

How to install solar panels

In a sense, all this research you’re doing now is the hardest part of installing solar panels on your home. The time between when you get a quote from a solar energy company to solar panel installation can be anywhere between one and four months. The whole process can be described in six steps:

  1. Select equipment
    The two most important pieces of equipment in any residential solar energy system are the panels and inverters. Your installer will likely make recommendations about both, but most people find that understanding how solar panels work makes it easier to decide which solar panels are the best for them.
  2. A solar installation engineer will visit your property
    After you sign a contract, the first sign of progress in your solar panel installation is meeting an engineer at your home. They will make sure that your roof is structurally sound enough to support solar panels and check your circuit breaker or electrical panel. Once an engineer determines that your home is structurally sound to support solar panel installation, it’s time to start filling out forms.
  3. Permits and paperwork
    Your installer should handle most of the complicated paperwork—federal and state tax incentives and rebates, PACE and other clean energy financing initiatives and solar renewable energy certificates (SRECs)—but you’ll still want to be aware of what is getting filed where. In addition to helping you apply for state and federal incentives, your installer should also be knowledgeable about local building permits and restrictions, and may even fill out this paperwork for you. Once all your paperwork is filed and approved, your installer will place orders on the equipment you selected when you signed your contract and you’ll be added to a solar panel installer’s queue.
  4. Let the pros do all the heavy lifting
    The actual installation of solar panels on your home takes only a few days at most. First, a solar panel installer will prep the roof of your home to make sure everything is still intact from the engineer’s visit. Next, electrical wiring is installed that connects your panels to your power system. Racking is then attached to your roof to support the panels, which go on top of the racking. Finally, inverters, which convert solar energy into usable electricity, are connected to the panels.
  5. One last check
    Someone from your local government will have to check and approve your installer’s work before you can connect your new panels to the grid. They will be mostly be looking for faulty wiring or violations of electrical and roof setback codes.
  6. Flip the switch
    Finally, your local electric company will send a representative to officially connect your new solar panel system to their grid.

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    How many solar panels do I need?

    How many solar panels you need will depend on your electricity usage. To estimate the amount of energy you’ll need, multiply power consumption in kWh by average hours of usage.

    Average households need
    867 kWh/MONTH
    in electrical power

    First, calculate the average kilowatt hours (kWh) used per month. This number should be on your utility bill as “kWh used,” so to get your monthly average you’ll need to look at past bills for the past year, add up the stated kWh’s used and divide by 12. Next, divide your monthly kWh average by 30 to calculate your daily average. For instance, if your average monthly kWh is 900, then your average daily kWh is 30.

    A solar panel produces about 1 kWh per day, so if your daily kWh usage is 30, you would need 30 solar panels to generate 100 percent of your energy needs. One solar panel s 5 ½ feet tall by 3 feet wide, so the size of your roof is also a factor to consider.

    How much do solar panels save?

    Switching to a solar energy system could potentially cut your energy bill by 75 percent, which makes buying a solar energy system for your home a smart investment. On average, American families can expect to see a savings of approximately $1,400 per year on their electric bill by switching to solar energy.

    Taking into account the 30 percent federal tax credit for installing solar panels, most Americans’ solar panels start paying for themselves within seven years. Federal solar-electric property tax credits will decrease to 26 percent for systems installed before 2021, and decrease again to 22 percent for systems installed before 2022.

    To calculate how long it will take you to “break even” on your solar panels, first subtract your incentives and rebates from your costs. Divide that number by the amount you are saving on utility bills per year.

    The savings you and your family see will depend greatly on where you live, what the climate’s like and your particular energy needs—you’ll need to generate extra energy to heat a pool or run air conditioning. For instance, an average homeowner in Portland, Oregan, will see total savings of $38,000, whereas a homeowner in Los Angeles could save as much as $90,000 over a 20 year period.

    Since the sun provides a free source of energy, once you’ve paid for your panels and installation, returns are high and maintenance cost is minimal. However, if the solar panels do not produce enough energy to cover all of your electricity use, you will still need to pay for traditional electricity as well.

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    Bottom line

    Solar panel costs are lower than ever. The average total cost to install a residential system for solar panels before tax credits or rebates is comparable to the price tag on a new car. When you make the decision to install solar panels on your home, you also have to consider the cost of equipment and installation, plus costs or fees associated with labor, permits, inspections and systems maintenance.

    Also like buying a new car, you can pay for solar panels outright, but most people consider financing, leasing or power purchase agreements first. Read our Solar Financing guide for more information about companies that can help you finance your solar purchase and make the solar panel cost easier for you to manage.

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    Profile picture of Kathryn Parkman
    by Kathryn Parkman ConsumerAffairs Research Team

    As a member of the ConsumerAffairs Research Team, Kathryn Parkman believes everyone deserves easy access to accurate and comprehensive information on products and businesses before they make a purchase, which is why she spends hours researching companies and industries for ConsumerAffairs. She believes conscious consumption is everyone's responsibility and that all content deserves integrity.