How Much Do Solar Panels Cost? (2023 Guide) - MarketWatch

The demand to expand renewable energy infrastructure in the U.S. shows no signs of slowing. As a result, the federal government and many states are incentivizing residents to install solar panels on their homes.

There are plenty of programs that can help you save money on solar panels. Your solar installer can help you apply for the federal solar tax credit and any state and local incentives for which you’re eligible.

Federal Solar Incentives

The Federal Solar Investment Tax Credit (ITC) is a tax incentive worth 30% of the total cost of your solar panel system. All U.S. homeowners who install solar panels are eligible for this credit, and it reduces what you owe in federal income taxes. For most solar systems, this credit is worth several thousand dollars, which is significant savings.

However, if you choose to lease your panels, you will not be eligible for this tax credit. You can only claim this tax credit if you own your panels.

The credit is currently set to decrease to 26% in 2033, then to 22% in 2034 before expiring entirely in 2035.

State Solar Incentives

In addition to federal incentives, many states offer other incentives to go solar, including tax breaks, credits and rebates. If you’re interested in the solar incentives available in your state, you can browse the Database of State Incentives for Renewables & Efficiency (DSIRE) or visit your local government website to learn more.

Additionally, net metering is a program that allows you to sell the excess electricity your solar panels generate to your utility company for billing credits. Forty-one states and Washington D.C. have a state-mandated net metering policy, though some policies are better than others. States without a mandated net metering policy, like Texas and Idaho, may have utility companies that offer the program.

Many states also offer solar rebate programs for low- and moderate-income households or community solar programs that aim to make clean energy more accessible.

It costs an average of $20,000 to install a typical solar panel system in the U.S. This works out to about $3.00 per watt of solar installed. If the solar panels are paid for using a solar loan, the price may be over $4.00 per watt. 

The upfront cost of solar can be surprising at first, but the electricity bill savings are substantial! Solar panels in most states pay for themselves in 12 years, sometimes less. Then, you get free electricity for over a decade! 

The total price of installing solar panels in 2023 will vary with your location, your energy usage, available solar incentives, the brands of equipment used, and the solar company you choose. 

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Table 1: Average solar panel cost based on system size in 2023 System size Number of solar panels* Average cost per watt Average total cost (after tax credit) 4 kW 11 $3.25 $9,100 6 kW 16 $2.95 $12,390 8 kW 22 $2.85 $15,960 10 kW 27 $2.75 $19,180 12 kW 32 $2.75 $23,100 14 kW 39 $2.60 $26,936 16 kW 43 $2.60 $29,860

*Based on 370-watt panels

What is the cost of a solar panel installation for an average 2,000 square foot home today?

The average cost of a residential solar panel installation in 2023 ranges between $18,000 and $20,000, before applying tax credits or other incentives that may be available where you live. This works out to between $2.75 and $3.35 per watt of solar installed, depending on your location and the brands of solar equipment used. 

Once you take the federal solar tax credit into account, the overall cost drops to an average of between $12,600 and $14,000.  Our solar panel cost and savings calculator will show you local incentives you may be eligible for to help lower the upfront costs. 

Why are solar panels expensive?

You may have been taken aback when you first saw the price of solar panels. This shock is compounded when you hear that residential systems are much cheaper in some other countries.

But solar panels are a lot more affordable now than they were even just a few years back, and in many states, they now offer an excellent return on investment. According to the National Renewable Energy Laboratory, the cost to install solar panels on a home has fallen over 60% since 2010.

There are several components in residential solar installations that affect the final price. 

The cost can be grouped into two categories, hardware costs and “soft costs”. According to our data:

• Hardware accounts for 46% of average solar panel costs. This covers solar panels, solar inverter(s), and balance of system (racking and mounting, wiring, etc.)
• Soft costs account for 54% of average solar panel costs. This includes installation and labor, sales and marketing expenses, permitting and inspection fees, and installer margins.

Factors that affect solar panel installation costs

1. Solar system size

The size of a solar panel system will play a major role in how much the installation will cost. Solar system size is measured in kilowatts (kW), which tells you the maximum amount of power the solar panels will deliver under perfect conditions. Kilowatt-hours (kWh), on the other hand, represent how much electricity your panels produce and how much your home uses.

The size of the solar energy system you need will depend on how many kWh of electricity your home uses and how much you want to reduce your electric bill by. The higher your energy usage, the bigger the system you need to cover your electric bill, which means your solar installation will be more expensive. 

But, the cost-per-watt of larger systems is often lower because the equipment can be purchased at a bulk price, and other overhead costs will be spread out over a larger system.

2. Your location

The location of your home affects solar pricing in a few ways:

• How sunny your area is: The less sunlight your home gets, the more panels you need to cover your energy needs, and the higher the price you’ll have to pay
• State and local incentives: The 30% federal solar tax credit, sometimes called the Investment Tax Credit (ITC), greatly reduces solar installation prices, but there are also a variety of state and local solar rebates and tax incentives that can help lower costs. You can read more about what incentives you qualify for in our State Solar Incentive Guide
• Market conditions: Local competition between installers, job volumes, cost of business overhead, labor costs, and different state and local policies can dictate solar panel costs. 

The following table outlines the average prices you can expect to see in different states based on these factors: 

Table 2: Average cost of 6 kW solar system by state

3. Equipment type and manufacturer

Like most things, the brand dictates the price with solar. Panels from certain solar manufacturers are more expensive than others, and that doesn’t always mean they’re that much better in terms of performance. 

For instance, Jinko Solar’s panels are much cheaper than premium brands like SunPower but have almost the same specifications and great customer reviews. 

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The following table outlines the cost of some of the most popular residential solar panel brands on the market: 

Table 3. Average system cost based on solar panel manufacturer Panel manufacturer Average cost per watt Average system cost (after tax credit) Qcells $2.49 $10,485 Panasonic $2.87 $12,054 SunPower $2.85 $11,970 Canadian Solar $2.87 $12,054 LONGi Solar $2.85 $11,970

The solar panel brand isn’t the only thing that influences the price. The other equipment used in a residential solar system, like the type of inverter you use, will also impact the installation cost. Microinverters, for example, cost more than string inverters but they can lead to higher electricity production. 

The type of solar panels you install can also influence the price, but only slightly. Most solar panel systems are installed with monocrystalline solar panels, but some homeowners may choose polycrystalline panels to save a bit on the upfront costs.

The racking system installed will also change how much the installation costs. If you live somewhere that experiences heavy snow or hurricanes, you might need a more durable racking setup, which will bump up the price.

4. Solar system type

There are three different types of residential solar power systems: simple grid-tied systems, hybrid systems, and off-grid systems. The following videos show how each of these work:

Grid-tied solar system

A grid-tied system is the most common type of solar system. It has no solar battery for backup power and utilizes net metering to maximize savings. Solar panels are mounted on your roof then wired together, and the power generated flows into an inverter where direct current (DC) electricity is converted into alternating current (AC) electricity. This electricity is either used by your home or is exported to the utility grid.

What is the right price for a solar panel installation?

The SolarReviews Editorial team believes a fair price for a professionally-installed solar system in 2023 is between $2.60 per watt and $3.20 per watt. 

If you are being charged more than that, there are probably better offers available. However, if you are paying less than $2.60 per watt, you may run the risk of getting a low-quality installation or sub-par customer service. Not only that, solar companies that charge such low prices probably won’t be able to earn enough money off of their sales to offer you the customer support you need for the 25-year lifespan of your solar panels. 

Above all, you want to go with a solar company that has a good reputation and will be around for the long haul.

Solar battery costs

Adding energy storage to a solar power system will add a minimum of $10,000 to the installation cost. That’s a decent chunk of money, but the good news is that solar batteries are covered by the solar tax credit and you may even qualify for additional battery incentives in your state. 

When you consider the federal tax credit, a solar panel system paired with battery storage will cost an average of $20,000. The actual cost of installing a battery will vary depending on the battery manufacturer and how many batteries you choose to install. 

Despite being expensive, solar batteries like the Tesla Powerwall and LG Chem are becoming increasingly popular as widespread power outages are now more common than ever. Batteries are also becoming a popular addition in areas with Time-of-Use electricity rates, as they allow homeowners to save more on their electricity bills. 

But for most homeowners, solar batteries are more of a luxury than they are a necessity. 

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How can you find the right solar installation company?

At SolarReviews, we recommend going with a reputable local solar installer. Generally, you’ll want the installer to meet these requirements: 

• Been in business for over 5 years
• Hires their own installation crew
• Has between 15 and 20 employees
• At least one NABCEP-certified installer

But remember, you also want to make sure the company is charging a fair price for their services. If it’s too cheap, you might have to worry about a shoddy installation or low-quality equipment. If it’s too expensive, you might be paying an extra premium for no added benefits. 

You need to find a happy medium of a solid price from a trusted company that uses high-quality materials. The best way to connect with companies in your area is by using our state-of-the-art solar calculator, which will not only give you a detailed cost and savings estimate catered to your specific home, but will also put you in contact with our vetted solar installers. 

Learn more: Guide to the top-rated solar installers in your area

Calculating how much solar panels will cost for your specific home given its location and electricity use

Our solar panel calculator is the easiest way to determine the costs and savings of a solar panel installation for your specific home.

All you need is your address and the value of your monthly electric bill, and our solar calculator will determine your local utility company’s electricity rates and how much power you use in order to tell you:

• How many solar panels you need to power your home
• How much your solar panels will cost
• How much your solar panels will save you

Are solar panels worth the investment?

Thanks to the lower-than-ever cost of solar panels and various solar incentives, solar panels are a cost-effective investment for the majority of homeowners that will provide an excellent return on investment. 

Not only do they lower your energy bills, but you also get to power your home with clean renewable energy and reduce your dependence on your local utility company. 

Even though spending up to $20,000 is daunting, federal incentives eliminate 30% of solar system costs after 1 year. There are also various ways to finance a solar system - from solar loans and leases to PPAs - so you can pick whichever option that works best for you.

Plus, solar panels provide significant utility bill savings in most areas. An average home solar panel system can save between $1,000 and $1,600 per year on electricity bills depending on the state’s net metering policy and the home’s energy consumption. 

Actual solar savings will depend on the system size, the cost of electricity, home energy usage, and what net metering policies are in place, but the average solar homeowner can expect their solar payback period to be between 8 and 11 years. After that, they’ll be enjoying completely free solar electricity for at least 15 more years! 

If you’re still not convinced, you can use our solar panel calculator to find out how much solar costs and can save you for your specific home based on your average electric usage and prices in your area. 

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