How much do solar panels cost?

The National Renewable Energy Laboratory estimates that solar panel costs have decreased by 85 percent in the last decade. For most of recent history, solar panels were the largest cost in a home solar system. But consistent and steep declines in the price of solar panels over the last 20 years mean that today, they’re only about 15 percent of the total cost of an installed home solar system. The rest of the equipment (inverters, mounting systems, wiring, conduit, etc.) represent another 20 percent. When added to the 15 percent for solar panels, we’ve accounted for 35 percent of the cost…so where’s the other 65 percent?

The other 65 percent of the price to install a home solar system includes designing and permitting, installation labor, sales and marketing, and profit for the installation company. Unlike hardware (equipment) costs that continue to fall as new, more efficient technology and manufacturing processes are developed, these “soft” costs have decreased more slowly and, in the case of sales and marketing, have actually increased.

In 2020, the average cost of a home solar panel system in the US fell to $28,900, with an average system size of almost 10 kilowatts (10,000 watts). At 26 percent of the total project cost, the federal investment tax credit reduces the price by $7,514, resulting in a net cost of $21,386. State, local or utility programs may also provide incentives further reducing your final cost.

We’ll discuss rebates and incentives a little later, but what’s most important to understand now is that the cost of a home solar installation will vary, sometimes significantly, depending on several factors which are specific to your project. Though many of these factors are “real” in that they are directly related to actual costs, even comparable systems installed in the same area can be priced very differently.

The top nine factors which influence the cost of a home solar installation

1.  The size or capacity of your home solar system

This one’s relatively simple: More solar panels equals more solar generating capacity and a higher cost. But larger is not always better. You’ll want a home solar system that is customized to meet your energy needs and goals. Beware of anyone who doesn’t take the time to understand your needs and goals before attempting to sell you a home solar system.

2.  Whether you elect to install home batteries

Batteries add a significant cost to the system. How much additional cost is determined by what you want your batteries to do. Learn more about batteries here.

3.  Upgrades needed to get your home ready for solar

Upgrades such as a new roof, structural reinforcements or upgrading your home’s electrical panel will add to your project cost. The good news is that upgrades needed to prepare your home for solar may be eligible for the federal solar investment tax credit. Check with your tax professional for specific guidance.

4.  The type of solar panel used in your system

“Premium” solar panels are more efficient at converting solar energy but are more expensive. They can make sense in situations where space for solar on your property is limited. In scenarios where space isn’t limited, it is less expensive to use standard panels.

5.  The difficulty of installing the system

Steeper or less accessible roofs, roofs other than asphalt shingles such as slate or tile, more complicated roof planes or systems requiring additional structures such as ground mounted systems, canopies, or carports all increase cost.

6.  Whether you finance your purchase with a loan

Solar loan providers charge “dealer fees,” which are typically not disclosed to homeowners. Dealer fees will increase project costs when a solar project is financed. However, even with dealer fees, a solar loan may still make financial sense. We discuss financing in more detail here.

7.  Who’s selling you solar

The price that a salesperson quotes you can depend on their relationship with the installer and how they are paid. Mercenary sales organizations that sell solar to homeowners and, in turn, sell those projects to installers tend to result in higher prices. Salespeople who are heavily compensated by commission are incentivized to sell you the largest system at the highest price.

8.  Whether your state charges sales tax on solar equipment

Many states have sales tax exemptions for solar equipment. If your state doesn’t have a sales tax exemption, the tax that your contractor pays to buy solar equipment will increase your project cost.

9.  Other hidden costs

These are rarely discussed, but are worth being aware of:

Property taxes – some states and local municipalities have tax abatements that prevent the increase in property value from a home solar system from being taxed for a certain period of time. You may see an increase in your tax bill for those in areas that don’t have a tax abatement.

Homeowners insurance – It’s a good idea to check with your insurance company to make sure your solar system is covered and see if your premiums will increase.

How much do solar panels cost?

The National Renewable Energy Laboratory estimates that solar panel costs have decreased by 85 percent in the last decade. For most of recent history, solar panels were the largest cost in a home solar system. But consistent and steep declines in the price of solar panels over the last 20 years mean that today, they’re only about 15 percent of the total cost of an installed home solar system. The rest of the equipment (inverters, mounting systems, wiring, conduit, etc.) represent another 20 percent. When added to the 15 percent for solar panels, we’ve accounted for 35 percent of the cost…so where’s the other 65 percent?

The other 65 percent of the price to install a home solar system includes designing and permitting, installation labor, sales and marketing, and profit for the installation company. Unlike hardware (equipment) costs that continue to fall as new, more efficient technology and manufacturing processes are developed, these “soft” costs have decreased more slowly and, in the case of sales and marketing, have actually increased.

In 2020, the average cost of a home solar panel system in the US fell to $28,900, with an average system size of almost 10 kilowatts (10,000 watts). At 26 percent of the total project cost, the federal investment tax credit reduces the price by $7,514, resulting in a net cost of $21,386. State, local or utility programs may also provide incentives further reducing your final cost.

We’ll discuss rebates and incentives a little later, but what’s most important to understand now is that the cost of a home solar installation will vary, sometimes significantly, depending on several factors which are specific to your project. Though many of these factors are “real” in that they are directly related to actual costs, even comparable systems installed in the same area can be priced very differently.

The top nine factors which influence the cost of a home solar installation

1.  The size or capacity of your home solar system

This one’s relatively simple: More solar panels equals more solar generating capacity and a higher cost. But larger is not always better. You’ll want a home solar system that is customized to meet your energy needs and goals. Beware of anyone who doesn’t take the time to understand your needs and goals before attempting to sell you a home solar system.

2.  Whether you elect to install home batteries

Batteries add a significant cost to the system. How much additional cost is determined by what you want your batteries to do. Learn more about batteries here.

3.  Upgrades needed to get your home ready for solar

Upgrades such as a new roof, structural reinforcements or upgrading your home’s electrical panel will add to your project cost. The good news is that upgrades needed to prepare your home for solar may be eligible for the federal solar investment tax credit. Check with your tax professional for specific guidance.

4.  The type of solar panel used in your system

“Premium” solar panels are more efficient at converting solar energy but are more expensive. They can make sense in situations where space for solar on your property is limited. In scenarios where space isn’t limited, it is less expensive to use standard panels.

5.  The difficulty of installing the system

Steeper or less accessible roofs, roofs other than asphalt shingles such as slate or tile, more complicated roof planes or systems requiring additional structures such as ground mounted systems, canopies, or carports all increase cost.

6.  Whether you finance your purchase with a loan

Solar loan providers charge “dealer fees,” which are typically not disclosed to homeowners. Dealer fees will increase project costs when a solar project is financed. However, even with dealer fees, a solar loan may still make financial sense. We discuss financing in more detail here.

7.  Who’s selling you solar

The price that a salesperson quotes you can depend on their relationship with the installer and how they are paid. Mercenary sales organizations that sell solar to homeowners and, in turn, sell those projects to installers tend to result in higher prices. Salespeople who are heavily compensated by commission are incentivized to sell you the largest system at the highest price.

8.  Whether your state charges sales tax on solar equipment

Many states have sales tax exemptions for solar equipment. If your state doesn’t have a sales tax exemption, the tax that your contractor pays to buy solar equipment will increase your project cost.

9.  Other hidden costs

These are rarely discussed, but are worth being aware of:

Property taxes – some states and local municipalities have tax abatements that prevent the increase in property value from a home solar system from being taxed for a certain period of time. You may see an increase in your tax bill for those in areas that don’t have a tax abatement.

Homeowners insurance – It’s a good idea to check with your insurance company to make sure your solar system is covered and see if your premiums will increase.

Summary

The cost of having a home solar system installed has decreased consistently over the last 20 years and is expected to continue to decline. So, should you wait until solar prices get lower before making an investment in a home solar system? The short answer is no. In most cases, solar panel systems will save you money today, and waiting for lower prices will mean that you will miss out on months and years of savings.

So how can you make sure you’re getting the best home solar system for you at the right price today?

As we mentioned earlier, prices for home solar systems vary widely, even for comparable systems in the same areas. According to EnergySage, in the first half of 2020, home solar prices in New Jersey (the yellow area) ranged from below $2 per watt to $2.75 per watt.  This might not seem like much, but on a 10,000 watt system, that’s a difference in price of almost $8,000!

Rapidly changing technology combined with the many variables that influence cost make it difficult for the average homeowner to assess whether they are getting the right home solar system for them and paying a reasonable price. Being aware of the factors which will influence the cost of your specific home solar project and getting multiple quotes from solar contractors is a good start. But there’s a better way…

Summary

The cost of having a home solar system installed has decreased consistently over the last 20 years and is expected to continue to decline. So, should you wait until solar prices get lower before making an investment in a home solar system? The short answer is no. In most cases, solar panel systems will save you money today, and waiting for lower prices will mean that you will miss out on months and years of savings.

So how can you make sure you’re getting the best home solar system for you at the right price today?

As we mentioned earlier, prices for home solar systems vary widely, even for comparable systems in the same areas. According to EnergySage, in the first half of 2020, home solar prices in New Jersey (the yellow area) ranged from below $2 per watt to $2.75 per watt.  This might not seem like much, but on a 10,000 watt system, that’s a difference in price of almost $8,000!

Rapidly changing technology combined with the many variables that influence cost make it difficult for the average homeowner to assess whether they are getting the right home solar system for them and paying a reasonable price. Being aware of the factors which will influence the cost of your specific home solar project and getting multiple quotes from solar contractors is a good start. But there’s a better way…

Sentinel was founded to make sure homeowners get a home solar system, customized for them, at a fair price. Learn how we deliver better home solar here or get started with a free Solar Assessment.

Start My Free Solar Assessment

Have questions on home solar costs or anything else?  Send us a message and we’ll answer ASAP.

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Sentinel was founded to make sure homeowners get a home solar system, customized for them, at a fair price. Learn how we deliver better home solar here or get started with a free Solar Assessment.

Start My Free Solar Assessment

Have questions on home solar costs or anything else?  Send us a message and we’ll answer ASAP.

Thank you for your message. It has been sent.
There was an error trying to send your message. Please try again later.

Learn about solar

Find honest answers to some of the most commonly asked questions on home solar and clean energy.

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Six things to watch out for in a solar sales pitch

How much do solar panels cost?

How do solar panels for your home work?

Home solar checklist

Home solar FAQs

Will solar panels increase my home’s value?

Home solar system components

How do solar panels get installed?

Choosing a solar contractor

Solar shingles, solar tiles & solar roofing

Solar terminology

Home battery systems