Homeowners with high electricity bills can potentially save tens of thousands of dollars by signing up with a top solar provider. Be prepared to invest between $17,430 and $23,870 for a system, with an average cost of $20,650.* Luckily, most homeowners can break even on their solar investment in six to 10 years, depending on their home’s size, electricity costs, and financing options. Below, we’ll review solar panel systems’ main cost factors and suggest ways to save on your investment.
*All cost data in this article via EnergySage, Consumer Affairs, and Aurora Solar.
Solar Panel Cost by State
Solar panel savings vary from state to state, partly due to the area’s average electricity bill. For example, Hawaii has the highest electricity rates, while Louisiana has the lowest. Those in Hawaii stand to see bigger savings than those in Louisiana when going solar.
Cost of Solar Panels by State
Below, you’ll find the costs for a standard 6 kilowatt (KW) system in your state.
What Factors Impact Solar Panel Costs?
Several key factors determine the total cost of solar panels—namely, your home’s electrical demand and panel choice. There are hardware costs, such as the materials included in your system, and soft costs, which are fees related to labor, permits, and other essentials needed to get the system installed. Learn about cost factors below.
High-Impact Solar Panel Cost Factors
Here are some cost factors that influence your solar panels’ price:
- Household electrical demand: This is the amount of electricity your household uses per month. Homes with mostly gas appliances will use less energy than homes with electric ones. If you have high monthly energy consumption, you’ll need a larger system to match your needs.
- Purchasing options: Customers can pay with one lump sum, take out a loan, lease, or enter a Power Purchase Agreement (PPA). Each option affects how much you’ll pay in the long run.
- System size: The most influential factor in your solar system installation cost is the system size. The bigger the system, the higher the price tag. However, buying a solar system is similar to buying other products in bulk. A higher-wattage system has a lower average cost per watt. Thus, when you purchase a larger system, the overall cost is higher but you have a lower cost per unit.
Medium-Impact Solar Panel Cost Factors
Below are some of the medium-impact cost factors:
- Amount of sunlight: The more daily sunlight your home receives, the more significant your potential savings. Homeowners that live in areas with year-round inclement weather or cloudy days will experience lower energy production and cost savings.
- Labor: Labor costs vary by location and are more expensive in areas with higher costs of living. Different solar providers also charge different prices. Labor will be included in your initial quote.
- Panel quality: The equipment you choose greatly impacts your electricity production. You’ll want to find the most efficient solar panels that fit your budget. More expensive equipment doesn’t always mean higher savings, while the cheapest option can sacrifice value. Find the right balance between quality and price.
- Panel size: A larger solar system costs more because it requires more labor and more equipment. However, it can yield greater savings.
- Tax incentives: Federal and state solar incentives can reduce installation costs.
Low-Impact Solar Cost Panel Factors
Here are some other cost factors that pose a minimal impact on solar’s overall price:
- Location: Solar panels cost more in some states than others, largely due to regional electricity costs. Peak sunlight hours are also a factor.
- Permitting and interconnection: Required permits and local interconnection fees to the power grid will add a slight extra cost to your solar panel installation total.
Cost by Type of Solar Panel
The type of solar panel plays an important role in the total system cost. For example, monocrystalline panels are more efficient but more expensive than polycrystalline panels. More efficient panels are typically needed for homes with limited roof space.
The best residential solar panels include:
- Monocrystalline solar panels: Monocrystalline panels offer the best efficiency ratings and energy production but have the highest price tag. Wholesale pricing for monocrystalline panels ranges between $1.00–$1.50 per watt before installation costs.
- Polycrystalline solar panels: Polycrystalline panels offer lower pricing but less energy production than monocrystalline panels. Expect to pay $0.75–$1.00 per watt at wholesale.
- Thin-film panels: Thin-film panels have the lowest pricing and efficiency, making them a good option for small solar projects, such as recreational vehicles (RV) or sheds. You’ll pay around $0.43–$0.70 per watt at wholesale pricing.
Cost by Type of Solar System
The solar energy system type also impacts price. There are three system options: grid-tied, grid-tied plus storage, and off-grid.
- Grid-tied system: A grid-tied system, also known as on-grid or utility-interactive, is the most cost-effective since it doesn’t require a battery, eliminating a large expense and lowering installation costs.
- Grid-tied system plus storage: A hybrid system means your panels are tied to the utility grid along with solar battery backup(s). This costs more than grid-only. Your initial system price will include one or more solar batteries. For example, Tesla Powerwall prices start at $9,200 for a standalone battery but jump to $14,200 when included with a Tesla Solar panel system.
- Off-grid system: An off-grid system is the most expensive because you’ll have to source all of your electricity independently. This requires high-capacity battery storage and a backup generator. Based on our research, off-grid system costs range between $45,000 and $65,000.
Solar Panel Payment Options
Solar panel installation requires a significant financial commitment, so companies offer different payment options to suit different budgets. Here’s an overview of the typical solar financing options offered by solar providers:
- Full payment: You pay for the solar system outright without a loan or payment plan. This option will save you the most money because you won’t pay interest rates. Full payment also grants you system ownership, qualifying you for incentives.
- Power purchasing agreement (PPA): With a PPA, you only pay for the energy you use. Like an electric bill, the rate fluctuates each month. Your solar company retains system ownership, disqualifying you from incentives.
- Solar loan: A loan allows you to make small payments over a longer payback period. However, you’ll pay more in the long run due to interest rates. Solar loans also qualify you for solar incentives.
- Solar lease: This option allows you to make fixed monthly payments for about 20 years and requires little to no up-front cost. Your solar installation company retains system ownership and is responsible for its upkeep. Leasing customers don’t qualify for solar incentives.
We recommend full payment if you have the up-front capital to afford it. This is the most cost-effective option and yields the quickest return on investment (ROI).
A solar loan is an excellent second option if you don’t have the financial ability to pay for the solar system up-front. A solar loan still lets you experience maximum energy bill savings and solar incentive eligibility.
Solar Incentives and Rebates
We surveyed 1,000 homeowners that received solar quotes. We found 52% of respondents did not install solar panels because it was too expensive. An excellent way to reduce your overall system cost is by applying for federal, state, and local incentives. These tax credits, rebates, and solar renewable energy credits (SRECs) vary by state and payout rate.
Here is an overview of common solar incentives:
- Federal solar tax credit: The federal tax credit lets you apply 30% of your total solar installation cost to your federal taxes. There’s no cap on its value, meaning for a 6-kW system priced at the national average of $20,650, you’d subtract $5,370 from your taxes. This reduces your system cost to $12,530.
- Net-metering: You could earn additional savings from net-metering, an incentive where you send excess energy back to the power grid for monthly electric bill credits. Net-metering programs are offered on the state level or through certain utility companies throughout the state.
- Property tax exemptions: Since solar panels boost home value, they also increase your property taxes. These exemptions eliminate property taxes for a certain timeframe, or permanently, depending on your state’s legislation.
- Sales tax exemptions: Some states exempt state or local sales tax from solar panel sales, helping reduce your solar investment.
- Solar renewable energy credits (SRECs): Some states offer SRECS to help meet their renewable portfolio standards (RPS). These regulations require a certain percentage of generated electricity to come from renewable sources. Homeowners receive one credit for every 1,000 kWh of solar electricity their system generates. You can apply this credit to reduce your electricity bill or sell them for profit.
- State tax credits: Similar to the federal tax credit, homeowners receive a certain percentage of their total costs back to apply to their state tax liability.
Some cities, municipalities, and local utility companies offer additional savings for a new solar system, energy storage, or energy efficiency upgrades.
Check our state solar incentives guides below for more information about credits and rebates in your area:
Are Solar Panels Worth It?
Our survey revealed that 94.6% of homeowners said installing solar panels was worth it, and most respondents said the transition reduced their energy bills. Although solar panels are worth the investment for many homeowners, there are situations when they won’t benefit your home.
Solar is a balancing act between a hefty up-front cost and potential savings. One advantage of solar panels is that they pay for themselves over time. The average payback period for a solar PV system is six to 10 years. If you have access to SRECs and net-metering, you not only break even during this timeframe but also generate additional savings.
Below are ways that going solar can be worth it for you:
- Homes with plenty of sun exposure: An ideal house that maximizes the potential of solar energy should be obstruction-free, so no tall trees or surrounding buildings. In addition, the roof should be south-facing and have a steep slope that can hold a solar panel at a 15- to 40-degree angle. Homes that receive little light or have limited roof space will not benefit from a system, making it a less valuable investment for those homeowners.
- Increased home value: Going solar increases your home’s value. According to a Zillow study, homes with solar energy systems sell for 4.1% more on average than those without, equaling an additional $9,274 on the total resale price for median-value homes.
- Lower utility bills: Using solar power in your home reduces the need for costly fossil fuels and taps into a less expensive resource. Homes that use more electric-powered appliances would benefit from a solar conversion.
- Net-metering: Excess energy from your solar panel installation can be stored in a solar battery or returned to the power grid. You can accumulate enough credits through net-metering programs and SRECs to receive a monetary return.
- Unlimited sustainable energy: Solar energy provides a renewable energy solution that helps protect the environment. Harnessing solar energy’s power provides homeowners unlimited access to clean energy. Without relying on expensive fossil fuels, homeowners can take full advantage of a natural energy source with lower energy costs. As a result, customers will reduce their carbon footprint, helping to reduce harmful emissions that contribute to climate change.
- Solar tax breaks: As previously stated, there are plenty of solar incentives provided by local and state governments. We encourage you to ask your chosen solar installers to see what tax breaks they can help you obtain.
How Long Does It Take To Break Even With Solar?
On average, homeowners break even after six to 10 years. Determining your solar break-even point depends on a few numbers, namely the total system plus installation cost, any applied incentives, and your annual electricity bill savings.
Use the following steps to calculate your break-even point:
- Subtract the value of any applied incentives or rebates from your total solar panel system plus installation cost. That’s your first number.
- Then, add up how much you save annually in electricity costs by comparing pre-solar utility bills with post-solar utility bills. That’s your second number.
- Divide the first number by the second number for the number of years it will take you to break even. Every year after that should be counted as a financial gain.
Let’s demonstrate this calculation: If your system and installation cost amount to $20,000, but 30% was deducted due to incentives, your first number is $14,000. Pretend your annual electricity savings comes out to $2,500. Divide $14,000 by $2,500, and you’ll see that it takes just over five and a half years for you to break even.
As with any other home improvement project, there are some hidden costs and downsides to solar energy that are not often discussed.
Solar’s highest hidden cost is including solar batteries with your system, which often runs from $8,500–$10,000. The cost of a Tesla Powerwall battery is slightly higher given how reputable the company and product are. Though you can opt out of installing a solar battery, some homeowners choose to include it for backup power protection.
Read over some of these hidden fees and disadvantages here:
- Insurance: You can expect your home insurance to increase with a solar panel system purchase. Your state might require you to get solar panel-specific insurance in addition to your current insurance coverage. Therefore, we advise you to search for a reputable home insurance provider that helps with solar power system coverage before purchasing panels.
- Maintenance: Be aware that your solar panels will require maintenance to keep them in working order. Most installers recommend having panels checked every five years or so. You’ll need a professional to inspect wires and connections to ensure they’re in working condition. Although this won’t be a substantial cost, you should plan for maintenance fees in your ongoing panel costs.
- Panel cleaning: Most solar panels are cleaned naturally with rainfall. However, if you live in an area prone to wildfires or dust, you will need the occasional cleaning. We recommend hiring a pro to avoid potentially dangerous situations such as climbing on your roof.
- Repairs: Solar panels are durable and many have hail and hurricane ratings to provide their durability. Most insurance covers damage due to natural disasters or damaging weather events. There are rare occasions when solar panels require repair work. If they aren’t covered by insurance, you must pay those out-of-pocket costs.
- Roof work: Solar panel installation sometimes requires extra roof work to be completed before the project can even start. Depending on your roof’s condition, this can be the highest or second-highest hidden cost. If your roof is roughly five to 10 years away from needing replacement, you may need to install an entirely new roof. Alternatively, a solar installer might suggest simply fortifying your roof’s eaves. Either way, we advise you to contact a local roofing company for an in-depth roof replacement inspection.
- Utility company charges: You’ll still receive a utility bill after going solar. Though that bill should be around $80 less than before, you’ll likely see some solar-specific charges from utility companies. Namely, you’ll notice a charge when your solar panels take electricity from the power grid instead of adding to it.
- Solar battery: Many homeowners opt to purchase a solar battery with their systems. This device stores excess energy and lets you use this energy to power your home at night, during blackouts, or when utility rates are high.
- System monitoring: If you opt to use a solar company’s active monitoring, there’s sometimes a monthly $10–$15 fee included.
- Tree removal: If surrounding trees cast shadows on your panels, you may need tree removal services to ensure their performance. These services cost between $341–$1,523 on average.
Solar Panel Installation Process
Solar installation is a straightforward process. Your solar company will handle most solar panel installation steps.
- Consultation: A representative from your chosen solar company will meet with you to discuss your home’s energy usage and how suitable your property is for a solar installation.
- Design: Your installer will design a system tailored to your home’s specifications and handle the required permits from your local municipality. This process can take anywhere between one and six months.
- Scheduling: You’ll schedule an installation date once the design and contracts are finalized.
- Installation: Installation typically takes just one or two days.
- Inspection: Your solar company will manage final inspections. This process can take up to 60 days, as the company must schedule a town government representative to inspect the system and approve its activation. During this inspection, the representative will double-check your installer’s work and ensure the installation meets standard electrical and roof setback codes.
- System use: Once the representative gives approval, you can start generating free, renewable energy.
Matt Johnson, co-owner of Namaste Solar, says that a reputable installer should supply an itemized cost list for each aspect of the installation, such as labor, permit fees, sales taxes, utility fees, and the interconnection fee. The installer should also include available tax incentives.
Watch our video below to get a better understanding of what the solar installation process entails.
Although solar panels require a significant investment, they provide future financial and environmental benefits. Many factors, such as the panel type, your climate, and your energy needs, influence your final costs and whether a solar investment is worth it. Apply for any federal and state incentives to help lower your system costs and leverage your potential long-term savings.
We recommend getting quotes from at least three solar companies for the best rates. Compare the equipment quality, costs, financing options, and warranties.
Use our tool below to begin searching for your area’s solar providers.
Our Rating Methodology
The This Old House Reviews Team is committed to providing comprehensive and unbiased reviews to our readers. After over a thousand hours of research on solar companies, interviews with experts, and common customer needs, we’ve created a detailed rating system for solar providers based on six factors:
- Solar equipment, installation, and services (25%)
- Warranty and performance guarantees (25%)
- Brand reputation and certifications (15%)
- Financing options (15%)
- Experience (10%)
- Availability (10%)
Total scores are divided by 20 for a final 5-point rating scale.
To share feedback or ask a question about this article, send a note to our Reviews team at email@example.com.