What’s the Cost to Go Solar?


If you’re considering adding solar panels to your home, you probably want to know the cost. It’s one of the most widely asked questions. Like most home improvement projects, though, the cost depends on a variety of factors.

While solar panels do help save money on your electric bills, it’s important to realize that you aren’t getting ‘free electricity.’ The cost of the panels themselves, installation, and maintenance all factor into your costs.

The Cost of Installation

According to Consumer Affairs, the average homeowner pays $11,900 after federal tax incentives for solar panel installation. This comes out to approximately $2.96/watt. The cost of solar panels has continually decreased over the last 5 years, but the tax credit for going solar is also set to expire this year.

If you want to determine if it makes sense for you to install the panels, consider using the free solar calculators on most energy company’s websites. This helps you determine the savings you’ll realize once the panels are installed, taking into consideration the cost of installation and maintenance.

While $11,900 is the average cost, keep in mind that it depends on a variety of factors, such as:

  • Incentives offered in your area
  • The financing method chosen
  • The type of panels chosen

Are Bigger Systems More Expensive?

Knowing the cost per watt is helpful, but it’s not the only factor in the equation. What matters is the amount of electricity you want to create. Obviously, the more electricity you need, the more solar panels and equipment you’ll need, which will naturally increase your cost.

What Affects the True Cost of Solar Panels?

Many factors affect how much your solar panels truly cost. The state you reside as well as several other factors determine the cost:

  • The quality of the solar panels – Just because you buy a bigger system doesn’t mean you’ll save more on electricity. In this case, bigger isn’t always better. What matters is the quality of the panels themselves as well as the equipment used to run the panels. In addition, the style and type of roof, your home’s exposure, and the weather elements play a role.
  • Cost of labor – Some solar panel companies don’t include installation in the cost. Make sure you get a true breakdown of the costs for the process, not just the materials but labor and any other installation costs too.
  • The type of roof – If your roof has a steep or shallow pitch, it could complicate installation, which makes it cost more. If your roof isn’t south or west facing, it could also decrease the efficiency of the panels, which decreases your savings (making the panels more expensive).

Federal and State Incentives for Solar Panels

To promote the adoption of green technology, several federal and state governments across the U.S. offer a range of incentives, tax credits, and rebates to homeowners. You can take advantage of them to lower the cost of your solar panel system. Below are several major programs that homeowners can utilize to optimize savings from solar installations:

Federal Solar Tax Credit

The Federal Solar Tax Credit allows homeowners installing solar photovoltaic (PV) systems to claim a percentage of the installation cost on their federal income taxes. This federal income tax credit stands at 26% for residential solar systems implemented in 2020 and 2021, increasing to 30% for installations between 2022 and 2032. The credit percentage gradually decreases after 2032, eventually expiring in 2035 unless an extension is granted by Congress. Eligibility requires ownership of the solar PV system and its utilization for electricity generation in a U.S. residence.

State Solar Tax Credits

Many states offer their own tax credits for homeowners adopting solar energy, varying in amount and eligibility requirements, applicable on state income taxes. For instance, New York’s credit is 25% of the system’s cost, capped at $5,000, while Arizona’s is 25%, capped at $1,000. Refer to the Database of State Incentives for Renewables & Efficiency (DSIRE) for detailed information on your state’s offerings.

In addition to the solar incentives outlined above, there might be additional programs in your area, including rebates, grants, loans, or performance-based incentives that you may be able to take advantage of. For more information on all the solar incentives available based on state, zip code, technology, or sector, you can refer to the DSIRE website.

Do Solar Panels Save Money?

Solar panels are good for the environment and should save you money. But do they?

The short answer is ‘yes,’ solar panels save you money. How much money they save differs for each home as it’s based on a large number of factors. The two most important factors are your roof’s pitch and the number of hours of sunlight the roof receives.

Of course, another factor is the electricity rates in your area as they differ throughout the country. Overall, solar panels should save you money – here’s how to tell if they are right for you.

You’re Locking in Utility Rates

Here’s why you save money with solar panels – electricity costs. Homeowners that rely on grid electricity alone are subject to rising electricity rates. On average, electricity rates increase by 2.2 percent each year. With an average utility cost of $1,500 per year per household, that’s a significant yearly increase.

When you have solar panels and generate your electricity, there aren’t any increasing rates. You already invested in the panels – your expenses are done, except for the electricity you need from the grid.

If you want to maximize your savings – install solar panels large enough to provide 100 percent of the energy you need, or as close to it as you can get.

Net Metering – What is It?

Most homeowners with solar panels still receive an electricity bill. Since the sun doesn’t shine 24 hours a day, you likely need electricity during evening hours. That means you’re drawing electricity from the grid, just not as much as you did before solar panels.

But, there’s an incentive called net metering.

Your solar panel generates energy, oftentimes more energy than you use in a day. That energy is sent to the ‘grid’ which offsets your electricity costs when you use electricity from the grid at night.

The electric company credits you for the energy you sent. There may be months that you receive a bill with $0 due because you sent back more credits than you used.

Net Metering allows homeowners to sell surplus electricity generated by their solar PV systems back to the grid. This billing mechanism helps in reducing electricity costs and accruing credits for future consumption.

The applicability and specifications of net metering are contingent on state and utility company policies. Some states have established mandatory net metering provisions, while others allow utilities to optionally provide it.

Saving more than Money

Solar panels are great for reducing electricity costs and that’s often a homeowner’s number one concern – however, there’s another large savings – the environment.

When you reduce your carbon footprint, you do good for the environment. Reducing the greenhouse emissions your home releases into the air helps improve the atmosphere.

Whether solar panels save you money or not depend on the electricity rates in your area, how long you’ll be in the home, and the total cost of installation. Look at all factors when determining if you’ll save money. Everyone saves at least some money but determining if it’s worth it for you is a personal determination that relies on these key factors.

How Long Before you See a Savings?

Don’t expect to see savings immediately upon installing solar panels. On average, it takes up to 8 years to break even – not just see savings. Just how long it takes depends on many things including:

  • How much energy your household uses
  • How much energy your solar panels create
  • The cost of the panels and installation

If you live in an area where solar panels are common and they increase your home’s value, you may see faster savings just from the equity you gain in your home.

Final Thoughts

The cost to go solar can vary widely depending on where you live, the type of house/roof you have, and the size of the system. Make sure you get several quotes and know exactly what’s included in your quote to ensure that you get the most out of your solar panel installation. Additionally, consulting with a local solar installer or a tax professional can provide more insight into the best financing options and incentives tailored to your situation.