Last updated: 18th of March, 2023
With electricity prices on the rise, this may be the perfect time to invest in solar energy. The innovations in the field of solar technology have made solar panels affordable and easy to set up for almost anyone who wants to go solar.
You’ve perhaps heard about how solar energy can reduce your electricity bills, but how much does solar power cost to install?
The best way to calculate the average price of a solar power system for your home is to look at all the costs associated with a complete solar installation and compare them with the potential long-term savings.
There are a lot more costs when installing a solar power system than you might think.
In addition to the panels themselves, other operational costs such as permits, connection fees, other hardware components, wiring and mounting have to be considered.
Take some time to understand which is the most optimal system for your needs and what’s the best price you can get on it. With careful planning, you will get the benefits much faster and most likely in a greater proportion.
Here’s what you need to know to help you put the cost in perspective.
Estimating the cost of solar panel installation
When it comes to residential solar panels, the price varies according to the state and the size of the solar system you want to get. Simply put, the more energy you want the system to produce, the more solar equipment you will need to buy.
The good news is that the cost of installing solar panels has dropped drastically in recent years. Most homeowners are paying on average $2.86 per watt to install solar in their homes in 2023.
The average size of a residential solar system installed in United States is 5 kW (5,000 watts). At these rates, you should expect to pay around $14,300 (before federal tax credits) to upgrade your house with photovoltaic panels.
Yes, that might seem expensive. But that price tag could go lower by 30 percent or more if you access some of government grants and incentives.
Solar PV system installation cost breakdown
Based on the average $2.86 per watt cost of installing solar panels, the following is a breakdown of the estimated cost of different components that make up a solar power system installation.
I want cheaper solar panels: How to get the lowest price?
Fortunately, there are a couple of great ways to reduce solar panel installation costs.
The most attractive way is the 30 percent federal investment tax credit, which was just recently extended until 2032. Great news for the residential solar industry. On top of this, different states usually offer additional rebates and incentives for installing home solar systems.
To find out which rebates are available in your area, check out the Database of State Incentives for Renewables & Efficiency from North Carolina State University.
Don’t be surprised if you’ll find yourself eligible for solar grants that would cut your solar costs by up to 50 percent.
Dealing with solar providers: Watch out!
When requesting quotes from solar installers you will find yourself with different prices for the same sized solar systems. That’s because the solar market became very competitive in the past few years.
To make sure you get the lowest price possible, don’t settle on the first quote. Get multiple quotes and talk with people who already have solar systems installed on their homes in your neighborhood. You may learn a lot from their experience. Like with any major investment, it pays off to research well before making the commitment.
How much can you save with solar?
Saving money on electricity bills with solar power is definitely the way to go. Even though installing a residential solar power system can be pricey at the beginning, once it starts producing electricity, you will see significant savings within years rather than decades.
A valuable tool to determine what a solar system suited to your needs would cost in your area is the solar calculator.
While at first blush it appears to be just a marketing tool to open the door for solar installers to call you, the tool is recommended by the US Energy Administration to help prospective solar power investors enter customized information and make better-informed decisions.
During the last ten years, electricity prices have increased by an average of three percent annual rate. As electricity will continue to become more valuable in the modern world, reducing these costs can help you save a lot of money in the long term.
Going solar means you produce your own energy, so you’ll be able to better predict your monthly bills and protect yourself from the rising and fluctuating energy prices.
A typical US home spends more or less $1,200 annually on electricity. That’s about 11,000 kilowatt hours. With a 5kW solar system that will deliver between 350 to 850 kilowatt hours (kWh) per month, you’ll be able to cut your electricity bills in half.
That adds up to a savings of around $600 per year, and if you consider tax credits, utility rebates, and net metering, you’re looking at another 20 to 30 percent of extra savings potential.
With a lifetime of 25+ years for a solar system, your savings can easily reach $20,000 during that period.
What about solar prices in the future?
In the year 2000, the whole world had approximately four gigawatts of solar power capacity installed, and it didn’t seem to have a bright future right away.
Over the last 19 years, the installed solar energy capacity increased to over 400 GW. Now that’s a game changer for solar!
Solar energy is now becoming more affordable all over the world. It is predicted that the price of creating solar power technology will decrease by 4.4 percent every year.
This drop in cost is going to allow more countries to implement solar power as a viable method of delivering energy to their people.