Why are solar panels so expensive?
Updated
There’s no question about it: solar panels are expensive, costing between $10,000 and $30,000 for most homes. There are two main reasons solar panels cost so much:
The first is the equipment cost. Producing it requires advanced manufacturing and expensive raw materials, such as high-grade silicon for solar panels and lithium for solar batteries.
The second is due to soft costs, which include a professional solar installation that is safe, compliant with local codes and manufacturer warranties, and can pass the necessary inspections.
That, of course, is the short answer. The full story is that there are actually several factors that contribute to the cost of solar panels. Our analysis of solar panel cost data shows that prices vary greatly depending on brand choice, system size, location, roof type, and other factors.
But how have these costs changed over time? What can homeowners do to get the best deal on their new installation? Are solar panels worth it at their current cost? This blog will answer all these questions.
Key takeaways
- System costs dropped dramatically (60+%) over the 2010s, but further price drops over the next few years are unlikely.
- Solar panel maintenance can cost you several hundred dollars per year, but it’s possible to save on this by cleaning the panels yourself.
- Typical energy savings are about $1,500 per year, while solar payback periods are generally between 4 and 9 years.
- Because many factors can affect solar panel cost and savings, use a solar panel calculator to see if solar panels are a good idea for your home.
How expensive are solar panels?
The typical cost of solar panels for an average home is between $15,000 and $20,000 before federal and state incentives. Solar installers typically quote a price in dollars per watt of power-generating ability. The numbers above represent a cost per watt of between $2.55 and $3.35 for a typical 6 kilowatt (kW) system.
The wide price range is due to differences between solar equipment, individual homes, and markets in different parts of the country. The amount of work that goes into installing a home solar system varies depending on the type of roof, the age of the roof and home electrical panel, and the various laws and regulations that govern the solar marketplace in each jurisdiction.
Differences in the final price for a solar installation also vary based on the homeowner's needs. A small home with a gas furnace and water heater uses much less electricity than a large home with electric heat and air conditioning. The smaller home in a temperate climate might only need a 4 kW system, while the larger home in a cold climate might require a system of 15 kW or more, which could set the homeowner back over $45,000.
If you’d like more information for your specific home, you can use our solar panel calculator to estimate your system size, cost, and potential savings. If you’d like more general information on solar panel costs — by state, system size, and brand — check out our solar panel cost page.
Sticker shock?
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.
Solar panels cost less than before
According to the National Renewable Energy Laboratory, the cost to install solar panels on a home has fallen over 60% since 2010, from $7.53 per watt in 2010 to $2.95 per watt in 2021.
Based on the above data, a 6 kW residential solar panel system, which costs an average of $17,700 at current prices, would have cost $20,160 in 2015 and a whopping $45,180 in 2010.
Here’s our analysis of solar panel cost trends:
- The price decrease has significantly changed residential solar’s cost-benefit equation.
- In many states, the solar payback period is between 4 and 9 years.
- Solar panel costs have changed very little between 2017 and today due in part to trade restrictions, rising commodity prices, and pandemic-related supply chain constraints.
- We’re unlikely to see substantial price drops in the future because solar manufacturing technology has matured. But, the Inflation Reduction Act will likely help reduce costs in the future as more manufacturing happens in the United States.
What makes up the cost of a solar system?
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.
Cost breakdown
Here is a more detailed breakdown of solar panel installation costs based on the nationwide average solar panel installation cost of $2.95 per watt.
| Expense | Share as % | Share in $$* |
|---|---|---|
| Tier 1 solar panels | 26% | $4,602 |
| Inverter | 10% | $1,770 |
| Racking and balance of system | 10% | $1,770 |
| Installation and labor | 24% | $4,248 |
| Sales and marketing | 15% | $2,655 |
| Installer margin (profit and non-sales overheads) | 10% | $1,770 |
| Permitting and inspections | 5% | $885 |
| Total | 100% | $17,700 |
*Cost before incentives
Why are soft costs so high?
The large share of soft costs in the total cost of solar panels often surprises consumers. However, the number makes sense when considering the nature of solar panel companies and their installation jobs.
Each home is different and requires a customized design and installation. Solar companies need staff with the proper skills and qualifications. And like other companies, they have to factor in profits, overhead expenses, and marketing costs.
How can you lower the cost of your solar power installation?
Even with soft costs and extra tariffs, consumers can find ways to reduce the final bill of their residential solar power system.
- Use the federal tax credit: Take advantage of the federal investment tax credit for new installations to receive up to 30% of your investment back. This incentive is available to anyone who pays taxes.
- Search for state and utility incentives: Many incentives are available at the state, utility, and local levels, some of which are worth thousands of dollars.
Learn more about incentives and rebates on our solar incentives page.
Does the installation company affect the price?
Solar power companies often offer incentives to lure interested customers. These deals can have a positive impact on the final price of residential solar power systems.
Check with several installation companies to ensure you get the best price available. Keep in mind that lower prices do not always mean a better deal. Take time to read reviews and get an idea of the company’s quality of work before committing to work with them.
The easiest way to shop around is to use the SolarReviews solar panel calculator.
How much does it cost to maintain a residential solar system?
As components wear out, get damaged, or become obsolete, regular inspections and maintenance are key to protecting power sources.
While the solar company will cover any warranty claims, all other upkeep is the sole responsibility of the homeowner.
An annual inspection by a local solar installation company costs roughly $150. A professional cleaning to free panels of dirt and debris averages $10 to $20 per panel. Repairs and equipment replacement costs vary.
Using these estimates, a home with 10 rooftop solar panels would spend $250 to $350 each year to keep its system running smoothly. A family with 30 solar panels would need between $450 and $750 in regular maintenance fees.
Frugal homeowners can try cleaning their own panels to reduce their costs. However, periodic professional cleanings are still recommended to maintain optimal system performance.
How much will I save with solar energy?
The savings from solar panels come in the form of dramatically lower electric bills. The average savings from a typical 6 kW solar panel installation in the United States is about $1,500 annually.
Another way to look at savings is by calculating your solar payback period. The payback period is the length of time it takes you to recoup your initial investment costs. After that time, every watt of energy you make is profit. In most states, the payback period for solar panels is currently 4-9 years.
Learn more about solar panel savings and solar payback period.
However, it’s crucial to note that there are huge differences in annual savings from state to state, and even from house to house. How much a household can actually save depends on many factors:
- The size, direction, and pitch of the roof
- The number of panels and their rated energy production
- Hours of sunlight received on the property each day
- Whether or not battery storage is installed
- The cost of electricity in that particular area
Use the solar panel calculator below to understand how soon your new residential solar system will start paying you back.
Is going solar worth it despite the high cost?
Yes, solar panels are expensive. With a typical 6 kW system costing an average of $17,700 before incentives, they are a home improvement that requires a significant financial investment.
But in addition to offering energy independence and environmentally-friendly renewable energy, solar panels also have the potential to save you thousands of dollars over the life of the panels.
Furthermore, the high upfront costs needn't be an obstacle: most solar companies work with loan providers to offer many financing options.
If you haven't already, start by getting a solar cost and savings estimate to see if the math is in your favor.
Zeeshan Hyder
SolarReviews Blog Author
Zeeshan is passionate about promoting renewable energy and tackling climate change. He developed these interests while studying at beautiful Middlebury College, Vermont, which has a strong focus on sustainability. He has previously worked in the humanitarian sector — for Doctors Without Borders — and in communications and journalism.