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How Much Do Solar Panels Cost And Are They Worth It?

6-Minute Read
Published on August 26, 2022
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Rising electric bill costs are pushing all of us to consider alternative options for electricity. One option that jumps to mind is solar panels. Solar panel costs vary based on your location, type, and installation. But with their energy efficiency, it’s possible to save money on your energy bills after this major upfront cost.

Let’s explore how much solar power may cost you.

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How Much Do Solar Panels Cost?

As the technology has improved, average solar panel costs have fallen. According to the Solar Energy Industries Association, an average-sized residential system costs around $20,000.

However, the costs will vary based on the types of panels you choose for your home. We break down the potential costs for the different kinds of solar panels below.

Monocrystalline Solar Panel Cost

Monocrystalline solar panels are generally considered the most energy-efficient option. The panels cost $1 – $1.50 per watt. With that, a 6kW solar system would cost $6,000 – $9,000 for the materials alone.

Polycrystalline Solar Panel Cost

Although less energy efficient than their monocrystalline counterparts, polycrystalline solar panels are a bit more affordable. On average, the panels cost $0.90 – $1 per watt. With that, a 6kW solar panel system would cost $54,000 – $60,000.

Thin-Film Solar Panel Cost

Thin-film solar panels are the last option we will cover. However, these types of solar panels are typically not used in a residential setting because they require more roof space. With that, thin-film solar panels are generally used in an industrial environment.

On average, these panels cost $1 – $1.50 per watt, which means a 6kW system would cost $6,000 – $9,000.

How Much Does It Cost To Install Solar Panels?

Beyond the cost of the system itself, you’ll need to factor in installation costs.

Installation involves several steps, including:

  • Survey: When you choose a solar provider, an engineer reviews your home. Although some solar companies work with local contractors to complete this step, others have in-house experts to streamline the process. In either case, the goal of the survey is to ensure that your roof can accommodate the system you need. Additionally, the engineer will inspect your electrical system to make sure it’s compatible with your plans.
  • Design: After the company has a clear understanding of your roof, it’s time to design a system for your home. You’ll be asked to approve the design before the project moves forward.
  • Permitting: Permits and paperwork must be completed prior to the company installing the panels. Typically, the solar company will tackle this tedious step and obtain all necessary permissions for your home to install solar.
  • Installation: With the permits in place, the physical installation can begin. Typically, this step takes between one and three days. But the timeline will vary based on the size of your system.
  • Connection: Last but not least, it is time to officially connect your system to the power grid. After that, your solar panels will start generating energy for your home.

The number of steps involved means the cost of this process adds up quickly. In total, you can expect to pay around Solar Energy Industries Association, an average-sized residential system costs around $20,000.

For all the DIYers out there, you’re likely thinking that you could save thousands by tackling the installation yourself. And that’s true. But this particular home improvement project might be best left to the professionals, according to the Office of Energy Efficiency and Renewable Energy. That’s because the qualified installers earn a certification through the North American Board of Certified Energy Practitioners (NABCEP) to learn the ins and outs of this finely tuned installation process.

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Factors Affecting Solar Panel Cost

The cost of solar panels varies for households across the country. That’s because the following factors have an impact on costs for homeowners.

Household Energy Usage

The amount and type of energy your household relies on will impact the cost of solar panels. For example, a household that relies heavily on electricity will want a larger solar system than a household that mainly uses gas appliances.

Location

Where you live has one of the biggest impacts on your solar panel costs. Part of the cost of living in an area is how much you pay for electricity, which factors into the price of a solar panel system.

Additionally, your geographic location determines the amount of sunlight your home receives. A few states with the most year-round sunlight include Arizona, New Mexico, Nevada, Texas, California, Florida and Utah.

But the presence of sunny days doesn’t necessarily mean lower costs. Instead, the most affordable states for solar panel installation often have state-level financial incentives to lower the all-in cost for homeowners.

Solar Tax Credits

Solar tax credits are available on the federal level to offset the costs for homeowners interested in installing solar panels on their homes. A tax credit is a dollar-for-dollar saving on taxes you would already owe to the federal government. The tax credit serves as a major incentive because you’ll essentially get a discount on the hefty price tag of an installation.

The Investment Tax Credit provides a 26% tax credit for solar panel systems installed between 2020 and 2022. In 2023, homeowners that install solar systems will receive a 22% tax credit. As of now, the tax credit expires in 2024, but it’s possible that Congress will extend this tax credit opportunity to encourage solar energy in the U.S.

Additionally, homeowners in some states can tap into state-level tax credits to further offset their costs.

System Size

The larger your solar panel system, the higher the costs. Your household energy usage determines how many panels you’ll need for an appropriate amount of power generation.

When deciding on the size of your system, the solar company should be able to help you determine the appropriate size for your home.

Additionally, the goals for your solar system will come into play. If you are just looking to reduce your energy costs, then you might need a smaller system. But if you want to completely eliminate your electricity bill, then a larger system might be required.

Roof

Residential solar panels are generally installed on the roof. With that, the condition and layout of the roof will impact your costs.

Typically, solar panels need to be tilted for maximum sun exposure. Roofs without the appropriate pitch could require the installation of angled platforms, which adds to your costs.

If the roof is older or in bad condition, many solar companies recommend repairing or replacing the roof before moving forward with the solar panel installation. Of course, adding a new roof to the mix will push your costs higher.

Home’s surroundings

Not every home is a good candidate for solar panels. If yours is sitting in the shade of some lovely trees, you likely won’t get the most out of your panels without chopping down your trees. Removing trees from your lot impacts the overall installation cost and can cause your energy usage to rise in summer months. If a major motivation for using solar panels is environmental impact, chopping down trees defeats the purpose.

However, if you live on a sunny lot, it makes sense to consider solar. A solar company should be able to give you a reasonable assessment of your home’s suitability. But you’ll have to decide for yourself if the necessary changes for an optimal solar setting are the right fit for your home.

Do Solar Panels Save Homeowners Money?

It’s clear that installing solar panels involves a big upfront investment by the homeowner. But after you cover the upfront costs, you’ll save money on your electricity bills. The amount you can save will vary dramatically based on your energy needs and the amount of sunlight around your home.

For example, let’s say that your system costs $20,000 to install. In your area, the utility company is charging 14 cents per kilowatt hour of electricity, and you consumed the national average of 10,715 kilowatt hours as a household.

When the 26% federal tax credit is considered, your solar panel system will pay for itself in just over 10 years. After that, the energy your system produces will be pure profits.

It might take years to breakeven, but any savings past that are a boost to your bottom line. To run the numbers for yourself, take advantage of a free calculator, like this one, available through many solar companies.

Ultimately, solar panels can save you money. Although you won’t feel the rewards immediately after a large upfront expenditure, the lower utility bill will provide welcome relief for most homeowners.

The Bottom Line: Solar Panels May Be Worth The Cost For Some Homeowners

Solar energy can help you save on your monthly utility bills. But the savings will only occur after large upfront costs. If you’re seriously considering installing solar panels, take the time to compare bids from multiple providers. Depending on your area, the cost difference could be considerable.

Ready to move forward with solar panels? Apply for solar panel financing with Rocket SolarSM.

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Sarah Sharkey

Sarah Sharkey is a personal finance writer that enjoys helping readers learn more about their finances. She has an MS in Business Management from the University of Florida. You can connect with her on LinkedIn or Instagram @adventurousadulting.