With an average solar panel cost of $31,558, solar panels are expensive. Solar system costs have significantly decreased in recent years, but the costly investment is primarily due to the materials, manufacturing, and installation costs. We’ll break down why solar is so expensive in 2023 and how the hard and soft costs of solar panels impact the total cost of going solar.
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Key Points
- The price of solar includes soft and hard costs, including design services, local permitting, panels, installation labor, components, and maintenance.
- Solar incentives and rebates such as the Residential Clean Energy Credit make solar less expensive.
- Buying options for solar panels include cash, financing, leasing, or a Power Purchase Agreement (PPA).
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Why are solar panels so expensive?
Solar panels are expensive due to the complex components, technical expertise, and electrical nature of the installation. But not every piece of solar energy is expensive. Here are common costs associated with solar panel installation.
What are the hard costs of solar panels?
Material costs of solar includes the physical components, such as the panels, inverters, solar batteries, racking and mounting. Hard costs make up around 35% of the price of solar panels, according to the Office of Energy Efficiency and Renewable Energy (EERE), which would come out to just over $11,000 for an average solar system.
What are the soft costs of solar panels?
Soft costs of solar includes intangibles related to getting solar on your roof. Intangible costs include fees, services, and marketing. In the solar realm, this can look like permitting and inspection fees with your local utility and city, application fees, interconnection costs, design and engineering expenses, and more. Soft costs equal about 65% of the total cost, or about $20,500 for an average system. Depending on the company, solar research and development can make solar more expensive.
Why are solar soft costs so high?
Soft costs are harder to track and vary between installers and markets. The original estimate and the actual total cost at the end may differ due to adjustments in soft costs. If you purchase your solar system you may incur additional fees or expenses related to insurance, taxes, or maintenance after installation.
When getting solar quotes, it’s important to have a breakdown of all solar expenses, including soft costs. Ask your installer if there is any guarantee for staying true to that quote.
Because soft costs are not physical products, it can be hard to nail down exact fees but it is important to know what is related to the project. Using a spreadsheet to track soft and hard costs when getting solar quotes is a great tool for staying organized and comparing prices.
How much does a solar system cost in 2023?
The average cost of home solar panels is $31,558 based on a U.S. average of an 8.6 kW system with an average price of $3.67 per watt. Pricing varies by state, as do state and local incentives and rebates. Compare the average sizes and costs of solar panels in the top five solar-generating states of 2023.
Solar panels cost in top-generating states
| State | Average system size | Price per watt (PPW) | Total cost |
|---|---|---|---|
| California (CA) | 5 kW | $3.47 | $17,356 |
| Florida (FL) | 9 kW | $3.21 | $28,933 |
| Nevada (NV) | 7 kW | $3.08 | $24,631 |
| North Carolina (NC) | 9 kW | $3.51 | $31,614 |
| Texas (TX) | 9 kW | $3.33 | $30,014 |
Data from Find Energy.
If you’re wondering if going solar is worth it, it depends. Solar can be worth it if your energy consumption, average rate of electricity in your area and your total monthly electricity bill is expensive. When purchasing or financing solar, you will have significant costs; before signing a solar contract you should compare this cost to your savings over time. This way, you can determine how much you will save and how long it will take you to earn a return on your investment (ROI). If your current electricity bill and energy usage is low, solar may not be worth it.
How to reduce solar installation costs
There are two main ways to reduce your solar installation costs. These methods may allow you to reduce the expense by several thousand dollars.:
- Claim tax credits and Incentives. Apply for all rebates and incentives that are available to you. The biggest savings will likely come from the 30% federal tax credit. Claiming the 30% credit on your federal income tax can save over $9,000 on the average-priced $31,000 solar panel system. State and local rebates may also be available based on where you live. Your solar installer should be able to advise you about incentives and rebates to help you save money.
- Lower the cost of your solar power installation. Comparing multiple price quotes is key to getting the most value from your solar panel installation — we recommend getting at least three quotes. Note which components and services each quote includes to make sure you are comparing apples to apples. If any quote seems much less than the others, stop to question why this outlier exists. Remember, if it sounds too good to be true, it probably is.
How much does it cost to maintain a residential solar system?
Maintenance costs for solar are usually pretty low, as long as no major repairs are needed. Solar panels are built to withstand storms and even hurricane-force winds. Check with your installer and the solar panel manufacturer’s warranty to get the exact maintenance details for your specific panel brand.
Repairs and cleaning are necessary if debris can damage or collect on panels. Some solar contractors offer monthly or annual maintenance plans for a fee. These protection plans cost around $10 a month for most installers.
Generally, rain is enough to keep solar panels clean. However, if you notice dust or pollen accumulating, you can clean your solar panels by rinsing them off with a hose. For deeper cleaning, it’s best to use a professional to ensure you don’t accidentally damage your panels and void the warranty.
Myths about the cost of solar panels
Learning the truth about solar panels and debunking common myths about going green will help you decide if solar is right for you. Here’s a breakdown of the top solar misconceptions and the truth behind them.
Four solar panel myths
- Solar panels make sense for everyone. Solar panels may not make sense if your electricity bills are already inexpensive.
- Living in a place with less sun means they won’t be worth it. Solar panels convert sunlight into energy even in rain or cloudy conditions. But, living in a place with less sunlight may keep panels from reaching maximum efficiency.
- You can get solar panels for free. Solar panels aren’t free; however, some financing plans may have no money down to help you get panels installed.
- You need solar energy storage. A solar battery is good to have, but not a necessity. A battery is a solution to maintain energy reserves in case of a temporary power outage.
The bottom line
Solar panels are expensive because of varying soft and hard costs based on your location, system size, and installer. Keep in mind, solar technology is constantly changing and improving efficiency. If the investment is too much right now you can track prices over the coming years for a better time to buy. Although hard costs may decrease over time, soft costs related to installing solar panels can be difficult to control and can add to the bottom line.
Learn more about residential solar panels
Solar costs FAQs
Calculate your payback period by dividing the total system cost or quote by your average annual electricity bill (average monthly bill times 12 months). If you apply for the 30% federal tax credit, multiply the total cost by 70%.
Payback period in years: Total cost ÷ annual electricity cost = number of years
Payback period with tax credit: (Total cost x .7) ÷ annual electricity cost = number of years
The average payback period is 6–10 years. Solar panel return on investment is based on total cost and your average monthly electricity bill. Suppose you have a lower total cost and a higher monthly electricity bill. In that case, your payback period will be shorter than someone with a higher total system cost and a lower monthly electricity bill.
You can pay for solar panels in various ways, such as:
• Cash
• Financing
• Lease
• Power Purchase Agreement (PPA)Cash and financing are the only options that let you claim the 30% Residential Clean Energy Credit. Leasing and PPAs may be less money down but you will have a minimal return on investment.
Solar financing means paying for a solar system by borrowing money from a bank or other lending institution. Financing options include a solar loan, a home equity loan, or a home equity line of credit (HELOC). Financing takes the total cost of the solar system and breaks it into monthly payments with interest. A down payment may be required depending on the financing terms.