How Are Solar Energy Systems Priced?

In order to answer the question, “How much does solar cost?” it’s important to understand how pricing is usually quantified. Solar energy systems are not priced by the square foot or the number of panels. In most cases, solar power is priced by the watt. When you receive an estimate from a solar power company, you’ll likely see the amount of energy the system produces (measured in kilowatts, or kW) multiplied by the price per watt (1/1000 of a kilowatt) to determine the total, estimated cost of your solar energy system. That’s because different panels are more or less efficient, so two solar power systems with the same square footage may have significantly different power outputs. To break it down further:

Average System Size for Residential Solar

Solar power system size is a measure of the total power output of your solar energy system, measured in watts of power. If you want to get scientific, one watt is equal to one joule of energy per second, and a joule is a unit of electrical energy equal to the work completed when one ampere of current is passed through a resistance of one ohm for one second. Don’t worry though, you don’t need to know what any of that means! Just know that when you’re comparing different system sizes, they’re typically shown in kilowatts, and the more kilowatts a system can produce, the more energy it creates.

There are two key benefits to comparing the cost of solar energy systems in terms of kilowatts:

It prioritizes the efficiency and power output of your solar power system over the dimensions. A bigger solar array doesn’t necessarily mean it’s a better solar array, or that it supplies more power, especially if the solar panels used are less efficient than other models.
In the design process, it helps to ensure that the energy output of your solar array is aligned with the energy needs of your household. To do this, you can look at the total kilowatt-hours (kWh) of energy that your family consumes, and design a system that can offset your energy usage based on your clean energy goals.

The average size and power output of a residential solar power system in the United States is 5kW (5,000 watts) but many places have averages as high as 10 kilowatts or even 15 kilowatts of power, so it really depends on location and efficiency. While the total size of your solar energy system will depend on your specific needs, you can use a number between 8kW and 10kW as a starting point if you’re not sure of your exact power requirements.

Average Price per Watt for Residential Solar

In 2021, the average cost of solar panels for a home currently stands at about $2.91 per watt. Keep in mind, solar panel cost per watt will vary by system size, provider, location, timing, and a host of other factors. As a result, the average solar panel price per watt usually falls in the range of $2.51 to $3.31.

The reason there’s such a wide range is that sometimes the price per watt and total solar panel system cost factor in the federal solar investment tax credit, and sometimes they do not. Likewise, the scope of services included in a solar installation may vary from one company to the next, so it’s important to verify what’s included in each price per watt system cost before trying to compare bids.

How much does a single solar panel cost?

If you’re looking to understand the overall cost of a solar power system, or putting together an estimate for a DIY solar project, you may be wondering, “How much do solar panels cost per panel?” Like most things, the answer is going to depend on a variety of factors. The average cost of a solar panel depends on the type of panel, the size of a solar power system, and the amount of leverage that a buyer has.

Large solar companies have direct relationships with solar panel manufacturers and distributors, and can buy in bulk to get a much lower rate than what’s available directly to the average consumer looking to purchase solar panels. For example, on a 300 watt solar panel, a DIY homeowner might pay close to $1 per watt, for a total panel cost of $300. A solar company buying in build might be able to buy that same panel for $.75 per watt, for a total cost of $225, and a total savings of $75 per panel.

If you’re looking for the price range for a typical solar panel, prices can be as low as $.85 per watt for a lower efficiency panel, up to $1.25 or more for a higher efficiency panel. Keep in mind, these prices are just for the panel itself, and don’t factor in additional costs necessary to actually create a solar power system that can deliver energy to a home, such as inverters, wires, and mounting equipment. In general though, the cost of a solar panel is going to be less if you buy through a solar company than if you try to purchase a panel yourself.

What Do Residential Solar Panel Costs Include?

In order to accurately answer the question, “What do solar panels cost?” it’s important to consider every factor that impacts costs. The industry standard is to include all major fees—inspections and permits, solar panels and equipment, installation services and fees, as well as any commissions—into the price per watt stated on your solar system estimate.

Solar Panels and Equipment

Your equipment costs include solar panels, solar inverter(s), racking and/or mounting equipment, and wiring. Homeowners who choose to add solar energy storage will also see increased equipment costs from the price of the solar batteries and the equipment necessary to connect that battery storage into your solar power system. Likewise, those who add an energy monitoring system can expect a slight increase in costs as well.

While estimates don’t usually include an exact breakdown of equipment costs, there are a few assumptions you can generally make.

In most cases, equipment accounts for about 25-30% of your overall costs.
With few exceptions, the quality and efficiency of the equipment is reflected in the cost. This is true for both solar panels and inverters. Higher-quality equipment usually comes with higher performance and a better warranty, so you may pay more upfront, but you’ll often end up saving money in the long run.
A larger solar array typically has a higher total equipment cost, but a lower cost per watt, as the fixed costs are spread out over more panels.
The size and complexity of your solar energy system will affect both equipment costs and installation fees. For example, if the architecture of your home requires a multi-tiered system with several breaks to accommodate skylights, ventilation, and/or drainpipes, then you’ll likely require more racking, more engineering, and higher fees.
While solar panels have become increasingly affordable, solar energy storage batteries are relatively new, and have not seen significant price reductions yet. Any solar energy system that includes solar storage will show an increase in overall equipment costs.

Design and Installation

There is an immense amount of design, engineering, and project management that goes into crafting the ideal solar energy system for your needs, long before the installation can begin. Then, there’s the actual installation. So, how much do solar panels cost to install?

Solar energy modeling and installation experts require advanced training and tools. While labor rates vary by location, they typically reflect the experience and expertise of the provider, relative to the going rate for labor in their area.

The average cost to install solar panels, including design and installation fees, typically account for about 30% of the total solar energy system costs.

Inspections and Permits

Like any major home renovation, solar panel installation falls under several regulatory bodies including state and local building codes, zoning laws, safety regulations, and other legislation. You may also be subject to neighborhood and HOA requirements.

Most homeowners can anticipate several inspections, both before and after installation, to ensure the safety of the project and the quality of the installation. Design and engineering plans will likely need to be pre-approved, and multiple permits obtained before the install can begin. These may include electrical permits, structural or building permits, and solar photovoltaic (PV) specific permits.

After installation, your new solar energy system will need to pass a final inspection before you are given permission to operate (PTO) from your local utility provider. In most communities, there’s also an additional fee to connect your system into the grid.

All of these inspections and permits translate to additional time and money. While these inspection and permitting systems are designed to protect your safety, they can be clunky, difficult, or even tedious to navigate. That’s where a solar specialist comes in.

A qualified solar specialist like those used by Palmetto should be familiar with the installation requirements in your area, so they can accurately forecast inspection and permitting fees as well as the time required to move projects through your local regulatory pipeline. These fees and management efforts are reflected in your costs, but they are a necessary part of getting solar panels installed.

Factors That Impact Home Solar System Costs

There are a number of different factors that impact the cost of home solar panels, including the number of panels required for a given solar power system size, the type of solar panel installation, whether or not the solar power system is being designed to go completely off grid, and even the impact of national trade policy on the price of individual solar panels. So it’s important to consider all of these factors when answering the question, “How much do solar panels cost?’

Number of Solar Panels (Size of Your Solar Power System)

As we mentioned in our discussion of the cost of a single solar panel, the cost per individual panel can change depending on how many panels are being purchased. When a solar company can leverage their size to purchase a large number of panels all at once, they can typically do so at a much lower cost, and then pass those savings on to the homeowner they’re working with.

In addition, if a homeowner is installing a large solar power system, the solar company might be able to offer a lower cost per panel, because they can spread out the cost of items like installation and permitting over a larger number of panels. Fixed costs are going to be the same whether you install one panel or one hundred panels, so typically the larger your system size, the lower your cost per panel.

National Trade Policy On Solar Panels

You probably don’t think about national trade policy and how it might affect your plans to go solar, but our government’s decisions can have an impact on the cost of your solar.

For example, in January of 2018, President Trump imposed a four-year tariff on imported solar cells and panels. This tariff started at 30%, and drops 5% every year until February of 2022, when it goes back to 0%. As a result, the average cost for solar increased by $.16 per watt as a result of the increase in cost for foreign-manufactured panels, where most solar panels are still produced. $.16 might not sound like a lot, but when you multiply that out for a 10 kilowatt system, you’re looking at an additional cost of $1,600.

What do solar panels on the roof cost, versus solar panels on the ground?

Most homes are better served by a solar power installation on the roof, but if that’s not an option for your home, due to things like roof direction, shape, or shading, it may still be possible to go solar by installing solar panels with a ground mount system.

The cost of each solar panel in a ground mount system is going to be the same, but the overall installation cost is going to be higher, because additional equipment and expertise is necessary to perform that solar installation. Ground mount solar power systems are much less common, so they don’t have the benefit of scale that roof-mounted solar does.

What about on-grid versus off-grid solar power systems?

For most homeowners, going solar doesn’t mean going completely off the grid. Staying connected to the electricity grid allows you to draw power from the grid at night, during storms, or at times when your home needs more electricity than your solar power system is producing. In some locations, staying connected to the grid also means that your solar power system can feed extra electricity back into the grid, earning you net metering credits for that extra power that can help offset the cost of any electricity that you need to draw back out of the grid in the future.

If you want to go completely off-grid with solar, you’re typically going to need a much larger system, because you need to produce at least as much electricity as your home needs, and usually much more so you have an excess amount that you can pull from during high usage times. You also need a way to save the extra power that your system generates, so that you can use that power at times when your solar panels aren’t generating enough electricity directly.

As a result, the cost per panel doesn’t necessarily change if you want to go off-grid, but the overall system price will be much higher, as you’ll need more panels, more equipment, and a battery backup system that’s large enough to power your entire home for multiple days at a time.

What Are My Financing Options?

If you choose to finance your solar panel installation, you have several options available. The two most common options are 1) a solar energy loan, which functions like a home improvement loan and 2) an energy efficiency mortgage designed to help homeowners fund updates on fixtures and features. Financing rates change frequently, and each homeowner’s options are going to depend on things like credit score and down payment, so if you’re interested in financing a solar array, Palmetto’s dedicated team is available to help explain your options and identify which solution might work best for your needs.

Can I Save Money on Solar by Going DIY?

If you’re asking yourself, “How much do home solar panels cost?” then you may be wondering if you can save money by going the do-it-yourself route. Typically: No. While it is possible to install your own solar panel array, DIY projects usually end up costing more (and saving less) for a variety of reasons.

Because solar companies benefit from wholesale pricing, DIY projects typically have higher equipment costs.
Solar energy specialists use advanced modeling software to determine the best placement, orientation, and angle of your solar panels. This allows them to maximize the efficiency of your solar array. DIY installations often miss out on energy savings as a result of suboptimal placement.
The electrical work for a solar installation requires special training to complete. Homeowners who choose the DIY approach may damage equipment, increase their risk of fire, and spend additional money to pass inspections (often hiring an expert in the final hour).
A DIY installation may void any warranties on your solar panels and equipment, meaning the costs of any issues that arise down the road will fall directly to the homeowner, and decrease your return on investment.

Depending on where you live, the permitting process can sometimes be quite difficult, and you may miss out on tax incentives and rebates that a certified specialist can help you navigate and claim.

Will I Recover the Upfront Cost of Solar Panels Over Time?

For most homeowners, you will absolutely recover the upfront cost of going solar over time.

Homeowners who pay cash likely see the fastest return on their investment, depending on the incentives and rebates available in their area. That’s because you’re not paying any money towards interest on your payments, so all of your savings go immediately towards paying back your upfront cost. Your out-of-pocket expenses are higher, but your savings over time are higher as well.

If you can’t afford to pay for your system in cash, or if you want to spread out payments over time so you can save that money for other uses, then you’re likely to save more over the average lifetime of your solar energy system if you choose to finance, rather than lease, your solar array. Financing your solar power system allows you to capture the most value for yourself, since you’re not sharing the savings with a third party, and the more you can pay upfront, the more your savings will be over time.

That said, a solar lease does offer easy access to clean energy savings with little to no money down (i.e. no upfront costs to recover) so your savings start immediately. Since there are no upfront costs when you lease a solar power system, you don’t need to recover any of those costs over time, but your total lifetime savings will typically be lower.

What if you choose to move? Can you recover the cost of solar panels if you sell your home? In all likelihood, you can still recover the upfront costs of going solar through the increase in your home’s value. Solar panels have been shown to increase real estate prices, making your home stand out, sell faster, and earn more in the national real estate market. If you choose to lease your solar array, your solar lease can even be transferred to a new homeowner so you can include that benefit in the sale, as the new homeowner won’t need to do anything to start getting solar savings.

Factors that Impact Your Solar Savings

When you’re calculating how much you can save with solar power, and the return on investment that you can expect from buying solar panels, there are a few factors to keep in mind that can have an impact on your total solar savings.

Sunlight Exposure

Solar panels turn sunlight into electricity, so the more sunlight they are exposed to, the more electricity they can generate. An important term to know is “peak sun hour”, which is defined as an hour of sunlight that offers at least 1,000 watts of photovoltaic power per square meter. Peak sunlight hours is a measure of the intensity of sunlight in a specific area, so while different areas of the country may have a similar number of daylight hours, the number of peak sun hours can vary drastically, which impacts your solar power system’s ability to generate electricity.

In general, having at least 4 peak sun hours per day is best for solar panels. Peak sun hours increase the closer you are to the equator, and also increase during summer months, which is why states that are further south can typically generate more energy with the same size solar power system. That’s not to say that northern states aren’t good for solar too, it just might mean that an area with fewer peak sun hours needs a larger system to generate the same amount of electricity.

Quality of Solar Power Equipment

When thinking about the quality of solar power equipment and how it impacts your solar savings, it’s not just a calculation between cost and output. While it’s true that higher quality solar panels generally produce more electricity per panel, they also typically come with better warranties, and higher manufacturing quality that can also increase your solar savings over time.

If your solar power equipment isn’t designed to last the 25-30+ years of a typical solar installation, then you have to factor in the additional cost of maintenance, repairs, and early replacement of those panels into your overall savings calculation. You may be able to save a little more money upfront with less expensive equipment, but if those cost reduction comes with a lower quality as well, then you may end up paying more in the long run, so it can be better to go with a higher quality initially, and give yourself peace of mind knowing that your equipment is designed to last and keep producing energy for a much longer period of time.

Maintenance and Upkeep of Panels

Solar panels are designed to produce electricity day after day for years without requiring much interaction, but regular maintenance and upkeep can still help maintain their performance over time, prevent future issues, and keep them producing power for longer than a poorly maintained system.

You should factor regular cleanings and maintenance into the overall cost of your solar power system, and keep those costs in mind when thinking about your overall solar savings. Cleaning your panels each year helps ensure that they’re performing at peak efficiency, and also allows you to catch any issue early to prevent lower energy production that reduces your overall savings.

To help lower the cost of maintenance and upkeep, Palmetto offers a service called Palmetto Protect that combines real time energy monitoring, one-click customer support, comprehensive energy recommendations, and best-in-class service into a low monthly payment, so you can be sure that your system is running at peak efficiency. Palmetto Protect is available to any homeowner with a solar power system, whether we installed it or not, so be sure to check it out if you’re interested in automating the maintenance and upkeep of your solar power system.

How Long Will It Take to Break Even?

The most common question related to solar panels that homeowners ask after “How much do residential solar panels cost?” is, “How long does it take to pay solar panels off?”

Most Palmetto homeowners can anticipate a break-even point (also known as a solar payback period) of fewer than seven years. The solar break-even point is the time when your total energy savings will exceed your total installation costs, meaning every watt produced from that point forward puts more money directly in your pocket.

The primary factors that either accelerate or delay your break-even point are the cost of utilities in your area, the amount of energy that you use relative to the amount of energy that you produce, the size and complexity of your solar power system, your energy storage capacity, your eligibility for local and federal incentives, and your preferred financing method.

Because there are so many different factors that go into calculating your solar payback period, there’s no easy metric that we can provide for all homeowners, but if you get a solar estimate from one of Palmetto’s solar experts, they can provide you with a better idea of when your break-even point would be.

What About Solar Tax Credits?

The Federal Investment Tax Credit (ITC) can be applied toward solar panels, solar batteries, and in-home vehicle chargers, allowing you to deduct up to 26% percent of the equipment and installation costs of your home solar power system from your federal taxes. If you’re interested in learning more about solar tax credits, check out the article we wrote called, Everything You Need To Know About The Solar Tax Credit.

In addition to the Federal Investment Tax Credit, many states, municipalities, and electric utilities offer additional tax credits, incentives, and rebates that can help lower the cost of solar panels and solar power installations. These vary by location, but our solar specialists are familiar with the offerings in your area and can help you optimize your returns. So, when answering, “How much do solar panels cost for your home?” be sure to include the tax savings into your calculations.

How to Get Started with Palmetto

The best way to get started with calculating the cost of going solar is to visit our Solar Savings Estimator, where you can enter your address and your most recent energy bill and get a preview of system costs, monthly savings, and 25-year savings based on your preferred ownership options.

If you like what you see, it’s easy to request a custom estimate that will provide exact numbers and help you compare options. Our dedicated solar energy experts will work with you to outline your overall solar costs, as well as financing options and any incentives you may be eligible for. Click here to get started with your solar cost estimate.

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