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What is the Average Cost of Solar Panels? Your Guide to Understanding Solar Panel Cost

The words "Cost of solar panels" atop a solar panel with the sun shining and a translucent overlay of a dollar sign
PublishedApril 5, 2024
UpdatedMay 17, 2024
AuthorCory O'Brien HeadshotCory O'BrienSenior Director - Growth MarketingEditorRyan Barnett HeadshotRyan BarnettSVP, Policy & New Market Development
In this article
01.
How Much Do Solar Panels Cost?
02.
How Are Solar Panel Systems Typically Priced and Solar Power Costs Calculated?
03.
Understanding the Hard and Soft Costs of Solar Power Systems
04.
How Does a Solar Lease Impact Total Solar Panels Cost?
05.
Solar Loan Programs, Tax Credits, Solar Incentives, Solar Batteries, and Other Solar Energy Production Solutions that Help You Make or Save Money for Solar Panels
06.
How Much Do Solar Panels Save?
07.
Calculate the Cost of Going Solar with Palmetto

Converting to solar has many benefits for homeowners; however, it's not the right choice for every household. Here's a closer look at the total costs involved, to help you decide if a solar panel investment makes sense for your home.

How Much Do Solar Panels Cost?

For most homeowners, the decision to install solar panels is primarily driven by cost. The average cost of solar panels as of Spring 2024 was $3.40 per watt, excluding financing. This price includes both hard costs, like hardware and equipment, and soft costs, like installation labor costs, solar loan costs and fees, and required permitting.

This solar system installation cost data comes from a March 2021 Report from the Solar Energy Industries Association (SEIA) in partnership with Wood Mackenzie Power & Renewables, which annually assesses solar industry information from solar companies.

The bottom line is this: there is no set price for a solar panel system, despite what the internet may say. The reality is that your solar panels cost will be determined by your specific situation and will depend on a variety of factors that each solar installation company accounts for slightly differently, including:

  • Your energy usage and electricity bill
  • Solar panel system size and efficiency
  • Solar panel make and model
  • Your location in the United States
  • Eligible tax credits, incentives, and solar rebates
  • Local permitting and utility requirements
  • Roof condition, design, and orientation
  • Solar provider

The metrics and factors can be confusing and some of them might be new to you: price per watt, incentives, hard costs, soft costs, etc. It can be a lot to take in. In this article, we’ll break down these ideas and key terms so you can understand them better and asses how they might affect your solar panels cost. We’ll even provide you with an average savings amount per state so you can get a better sense of how much money you could potentially save on monthly costs should you make the decision to install solar panels.

If you’re ready to estimate your costs now and understand how to make solar panels worth the investment, head over to our solar panel cost calculator. Using proprietary Mapdwell technology, we analyze the solar potential of your specific roof to provide you with a preliminary system size recommendation, along with cost and savings estimates. It's the fastest and best way to gain actionable insights to make the right decision for your home.

See how much you can save by going solar with Palmetto

Step 01
Step 02
My electric bill is $290/mo

How Are Solar Panel Systems Typically Priced and Solar Power Costs Calculated?

There are many ways solar companies share the price of solar panels. The three most popular include:

  • Gross cost
  • Price per watt
  • Price per panel

In our expert opinion, the most effective and accurate method for pricing solar panels is the gross cost. Let’s explain why and then discuss each pricing model in detail.

Gross Solar Panel Cost

A lot of work goes into ensuring that you can safely turn on your solar power system–the process is much more involved than simply attaching solar panels to your roof. The gross or total cost of solar panels will typically encompass everything you need to lawfully turn your system on before financial incentives, such as the Federal Solar Tax Credit, are applied.

Yes, that's right: you cannot lawfully install or power on your solar system without getting permission from the “authority having jurisdictions” (AHJs) for your area, which are typically government entities. Other entities requiring permission may include your local building department and utility company, though the specifics vary by location. If your home is part of a homeowners association or HOA, there may be additional approvals required.

Other costs often not mentioned but necessary to the successful completion of your solar panel system include:

  • System design and engineering
  • Equipment and hardware (e.g. module, inverter, racking, and electrical wiring)
  • Permitting and inspections
  • Installation cost and labor

At Palmetto, our solar estimate tool factors in these costs so you can better understand what it takes to begin generating electricity with your solar panels.

Solar System Price Per Watt

While we prefer using gross cost as our metric, we cannot discount the importance of price per watt. Price Per Watt—or PPW—is based on the maximum power output of a solar energy system and is calculated as the dollar amount per watt of solar energy a system can produce.

Because solar panels vary in both size and efficiency, homeowners are encouraged to compare average cost per watt based on overall system performance, rather than the number of panels or square feet of roof space. PPW is calculated by taking the gross cost of a solar panel system and dividing it by the total wattage, or power capability, of that system.

How do you calculate the size of the solar system you’ll need? That will depend on your energy consumption (which you can see on your electricity bill) and how much of that electricity you want to come from solar panels. This is called solar offset, or the percentage of your total energy needs that can be offset by the electricity your solar panels generate in optimal conditions.

Many homeowners target a 100% solar offset when selecting the right system size for their home. The ability to do this will depend on preference, roof specifications, and utility guidelines. To calculate yours, you can use our free solar design and savings estimator tool.

The difference between gross cost and PPW is that the former already factors in system size, while the latter does not. Using PPW, you’ll be able to measure the comparable value of several solar power system quotes that may differ in solar panel types, wattage, and more.

Price Per Solar Panel

You might also see solar panel systems priced by the panel. This metric is often used to price DIY solar panel kits, which we may recommend for your RV or boat but not for your home.

It’s true that panels do differ in price depending on their make, model, and efficiency. Higher-efficiency panels will likely cost more; however, you will not need as many of those panels to generate the same amount of energy created by a larger system that uses cheaper, low-efficiency panels. You could even spend more on those lower-efficiency panels because you need to buy more panels for the same amount of electricity.

We rarely see this metric used to price residential solar energy systems because it leaves a lot of valuable information out of the equation. A Palmetto expert can help you determine where efficiency and quantity fit into the equation for you, and whether your ideal deployment means more solar panels or fewer solar panels.

Understanding the Hard and Soft Costs of Solar Power Systems

Solar panel costs are a fraction of what they used to be and continue to decrease. However, they still represent a sizable investment. It’s important to understand that the price tag of solar almost always includes more than just the equipment costs. It includes the costs necessary to install and get your system online. Let’s go over hard costs and soft costs so you can better understand them.

Hard Costs of Solar Panels

The hard costs of solar refer to the physical equipment of your solar panel system, including the following:

  • Solar panels
  • Solar inverter
  • Electrical panel
  • Mounting and racking
  • Electrical equipment
  • Minor additional solar equipment
  • Solar battery (optional)

These prices will vary by solar company, as not all installers offer the same equipment.

Soft Costs of Solar Panels

The soft costs of residential solar panels include labor costs and time taken to make sure you have all the relevant permits and licenses needed to operate your system. This may include but is not limited to the following:

  • Solar system permitting fees
  • Inspection fees
  • Interconnection fees
  • Sales taxes (if applicable)
  • Supply chain costs
  • Installation costs
  • Customer acquisition costs
  • Transactional fees

The advantage of choosing Palmetto as your solar installer is that we factor these services into the cost of our system. There are no billing surprises and the process is transparent and fully accountable. We work on behalf of our customers to make sure their installations meet strict quality standards and that their system receives the correct permits in order to lawfully operate.

How Does a Solar Lease Impact Total Solar Panels Cost?

A solar lease is a financial arrangement in which the company that installs your solar panel system retains ownership and you pay a fixed monthly amount to use any electricity the solar panels produce. Leasing solar also helps you lower your utility bill and is often ideal for homeowners who are on fixed incomes and/or may not be eligible for the solar tax credit.

With this arrangement, you typically don’t pay any upfront costs for the residential solar installation and your costs are simply the subsequent monthly "rent." You'll make that monthly payment for the duration of your lease and the solar installer is fully responsible for installation and maintenance.

To learn more about solar leases, visit our article that compares leasing vs. buying solar panels.

See how much you can save by going solar with Palmetto

Step 01
Step 02
My electric bill is $290/mo

Solar Loan Programs, Tax Credits, Solar Incentives, Solar Batteries, and Other Solar Energy Production Solutions that Help You Make or Save Money for Solar Panels

The shift to renewable energy and residential solar systems is one that is large scale and happening in order to make our world safer and more livable. Numerous solar incentives have been created to support that shift and make it easier and better for homeowners to install solar panels, and for solar installation companies to support the movement toward more residential solar systems.

Here's an overview of some of the solar energy production incentives that make having solar panels installed an investment that pays substantial dividends.

Federal Solar Tax Credit

"The federal residential solar energy credit is a tax credit that can be claimed on federal income taxes for a percentage of the cost of a solar PV [solar panel] system paid for by the taxpayer. The installation of the system must be complete during the tax year. There is no maximum amount that can be claimed." -- United States Department of Energy, Office of Energy Efficiency & Renewable Energy.

Your eligibility to claim this valuable federal tax credit may be determined according to the following criteria:

  • Your solar panel installation happened between January 1, 2017 and December 31, 2034.
  • Your solar system is located at a residence of yours in the United States.
  • Either 1) you own the solar system and solar equipment (outright purchase or financing, but not leasing or using a power purchase agreement), and 2) you purchased an interest in an off-site community solar project (with certain caveats).
  • The solar panel installation is new or being used for the first time.

The federal solar tax credit is relatively straightforward’ however, it's a good idea to confirm with your tax advisor, lawyer, or accountant that your intended solar panel installation meets the criteria to claim the federal tax credit. This is not tax advice and is for educational purposes only.

State and Other Tax Credits

Many states offer local renewable energy incentives that reduce how much solar panels cost. These can include:

  • State tax credits
  • Solar equipment rebates
  • Low-interest loan programs and payback period adjustments
  • Solar renewable energy certificates
  • Performance-based incentives
  • Property and sales tax exemptions
  • Electric bill net metering programs

Incentives that impact total cost for solar panels vary significantly according to your location. Check with your solar installer, state government, and electricity bill provider to learn more details, or talk with a knowledgeable Palmetto expert to understand all your incentive opportunities.

Making Solar Batteries Pay Off

After installing solar panels, another path to residential energy independence is adding a solar battery system. Batteries allow you to save electricity generated during the day for use at night or in unfavorable weather. They also open up additional opportunities to sell electricity back to the grid and defray your solar panel costs.

The United States Energy Information Administration has more information about solar battery options and benefits.

How Much Do Solar Panels Save?

The overall goal of residential solar systems is for homeowners to reduce energy costs, save on energy bills, and become part of a sustained renewable energy solution. Because average cost and savings may vary by state, understanding only the national average cost doesn't provide a clear picture of your potential solar panel costs. We’ve compiled a state-by-state table of Palmetto customers' median system size and median estimated total savings.

We sorted the data by state using a variety of metrics, including solar panel installation costs, average cost per watt, availability of solar incentives, state and federal tax credit eligibility, power purchase agreement availability, and forecasted electric bill savings based on a 25-year lifetime of the residential solar system, before breaking that down into monthly savings.*

State Median System Size (kW) Median Estimated 25-Year Savings Equivalent Monthly Savings
AZ 9.6 $10,779 $35.93
CA 6.715 $64,403 $214.68
CO 7.2 $9,281 $30.94
CT 8.69 $35,865 $119.55
FL 10.53 $12,740 $42.47
GA 6.48 $6,753 $22.51
IL 9.2 $17,130 $57.10
MD 7.6 $7,794 $25.98
MA 9.085 $67,009 $223.36
MI 5.6 $6,114 $20.38
MO 10.8 $12,793 $42.64
NV 8 $19,321 $64.40
NJ 8 $30,856 $102.85
NM 8.4 $36,465 $121.55
NY 8.295 $6,378 $21.26
NC 7.695 $7,161 $23.87
OH 8 $9,029 $30.10
PA 8.91 $13,529 $45.10
RI 6.715 $10,499 $35.00
SC 7.695 $13,680 $45.60
TX 10.125 $17,518 $58.39
VA 8.8 $12,991 $43.30
WI 6 $10,804 $36.01

*Monthly savings figures are based on median estimated total savings over 25 years for recent Palmetto customers. Actual savings may vary. This information is current as of March 2023.

For more numbers and facts about solar energy, visit the Solar Resource Maps and Data page at the National Renewable Energy Laboratory.

Calculate the Cost of Going Solar with Palmetto

Want to see how much you could save on electricity bills by installing solar panels on your home? Using Mapdwell technology, Palmetto has mapped the solar potential of more than half of all rooftops in the United States. We can help you understand the average cost for installing solar panels in your area, how many solar panels are best for your solar system, availability of different solar panel types (monocrystalline solar panels, polycrystalline panels, thin film solar panels, more efficient solar panels, etc.), energy usage data, and more.

Our solar panel installation experts can also help you understand your eligibility for tax credits and other incentive programs that really make an impact on solar installation total cost and value. We can even help you to directly understand how much energy you use and make energy consumption changes to consistently save money on your energy bills.

Palmetto makes it simple to understand if purchasing solar panels is the right decision for your family. To see what your roof could look like with solar panels and to get a custom quote for total cost, use our free solar design tool and cost calculator. You can begin your journey toward a cleaner, more affordable energy future today!

See what solar can do for you:

My electric bill is $290/mo

Disclaimer: This content is for educational purposes only. Palmetto does not provide tax, legal, or accounting advice. Please consult your own tax, legal, and accounting advisors.

About the AuthorCory O'Brien HeadshotCory O'BrienSenior Director - Growth Marketing

Cory brings over 8 years of solar expertise to Palmetto, and enjoys sharing that knowledge with others looking to improve their carbon footprint. A dog lover residing in Asheville, NC with his wife, Cory graduated from UCSB. If you run into him, ask him about the company he founded to rate and review beer!

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