The Cost to Go Solar | Worth the Investment?

August 1, 2020
By John Cole

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Installing solar panels makes a great long-term investment for homeowners looking to save on their monthly electric costs. However, the initial upfront cost can be a major drawback for many people. But many homeowners don’t realize that the cost to install a solar system has drastically decreased over the past few decades, making it much more affordable.

What is the Cost of Installing Solar Panels?

While the cost to install solar depends on a variety of factors, the average cost to install a residential solar system in the United States is $11,900 after federal tax incentives. But this number can vary, which is why you’ll want to collect multiple estimates from different solar companies in your area. If you’re still in the research phase, most solar companies offer solar calculators for you to estimate the cost and savings of solar panel installation.

Multiple factors can impact the cost of solar panels:

  • Electricity costs – How much is your current monthly electric bill? Homeowners with higher electric bills tend to see higher savings from solar panels, but that doesn’t mean you need to have high electric bills to see cost savings! Using an online calculator you can estimate how many solar panels your home will need and what the cost savings will be.
  • Incentives – When you’re looking to install solar panels, you need to consider federal, state, and local incentives and rebates. These can help you reduce the costs of your solar system by 10-20%!
  • Financing options – When installing solar panels, you don’t have to pay for them outright. Many financing options are available, and you can work with your local solar company to determine the ideal financing option for you.
  • Solar panel equipment – There are many types of solar panels on the market for you to choose from. The efficiency levels of your solar system will impact the overall cost of the equipment. The more efficient, the more expensive the solar panels will be—but the more efficient, the quicker you’ll reach the solar panel payback period!

When considering solar panels for your home, there are many factors that you need to look at. Apart from the cost, you’ll need to decide if the solar panels are worth it for your home. Even though each home and situation is different, most homeowners will agree that solar panels are a great investment. While you won’t pay back your investment right away, once you hit the solar panel payback period you’ll be reaping the rewards of your solar panel investment!

What Is The Cost of Going Solar & Is It Worth It?

For the average-sized home in the United States, solar panel installation typically ranges from $11,411 to $14,874 after solar tax credits. The average price per watt for solar panels ranges from $2.57 to $3.35.

No solar system is going to cost the same—even if your neighbor has solar panels installed as well! Ultimately, the cost of solar panels can vary because the cost depends on how much electricity you need to generate to power your home. The larger the solar system you install, the more the system will cost because there are more equipment and labor involved.

Ask These Important Questions to Determine If Solar Panels Are Worth the Cost for You!

If you’re in the research phase of purchasing solar panels for your home, you probably have a lot of questions that need answers. That’s alright! Solar panels are a huge investment, and you need to equip yourself with information before committing to a local solar company. Before you commit to investing in solar panels, you should ask the following questions before making the final decision.

  • What is your average electricity bill? The higher your current electricity bill, the more likely you'll benefit from switching over to solar energy. If your energy bill is high, solar panels will help you to offset those monthly costs. If your home doesn’t use that much energy to power it, solar panels could still be a great investment but might not save you as much upfront.
  • How much sunlight does your home receive? The more sunlight your home gets, the more opportunities your solar panels have to produce the energy you need to power your home. Homes that have minimal shade and face the sun directly have the most potential to save you money in the long run. If you live in a state like California or Arizona, you have more of an opportunity to get direct sunlight throughout the entire day.
  • Are there tax incentives available to me? The government provides homeowners looking to install solar panels with significant incentives for investing in an alternate energy source. Make sure if you’re planning on purchasing solar energy, you look at what incentives and tax credits are available in your state. These incentives could be both discounts in the form of a refund and reduce the amount of money you owe on taxes.
  • Do the potential savings outweigh the upfront costs? While solar energy will save you money over time, the upfront cost to install your solar panels will be a large investment. If you’re looking to save more money over time, rather than looking for a quick way to save money, then solar energy might be a great choice for you.
  • How many estimates should I receive before deciding on a solar installer? Homeowners that receive multiple estimates save on average 10% on their solar panel installation costs. A recent study also found that larger solar panel installation is on average $2,000 to $5,000 more expensive than small solar companies. Ensure you get estimates from a variety of solar panel companies in your area.

Solar panels are a great investment if you’re looking for a renewable energy source, but they might not be the right decision for everyone. Consider the questions above before committing to your solar panel installation.

Average Cost of Solar Panels Based on System Size

As a homeowner considering solar panel installation, there are probably many thoughts running through your head. It’s a big investment and you want to make sure it’s the right decision for you. How many solar panels will it take to power your home? How much solar energy will your solar systems need to produce to power your home? Will the lifelong savings outweigh the upfront costs? Multiple factors can impact the cost of your solar panel system, including the area in which you are located.

Here is the average cost of a solar panel system based on the solar system size:

System SizeAverage Solar Panel System Cost (Before Tax Credits)Average Solar Panel System Cost (After Tax Credits)
2 kW$5,920$4,381
3 kW$8,880$6,571
4 kW$11,840$8,762
5 kW$14,800$10,952
6 kW$17,760$13,142
7 kW$20,720$15,333
8 kW$23,680$15,523
10 kW$29,600$21,904
12 kW$35,520$26,285
15 kW$44,400$32,856
20 kW$59,200$43,808
25 kW$74,000$54,760

When calculating the cost of your solar panel system, you’ll want to factor in the federal solar tax credit, which can reduce the cost of installing a solar system by 26%. Most states have different tax rebates and incentives for homeowners to utilize that will help to reduce the upfront costs—which can make solar panel installation seem less daunting.

As mentioned though, the total cost of installing a solar panel system will vary depending on the state that you live in. To determine how much it will cost you to install solar panels, you will want to get estimates from multiple solar panel contractors and compare them.

Other Costs to Consider When Installing Solar Panels

Investing in solar panels in a big commitment, and one that you shouldn’t take lightly. There are additional factors to consider that can impact the final installation cost of your home’s solar system:

  • How much energy your home needs to produce to power it
  • How difficult the installation process is (sloped roof, skylights, multiple stories, etc.)
  • The type of roof the solar panels are being installed on (metal, shingle, flat, etc.)
  • The quality and brand of solar panels you choose to install
  • The amount of sunlight versus shade your home gets during the day

Consider these factors when determining if solar panels are the right choice for your home. Each of them plays an impact on how much your home’s solar panels will cost and how quickly you’ll be able to reach the solar panel payback period.

How Many Solar Panels Do I Need to Install?

When installing solar panels, most homeowners hope to eliminate their electricity bill. To reach this point, you need to install enough solar panels on your home to produce enough electricity to match your home’s consumption levels. On average homeowners need somewhere between 28 and 34 solar panels to meet 100% of their energy usage. This number can vary depending on your home’s location and roof size.

How Long Does It Take for the Average Homeowner to Pay Off Solar Panels?

One of the most frequently asked questions about solar panels is how long it will take for the solar panels to pay for themselves. The “solar panel payback period” is defined as the amount of time it takes for the homeowner to pay off their home’s solar system through savings on their electric bill.

To calculate how long it will take for the solar system to pay for itself through savings, you need to look at the following information:

  • Cost of the solar panel system – The cost of your home’s solar system will vary depending on the size of your home and solar panel equipment.
  • Tax incentives and rebates – Most states offer different tax incentives and rebates for homeowners to use that can dramatically reduce the cost of installing solar panels.
  • Average monthly electricity use – Before installing a solar system, you’ll want to factor in the size of your home and how much electricity you use each month. The most electricity you use, the more you’re likely to save with solar panels (because you’ll have a shorter solar system payback period!).
  • Estimated electricity generation – Many factors can impact your solar system’s electricity generation, when calculating what your estimated electricity generation will be you’ll want to consider your home location, seasons, shaded areas, etc.

With this information, you can calculate the estimated amount of time it will take to pay off your solar panels:

  • Calculate combined costs – Take the overall cost of installing your solar panel system and subtract any rebates and incentives you used to reduce the cost of your solar system.
  • Calculate annual benefits – Add up the total monthly savings generated from your home’s solar system.
  • Divide your combined costs by your annual financial benefits – Divide the two numbers (the total cost minus the rebates/incentives and the total monthly savings) to calculate how many years it will take for you to reach solar panel payback. After you hit this payback period, all your savings moving forward will be a financial gain for you!

For example, if your solar panel system costs $20,000 to install and then you receive a tax break of $5,000, the total cost after incentives is $15,000. With a monthly savings of $1,500 on your electric bill, the solar panel payback period would be ten years. 

What Is the Ideal Solar Panel Payback Period?

With most solar panel warranties covering 25 years, you can expect your solar panels to last at least that long—while more recent technology will last even longer! Since solar panels will last for around 25 years, your solar panel payback period should be less than half that period for the payback period to be considered good. The earlier you reach your solar payback period, the longer you’ll get to reap the rewards.

What Is the Average Solar Panel Payback Period in the United States?

The average solar panel payback period is 8.5 years—but this can vary depending on where in the country you live. Areas of the country that have more sunshine and less foliage are more likely to have a faster solar payback period.

What Factors Affect the Cost of Solar Panels for Your Home?

No solar panel installation job is one-size-fits-all, which means that no installation is going to cost the same. Numerous factors can impact the cost of your home’s solar panel installation, which we will explore next.

Your Home’s Location

The average cost per watt for solar panels varies throughout different parts of the country, which impacts the prices of solar panels in each specific area. This means that what your friend paid for their solar panels in California could be very different than what you pay for solar panels in Michigan. But there are even some inconsistencies at a state-level because of factors like the direction your home faces and how much sun will be received by the solar panels—which will directly affect the cost of your entire solar system.

Your Home’s Electricity Usage

The square footage of your home will impact how much electricity it needs to function, which will ultimately require more solar panels to power it. As you add additional panels to your solar system, your solar panel cost will reduce on a per-watt basis. However, as the size of the solar system increases, so will the cost of installing the solar panels. Meaning the more power you use, the larger your solar system needs to be—but homes with more power usage typically benefit from solar panels the most.

Type of Solar Panels Installed

As with most investments, there are plenty of options for you to choose from when deciding on solar panels for your home. These will range in quality and price, depending on whether you choose to go with a popular name brand or a more low-cost variety. When it comes to solar panels, quality is key and you will reap more safety and cost-saving benefits than you would with a lesser quality brand that needs to be replaced sooner.

We understand that choosing to invest in solar panels is a big purchase. You want to make sure you make the right choice when deciding on the brand. If you’re looking for a way to maximize your long-term savings, you need to consider the quality of your solar equipment. The more efficient your solar panels, the higher the price tag. However, many homeowners choose to go this route because even though there is a higher price tag, these solar panels can produce more electricity than a lower level panel—with the same amount of sunlight.

Ease of Solar Panel Installation

While solar panel contractors are trained to skillfully install your home’s solar system, there could be factors that impact that cost. If there are features of your roof that make it difficult to install solar panels, the cost will go up. For instance, if your roof is at a steep angle, has a skylight, or is a few stories up and will take extra time for the installation, the solar system cost might be slightly higher.

While you can do calculations to find out roughly how much it will cost to install solar panels on your home’ roof, getting an estimate from a local contractor will be your best bet. It’s even recommended that you receive multiple estimates for maximum savings. Many factors can impact the cost of installing a solar panel system on your roof, and they will be able to ask you specific questions to give you a clearer picture of what your solar panel installation cost will be.

Tips for Homeowners Looking to Install Solar Panels

If you’re in the market for solar panels, you know how big of an investment it can be. That’s why you don’t want to jump right in and go with the first solar company you find online—you need to make sure you’re getting a great price and great value. With it being such a large investment, you should take your time reviewing all the companies in your area to get the best deal by following these tips.

Get More Than One Quote When Shopping Around for Solar

A recent report by the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL) stated that any homeowners who are in the research phase of investing in solar panels should look at all their options. By comparing prices and getting quotes from multiple companies, homeowners will avoid paying inflated costs for their solar system. In fact, homeowners who receive three or more quotes will save 10% or more on average.

Smaller Solar Companies Sometimes Offer the Best Rate

Even though people are often saying “bigger is better,” that’s isn’t always the case when it comes to solar companies! When receiving estimates from multiple companies, contact solar companies of multiple sizes. It’s estimated that larger companies will charge an average of $2,000 - $5,000 for the installation of solar panels. Compare bids from both small and large solar companies to ensure you’re not overpaying.

Consider Different Brands of Solar Panels

Most homeowners leave it to the experts to guide them with their solar panel equipment recommendations. While doing your research and collecting estimates from multiple solar companies, you’ll also want to factor in the different equipment options they’re offering.

Everyone’s solar needs are different, which means you need the ideal solar system for your home and electricity needs. When installing solar panels on your home, you’ll need to consider the equipment efficiency rates and overall investment cost. Factoring in both the equipment options and estimates, you can find the ideal system and installer that fits your needs.

If you’re in the early phases of your solar installation journey, you can easily calculate the estimated cost of solar panel installation using an online calculator. However, for a more accurate representation of what your solar investment will cost you, reach out to a local solar provider in your area.

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