To add some much needed transparency to the industry, the cost of solar power will be completely explained here.
The current average low-end cost of solar power As of early 2025, is approximately $3.00 per watt, installed. The average sized solar panel system is 5,000 watts, so this brings the total cost to $15,000. That 15k figure is just a lower end average amount. Systems can cost more or less mostly depending upon a homeowner’s energy usage and location.
The typical solar installer does not make the price of solar easy to find online. This is unfortunate, as more homeowners would go solar if they knew how much they could save over the long term. The average homeowner would save at least $25,000 over 25 years by investing in a solar panel system.
Here is summarized solar cost information found on this page (4 different ways to measure the cost) –
- As low as $3.00 per watt.
- Average total cost – $15,000.
- 6 cents per kilowatt hour.
- $159/mo for a $15,000 ten year loan at 5% interest.
Solar pricing is significantly lower taking into account the 30 percent solar Investment Tax Credit. Here’s the pricing accounting for the tax credit –
- As low as $2.30 per watt.
- Average total cost – $11,500
- 4 cents per kilowatt hour.
- $122/mo for a $7,400 ten year loan at 5% interest.
That $3.00 per watt is, again, on the low side for the average installer. According to the Solar Energy Industries Association, the average price for a residential system is approximately $3.45/watt as of early 2024, which is slightly higher than previous years. Pricing can vary due to specific brand of panels used, inverter brand, and regional pricing differences. Many installers can achieve sub $3.50/watt pricing. Some are now installing for less than $3.00/watt, though this pricing is not widely available yet. Marketing and other “soft costs” have prevented many installers from offering even cheaper prices for their solar installation services.
There is still a federal tax credit and many states have incentives that will bring this cost down a few thousand less. Plenty of no money down financing options are also available. An average non-financed system payback time period is about 6-9 years.
What is the cost from a payment point of view? Monthly payments on a ten year solar loan are NOW LESS than the average homeowner pays for a typical utility bill. Of course, after the loan is paid off, you’ll get to benefit from free solar power.
While the cost of solar power has fallen drastically in recent years, the pace of that change is slowing, and has actually increased a bit. A common misconception is that a reduction of the price of the panels themselves will result in a significant overall reduction in the total cost of an installed system. This is not true because an installed system has three main cost categories;
1. Cost of equipment – panels, inverter, wiring, etc.
2. Cost of installation service.
3. Cost of permitting, inspection, and interconnection.
The “soft costs” of solar – items 2 and 3 above – will also decrease in the coming years, but not as substantially as the historical reduction in the cost of solar panels. Solar contractors and installers will still need to make a reasonable profit, as seen in the cost of solar installation, and utilities will most likely continue to charge connection fees. A high percentage of the total cost of solar is attributed to the cost of equipment and installation service. See this post for more reasons why now is a great time to buy solar panels.
Another misconception is that the price for residential solar power is still more than what utilities are charging their customers across America. This is no longer true. The effective rate for solar power spread across the life of a system is $0.06/kWh. The average cost for conventional energy is $0.16/kWh and rising.
The price involved for solar installation varies from state to state. There are quite a few reasons for this; local market dynamics, regional energy prices, and differences in regional climates. Of course, costs for the services of residential solar installers still hover close to the standard $3.00 per watt, on average. The following chart shows where each state stands for typical solar installation costs.
| Cost of 5kw System | Cost of 5kw System After Incentives | Average Cost Per Watt | |
|---|---|---|---|
| Arkansas | $13,630 | $9,541 | $2.73 |
| Arizona | $11,557 | $8,090 | $2.31 |
| California | $13,641 | $9,549 | $2.73 |
| Colorado | $15,382 | $10,767 | $3.08 |
| Connecticut | $15,468 | $10,828 | $3.09 |
| Delaware | $12,742 | $8,919 | $2.55 |
| Florida | $13,630 | $8,378 | $2.39 |
| Georgia | $14,212 | $9,948 | $2.84 |
| Iowa | $15,268 | $10,688 | $3.05 |
| Idaho | $14,262 | $9,983 | $2.85 |
| Illinois | $15,770 | $11,039 | $3.15 |
| Indiana | $17,396 | $12,177 | $3.48 |
| Kansas | $15,088 | $10,562 | $3.02 |
| Kentucky | $14,356 | $10,049 | $2.87 |
| Louisiana | $14,642 | $10,249 | $2.93 |
| Massachusetts | $16,832 | $11,782 | $3.37 |
| Maryland | $14,504 | $10,153 | $2.90 |
| Maine | $16,648 | $11,654 | $3.33 |
| Michigan | $16,063 | $11,244 | $3.21 |
| Minnesota | $15,561 | $10,893 | $3.11 |
| Missouri | $14,158 | $9,911 | $2.83 |
| North Carolina | $12,838 | $8,987 | $2.57 |
| New Hampshire | $16,552 | $11,586 | $3.31 |
| New Jersey | $14,483 | $10,138 | $2.90 |
| New Mexico | $15,401 | $10,781 | $3.08 |
| Nevada | $12,753 | $8,927 | $2.55 |
| New York | $15,361 | $10,753 | $3.07 |
| Ohio | $13,380 | $9,366 | $2.68 |
| Oklahoma | $12,799 | $8,959 | $2.56 |
| Oregon | $14,080 | $9,856 | $2.82 |
| Pennsylvania | $14,348 | $10,044 | $2.87 |
| Rhode Island | $16,617 | $11,632 | $3.32 |
| South Carolina | $13,303 | $9,312 | $2.66 |
| Tennessee | $16,888 | $11,822 | $3.38 |
| Texas | $11,951 | $8,366 | $2.39 |
| Utah | $13,607 | $9,525 | $2.72 |
| Virginia | $14,829 | $10,380 | $2.97 |
| Vermont | $15,,617 | $10,932 | $3.12 |
| Washington | $13,782 | $9,647 | $2.76 |
| Washington DC | $15,499 | $10,849 | $3.10 |
| Wisconsin | $15,323 | $10,726 | $3.06 |
| West Virginia | $15,179 | $10,625 | $3.04 |
A common question from those looking to go solar is, “how much do solar panels cost per square foot?” The answer might surprise some homeowners – the cost of solar doesn’t vary too much based on the size of most homes. Solar panel systems are sized based on electricity usage not space. For example, a 1,500 square foot home can use about the same amount of power as a 2,500 square foot home. It’s even possible for that smaller home to use more electricity if there is a pool and electric vehicle involved.
Now let’s consider the four primary ways in which the cost of solar power is typically analyzed. This will explain how we arrived at some of the previously mentioned numbers.
The levelized cost of energy is simply the cost of the solar panel system over its useful lifespan divided by the total amount of energy that it will produce. It’s a simple analysis because it does not take into account the “net present value of money.” The end result of this LCOE analysis gives us a dollars per kilowatt hour figure. We’ve already discussed that a 5kw system costs on average $15,000 before incentives. In a relatively sunny locale, a 5kw system can generate an average of 25 kWh per day or about 230,000 kWh over its 25 year warrantied lifetime. So $15,000/230,000 kWh = $0.065/kWh. 6.5 cents per kilowatt hour beats conventional electricity charged by utilities in just about every single American city.
This way to measure cost describes how many years it will take for your electricity bills to add up to the cost of your solar panel system. Again, the cost of money over time and other factors are not discussed. Here’s the formula: Simple Payback Years = (Net Cost) / (Annual kWh Produced) x (Production Value) Here are the figures for our example:
- System Price: $15,000
- Life of System: 25 Years
- Annual Average kWh Produced: 9,125
- Assumed Value of Energy Produced: $0.20/kWh
- Simple Payback Years = $15,000 / (9,125 kWh)($0.20/kWh) = 8.22 years.
It should be noted that this is a somewhat conservative example because the 30 percent federal tax credit was not accounted for and some homeowners pay more than $0.20/kWh, which can lead to payback periods closer to 6 years.
- Acquisition method: Purchase
- System Price: $15,000
- Life of System: 25 Years
- Annual Average kWh Produced: 9,125
- Assumed Value of Energy Produced: $0.20/kWh
The first item to be considered is the annual savings. We take the average yearly kWh generated, 9,125 kWh, and the value per kWh, $0.20 to come up with the average annual savings of $1,825 (9,125x$0.20). This is the amount of positive cash flow each year. However, we start off at $15,000 negative cash flow. See the following chart:
| Year 1 | Annual Cash Flow -$15,000 + $1,440 | Equals | Cumulative Cash Flow -$13,560 |
| 2 | +$1,440 | = | – $12,120 |
| 3 | +$1,440 | = | -$10,680 |
| 4 | +$1,440 | = | -$9,240 |
| 5 | +$1,440 | = | -$7,800 |
| 6 | +$1,440 | = | -$6,360 |
| 7 | +$1,440 | = | -$4,920 |
| 8 | +$1,440 | = | -$3,480 |
| 9 | +$1,440 | = | -$2,040 |
| 10 | +$1,440 | = | -$600 |
| 11 | +$1,440 | = | $840 |
| 12 | +$1,440 | = | $2,280 |
| 13 | +$1,440 | = | $3,720 |
| 14 | +$1,440 | = | $5,160 |
| 15 | +$1,440 | = | $6,600 |
| 16 | +$1,440 | = | $8,040 |
| 17 | +$1,440 | = | $9,480 |
| 18 | +$1,440 | = | $10,920 |
| 19 | +$1,440 | = | $12,360 |
| 20 | +$1,440 | = | $13,800 |
| 21 | +$1,440 | = | $15,240 |
| 22 | +$1,440 | = | $16,680 |
| 23 | +$1,440 | = | $18,120 |
| 24 | +$1,440 | = | $19,560 |
| 25 | +$1,440 | = | $21,000 |
This is defined as Gain from Investment – Cost of Investment / Cost of Investment) x 100. It’s typically expressed as a percentage. Let’s look into a return on investment based on our previous example.
| Year 1 | Net Savings (Profit) -$13,560 | ROI -90% |
| 2 | -$12,120 | -81% |
| 3 | -$10,680 | -71% |
| 4 | -$9,240 | -62% |
| 5 | -$7,800 | -52% |
| 6 | -$6,360 | -42% |
| 7 | -$4,920 | -33% |
| 8 | -$3,480 | -23% |
| 9 | -$2,040 | -14% |
| 10 | -$600 | -4% |
| 11 | $840 | 6% |
| 12 | $2,280 | 15% |
| 13 | $3,720 | 25% |
| 14 | $5,160 | 34% |
| 15 | $6,600 | 44% |
| 16 | $8,040 | 54% |
| 17 | $9,480 | 63% |
| 18 | $10,920 | 73% |
| 19 | $12,360 | 82% |
| 20 | $13,800 | 92% |
| 21 | $15,240 | 102% |
| 22 | $16,680 | 111% |
| 23 | $18,120 | 121% |
| 24 | $19,560 | 130% |
| 25 | $21,000 | 140% |
While there are many different ways to measure the cost of solar power one thing remains true, solar power is considerably more affordable than continuing to purchase electricity from a utility. Savvy homeowners will choose the power ownership model that solar offers instead of being renters of electricity forever.