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 2024, 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.
- 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.
- 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
| 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 |
| 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% |
