After tax credits and rebates, the cost to install solar panels on an average-size U.S. home in 2019 is $11,200 to $14,400. Keep reading to learn the factors that decide your costs.
Installing solar panels is more than a 20-year investment in your home and green energy. To budget correctly, it’s important to know how much it costs to install enough photovoltaic (PV) solar panels to power your home or business. Determining costs and the ideal solar system setup can be confusing. To help, we’ve included guidelines that put costs in perspective.
Breaking Down the Cost of Solar Panels
The standard way to evaluate solar panel system cost is cost-per-watt, or dollars-per-watt. It’s calculated by taking the total cost to install the system (parts and labor) and dividing by how much power it produces (electrical output). The price of solar power will vary based on other factors including the state you live in, the installation company, and any rebates and incentives collected. In 2019 someone in California can expect their cost-per-watt to range from $4.39 for a small system, down to $3.56 for a vast system.
Based on research from SolarReviews, the installed cost of solar panels was between $3-$4 per watt: A 5 kW system would cost around $14,000 to $21,000. Many utility companies offer incentives, and some subsidize as much as 50 percent of system costs. Even at half the cost, a system that generates an average of $75 of electricity per month could take a long time to pay for itself.
Here’s an example. A system that costs $18,000 has a payback period of about 20 years. The cost of a solar panel today is around $3.93 per watt, and the extra cost of installation brings expenses up to $5- $6 per watt. Installation costs for PV systems include both labor and the electronics needed to tie the solar array into your existing electrical system.
How to Calculate Solar Energy Costs
The rule of thumb is that the average U.S. household consumes electricity at the rate of one kilowatt per hour (kWh). There are about 730 hours in each month, and the national average price of a kWh of electricity is $0.10. So an average monthly bill would be around $73 for 730 kWh of electricity.
The average electricity bill can vary considerably if you have non-standard items, such as a hot tub, or some electrical appliances running continuously. Extended computer use, plasma screen TVs and video games consoles can also make an impact. Your usage will also increase significantly in months when you run an air conditioning unit or heater. Finally, the cost of electricity varies widely across the USA, from as low as $0.07/kWh in West Virginia to as much as $0.24/kWh in Hawaii. To get a precise estimate, you’ll want to adjust our calculations to fit your electricity usage patterns.
A conservative value to use as a solar panel’s generating capacity is 10 watts/sq. ft. This value represents a panel conversion efficiency of about 12 percent, which is typical. This means that for every kW you generate, you need about 100 sq. ft. of solar panels. If the sun shone 24 hours a day, you could put up 100 sq. ft. of panels and have enough energy to power the average home.
The average sunshine across the country varies. In Seattle, Chicago, and Pittsburgh you’ll likely get up to three hours of direct sunlight. In states like Colorado and California, you’ll probably absorb five or six hours of sunlight. Homes in sunny Arizona can get nearly 7 hours of sunlight per day.
The amount of average sunshine means that the size of the panel array required can vary, anywhere from 400 sq. ft. to 800 sq. ft. (i.e., 4 kW to 8 kW), depending on where you live. You’ll need more panels if you live in a location that gets less sunshine per day, and fewer panels if you live in a location that gets more sunshine.
How Utility Companies Affect Solar Power Costs
If your utility company allows you to have net metering — that is, they supply you with a special meter that will spin backward when you generate more electricity than you use — your annual bill can average out at zero. Because of shorter days in the winter, you’ll likely be a net purchaser of electricity in that season and a net producer in the summer months. A grid-tied system like this is different than off-grid systems used in remote locations with no electrical service; those require batteries, which can significantly increase overall system costs.
Standard Solar System Components
This brings up an important point: it takes more than a solar panel to get a PV system up and running, though. In fact, there are generally four components in every PV system:
- Solar panels – captures sun’s energy and converts it to electricity
- Controller – protects batteries by regulating the flow of electricity
- Batteries – store electricity for later use
- Inverter – converts energy stored in a battery to voltage needed to run standard electrical equipment
The entire system is what drives the cost of solar up and equipment like batteries need to be replaced over time.
The good news is that the costs for solar panels are expected to continue to drop, as thin film panels from companies like First Solar, Nanosolar, and AVA Solar become available to the residential market. Right now, though, First Solar is only selling to commercial customers. Nanosolar and AVA Solar have yet to ramp up their production facilities. It will be interesting to see where this all goes in the next year or two, since these companies are talking about very aggressive price targets — in the order of $1-2 per watt — and volumes that are several times today’s total output.
Assuming that installation and auxiliary equipment costs can be reduced to around $1 per watt, then a 5 kW system may cost as little as $10,000, and the payback period would be 10 years, even without subsidies. This makes PV solar installations much more attractive. Of course, all this assumes that electric rates stay constant.
However, they are likely to rise as fuel and other infrastructure costs increase, so payback periods may be even shorter in the future. In the meantime, expect to see more PV solar panels installed on roofs, especially in areas with favorable solar conditions or with higher-than-average electricity rates.
Want to get an idea for how much you can save? Here’s a calculator you can use to find out!