Solar panels are a significant investment with a big upside
If you’re thinking about investing in a residential solar system, it’s natural to ask, “how much do solar panels cost?”
Installing solar panels for your home does require considerable upfront costs, but there’s potential for an even bigger upside over time. By using solar power to generate renewable energy, you’ll see much lower utility bills. You may also be eligible for cost-saving solar tax incentives. Over time, your investment may pay off in significant savings.
How much does going solar cost the average homeowner?
The average cost of a solar panel system in the U.S. in 2022 is $20,498. This figure accounts for a 30% federal solar tax credit (note, a 26% credit was available prior to the passage of the Inflation Reduction Act in August 2022). Costs vary based on system size, type of solar panels used, and other factors explained a bit later in this article. Options are available for financing your residential solar system which help homeowners make installment payments over time.
The cost of solar panels is usually expressed in dollars per watt. The current national average price of solar panels, before any government incentives, is $2.77 per watt, according to EnergySage. The average cost varies by state due to local market trends and system size differences. Here’s the most recent state-by-state breakdown.
You can calculate a rough estimate if you have an idea of what size solar panel system you need for your home. Let’s say you live in Ohio, where the current average cost is $2.68 per watt and you want to install a 7kW system.
$2.68 per watt x (7kW x 1000) = $18,760
Factors affecting solar panel costs
It’s important to understand that the actual solar panels make up only 25 to 30 percent of your total system cost. You’ll also pay a professional solar panel installer for installation costs, plus your inverter, mounting, wiring and electrical components, and expenses such as engineering, monitoring, permits, and connection fees. According to Modernize.com, the national solar panel installation costs average $16,500 for a 6kW solar panel system for a 1,500 square foot home.
Your solar costs will vary by other key factors.
• What type of solar panels you buy — Homeowners usually have multiple options for types of solar panel. Monocrystalline solar panels are the highest performing, generating more wattage per panel than polycrystalline panels. As such, monocrystalline panels cost more. However, that performance means you may be able to have fewer panels in your system (lowering your total installation cost).
A third type, thin film solar panels, is cheaper. But this newer technology currently performs at even lower levels than polycrystalline panels. For that reason, thin film panels are rarely installed on residential homes.
• How your roof is constructed — Your home itself will play a role in your cost of going solar. A sizable, south-facing, angled roof with sun exposure throughout the day makes a solid foundation for a solar panel array. The installation would likely be relatively straightforward. On the other hand, a roof with multiple levels and angles might require additional solar panel system design and installation labor, adding to your cost.
• Your electricity needs — A bigger rooftop system (with more solar panels) will cost more than a smaller one with the same type of panels. However, that bigger system will generate more electricity, lowering your electricity bills and saving you more in the long run. Your installer or a solar consultant can help you understand how many solar panels to install based on your needs.
Federal solar tax credits and incentives
With the passage of the Inflation Reduction Act, you can now claim a federal income tax credit worth 30% the cost of a system installed in 2022. The 30% credit will be available for solar systems installed through 2032.
You can use IRS Form 5696 to calculate your credit, then enter it on your Form 1040 during the tax year when you install solar panels. It’s a good idea to consult with a qualified tax professional when figuring how to file for solar tax credits in your personal taxes.
How much do solar panels save?
Buying solar panels for your home is a long-term investment. The average break-even period is 8.7 years, according to EnergySage. That means, on average, it takes 8.7 years for a homeowner’s total electricity bill savings to equal the total costs of their solar panel system. After this break-even point, your solar panels will be “paying you back.” Homeowners can save tens of thousands of dollars over a 20-year period.
Estimating your break-even point can also help you decide whether going solar is right for you. If you calculate a break-even point of 8-years but know that you’ll likely move before that point due to career or family needs, then you might want to pass on converting to solar power.
Below is some guidance to get a rough estimate of your break-even point and long-term savings:
After the break-even point, simply multiply the annual benefit by any number of years to determine the total return on investment (ROI) for your solar panel system.
Here’s a simple example in which the homeowner’s combined cost is $17,500, and their monthly energy bill savings is $150.
Here, the homeowner’s investment in solar will begin to pay off in 9.7 years. Twenty years after installation, the homeowner will have realized an $18,500 return on their investment.
Your solar installer or a solar consultant should be able to help you develop a more accurate picture of the long-term financial benefit of going solar.
How solar panels may increase your home’s selling price
When considering the long-term financial benefits of going solar, you should also think about what it can do to your home’s value.
A 2022 study of 3.1 million home sales by Zillow found that listings with features such as solar panels, electric vehicle (EV) chargers, double-pane windows, and drought-resistant landscaping not only commanded higher selling prices but tended to sell faster than listings without such features.
According to the study, homes with solar panels sold for 1.4% more than expected. However, those sales closed 2.6 days slower than expected.
What will happen to solar panel costs and savings in the next five years?
Solar panel costs have dropped significantly in recent years, and chances are they’ll continue to fall in the future. The Biden administration has made renewable energy a priority, and the Department of Energy in 2021 announced a goal to cut the cost of solar energy by 60% within a decade. This includes investments in R&D for promising new technologies that would make the next generation of solar energy even more efficient than today’s.
At the same time, the cost of utility-provided electricity is likely to increase. It’s true that electricity rates vary by geographic region and fluctuate over time. However, the national average increase in electricity rates was 14% from 2010 to 2020. According to EnergySage , prices are expected to continue to rise due to rising natural gas costs and rising temperatures (related to climate change) driving demand.
It’s hard to predict precisely how much it will cost to install solar panels in the future. But as our society places greater value on renewable energy in the fight against climate change and alternative energy sources, chances are that going solar will continue to make sound financial sense for many homeowners.
AmeriSave can help make solar panels affordable
Installing solar panels can be a valuable investment in your home. But it does typically come with significant upfront costs. AmeriSave can help make it possible. We offer solar loan options that help make going solar affordable and can even connect you with a trusted installer serving your area. Contact an AmeriSave solar expert to learn more.