How Much Does It Cost to Install Solar Panels?

Most homeowners would jump at the chance to slash their energy bills, but the costs of installing home solar panels are a stumbling block for many.

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So the question many are asking isn’t just how much solar panels cost to install, but whether solar panels will save them enough money in the long run to justify the upfront costs.

According to Fixr, the average total cost of solar panel installation is around $18,000, with most homeowners paying between $15,000 and $21,000. You could pay as little as $7,000 for a small grid-tied system, while a sizeable off-grid system could cost as much as $70,000. 

As of 2022, homeowners can claim a 30% federal solar tax credit to help with the costs of purchasing and installing solar panels. You must pay income taxes and own the system to qualify, and you can only claim the credit for your primary or secondary home. The solar tax credit will reduce to 26% in 2033, 22% in 2034 and expire altogether in 2035.

Solar Panel Installation Cost Per Watt

One of the decisions you'll need to make when purchasing a solar panel system is how many kilowatts of energy you need. The higher the kilowatt rating, the more power it provides — and the more expensive it is to purchase and install. 

Most domestic solar panels produce between 250 and 600 watts. The Solar Energy Industries Association estimates installing solar panels costs around $3 per watt.

Materials

Typically, contractors charge for installation, materials and other costs in a single quote. However, the cost of solar panels and installation materials accounts for roughly 26% of the total costs. For example, if the average system costs around $18,000, you should expect to pay approximately $4,680 for materials. 

Installation Labor

Installation labor costs roughly the same as the materials — typically around 24% of the overall invoice. Fixr estimates that most homeowners pay between $3,000 and $5,000 for installation labor to install a domestic solar panel system, or between 50 cents and $1.20 per watt.

What Factors Affect How Much Solar Installation Costs?

State

Where you live can significantly impact the cost of installing solar panels. Various local factors can affect the price, including how much sunlight you get. The cost of living can also make a difference, as contractors tend to charge more in pricier areas. 

For example, you should expect to pay between $2.73 and $3.51 per watt in New York. In Alabama, the same system could cost between $2.21 and $2.70 per watt.

Home Size

Your home's size can give you a rough idea of how much you'll likely pay to install solar panels. The larger your home is, the higher your energy needs. This means you’ll need a higher kilowatt rating.

The average costs to install a solar panel system by square footage are:

• 1,000-square-foot home: $5,000 to $28,000

• 1,500-square-foot home: $7,000 to $32,000

• 2,000-square-foot home: $15,000 to $40,000

• 2,500-square-foot home: $18,000 to $55,000

Number of Panels

It's less useful to consider the number of panels when estimating how much solar panel installation costs because they come in numerous types and sizes. Typically, manufacturers sell their systems as package deals, making the number of panels relatively irrelevant. 

However, solar panel systems generally become more expensive as you add more panels. For example, a 10-panel system could cost between $2,500 and $6,000, rising to between $5,000 and $12,000 for a 20-panel system.

Installation Location

Although most people install solar panels on roofs, you can also consider installing frame-mounted ground units. Ground solar panels can be suitable if your roof isn't strong enough to support solar panels or doesn't receive adequate sunlight. 

Typically, roof solar panel systems cost between $15,000 and $21,000. Ground systems are somewhat more expensive, costing between $18,000 and $25,000 on average.

Grid-Tied Vs. Off-Grid

Grid-tied solar panel systems generate solar energy while retaining your connection to your local power grid. In fact, you can still draw energy from the grid if your system doesn't produce enough energy to power your home.

While this means you may need to pay for additional energy, you may also be able to sell any excess power generated back to the grid. Grid-tied systems are also the more affordable option.

Meanwhile, off-grid systems are large enough to supply all the power you need without connecting to the grid. Therefore, you may need to install a bigger system than you think you need to account for unexpected usage increases. Expect to spend double or triple what you would for a grid-tied system.

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Are There Other Installation Costs Involved?

There are several other costs involved in installing solar panels. The following prices are for an average home solar system:

• Building inspections and permits: $900
• Inverter purchase and installation: $1,800
• System racking and balancing: $1,800

Can You Lease Solar Panels?

You can choose to lease solar panels, instead of purchasing your own system. According to Solar Power Authority, most people pay between $50 and $250 per month. You may also have to make a down payment at the start of the lease. 

How Much Can Solar Panels Save You on Electricity Costs?

Estimating how much solar panels can save you on electricity is challenging without knowing future electricity rates. It also depends on whether your system generates enough electricity to meet your household needs. However, EnergySage estimates that the average household could save between $10,000 and $30,000 over their system's lifetime. 

Are Solar Panels Worth It?

Overall, installing solar panels is usually worth it if you can afford the upfront costs and install a system that meets your energy requirements. Most home solar systems will pay for themselves in energy savings within seven to eight years.