Budgeting For Solar: Estimating The Total Cost Of Solar Panel Installation

Solar panels do not have a single standard price tag. The cost generally differs based on its quality and energy output. However, as solar continues to be in high demand due to the rising electricity costs, the equipment costs are plummeting drastically. Home solar now offers more potential savings than before. The government-aided incentives and tax credits have further made it possible for homeowners to transition to solar for long-term use. 

But what makes you apprehensive is - how much do solar panels cost.

As mentioned in a 2023 article in CNET, solar systems are “site-dependent purchases”, which means it is hard to estimate their exact cost. Certain factors like the home size, roof age and orientation, shading, and peak sun hours, decide the total number of solar panels needed to be installed in a household. The cost of the system varies accordingly.

How Much Do Solar Panels Cost?

In 2023, the average cost of solar panels in the US is around $20,650. Compared to 50 years back when the prices were $50,000, the cost has significantly reduced, thanks to the Biden Administration and its initiatives to go carbon-free by 2050. 

How much does it cost to install solar panels?

The average solar panel installation cost in the US ranges between $17,430 to $23,870 after counting in the 30% federal tax credits. 

Now, one thing you know is that solar panel installtion is a huge investment. While the total number of required panels is influenced by the home’s geographical area, energy needs, and sun exposure, the upfront costs are expensive. On a cost per watt ($/W) basis, the solar panels price is $2.95/watt on average in 2023. This is before considering the government incentives.

*All data is based on a 2023 article published on the EnergySage website.

Solar Panels: Price Breakdown

Solar panel cost is different based on the brand type, installation labor, material of the panels, and additional equipment. Read this section in detail to understand how much it costs to install solar panels and which factors influence it.

Types of Solar Panels

Polycrystalline — These panels are 20% less efficient than monocrystalline panels, but they are more cost-efficient. The average cost of the polycrystalline panels is between $0.90 to $1 per watt, or for a 6 kW system, it is $5,400 to $6,000. 

Monocrystalline — This type is considered the most effective with peak solar output and optimal performance. With an efficiency rate of 24%, they are highly expensive with the average cost ranging between $1 to $1.50/watt. Therefore, for a 6kW system, the price is between $6,000 and $9,000. 

Thin-film — The thin-film solar panels are less popular for residential installation. They roughly cost between $4,200 and $6,000 for a 6kW system, which is around $0.70 to $1 per watt.

System Size

The bigger the solar panel, the pricier it is. However, big solar systems are also cost-saving in the long run. For example, buying a 10 kW solar system will help you save more on utility bills and lessen your out-of-pocket costs. Most manufacturers and solar companies also offer low-interest solar loans and leases which makes it easy for customers to buy residential solar systems. 

Labor

Solar panel cost including labor and permits constitutes about 25% of the total system cost.  So, if you purchase 6 kW monocrystalline solar panels for $20,000, the labor cost will be ∼$25000 for both the installation and the equipment. The labor costs increase for solar systems which are much larger in size.

Permits for Installation

Always factor in the solar permit cost and interconnection fees before installing residential solar panels. You can use the Department of Energy’s Solar App+ to clear the solar permit documents and fees and get the system connected to the grid, which is also known as interconnection. The government is targeting to make the process smooth and cheap through this portal.

System Size

To purchase the actual size of the solar system for your home, you will need to assess the size of your home, its layout, roof condition, and annual household electricity needs. Per EnergySage, a typical household will need a 7 kW solar system with 19 solar panels to fulfill their overall energy needs.

Additional Equipment

It is advisable to include the cost of solar batteries while calculating the cost of installing solar panels. Usually, residential solar panels need an inverter or a solar battery to convert DC or direct current output to AC or alternating current. Per Energy Sage, the average cost of a solar battery in the US is $8500 to $10,000.

Roof Condition

Solar photovoltaic panels are designed to absorb both direct and indirect sunlight. However, the solar output is maximum when the panels are placed on an angled roof, away from the shade, and with complete exposure to sunlight. For flat roofs, you have to install separate angled mountings, the price of which is added to the installation and labor charges. Roofs that are west, south, and south-west facing with a 15 to 40 degree slope are perfect for solar panel installation. Lastly, you should also consider the structural integrity and age of the roof before opting for solar panel installation. Roof repair costs make for an additional expense when deciding to buy a solar system.

Geographical Location

The location of your home largely determines the total solar cost and the number of panels to be installed. This is because optimal solar output is possible in areas with ample sun rays. You can check Google's Project Sunroof, put your address, and see how much usable sunlight your house gets every year. Read here to know more about this.

Energy Needs

Before knowing how much solar panels cost, experts recommend taking note of the current electricity costs and your annual home energy bills. The larger the home, the bigger the utility bill. A solar system can undoubtedly help you save on utility costs, however, you may not see much savings with solar if your electricity bills are already low.

*The above information is based on 2023 articles published on Energy Sage and Architectural Digest.

Government Incentives and Solar Rebates

The federal solar tax credit (ITC) is one of the most significant financial incentives offered by the Government to American residents. It is a dollar-for-dollar reduction in income tax amount and you can claim it upon buying a solar system, on your federal income taxes. The tax credit is currently valued at 30%. However, the credit can only be claimed by people owning the equipment or buying it via a solar loan. You are not eligible for it if the system is bought via a power purchase agreement or a solar lease. 

Take this solar cost as an example. If you own a 10 kW solar system at $35,000, after the federal tax credit, your cost will come down to $10,500. Similarly, if you buy a 6 kW system at $24,000, you will pay $7200 after the 30% tax credit.

Some state-level solar incentives are -

• Sales and Property Tax Exemption
• Equipment Tax Credits 
• NY-Sun
• Renewable Energy Tax Credits 

You can also visit Energy.gov to understand about solar incentives and tax credits.

What is The Solar Payback Period?

A solar payback period is the time taken by your solar system to help you start saving through electricity bills and pay off its initial price. It can be thought of as a calculator to break even on your solar investment. Per experts, the average solar payback period is approximately 9 years. However, you can also try this method to calculate your solar savings and analyze how much it costs to install solar panels. 

For example: 

The cost of your solar system is $19,000. 

You get a $5700 rebate. 

Your total investment is $13,300. 

Your total savings on electricity per year will be $1330 if the energy bills are reduced by $100 each month. So, $13,300 investment / $1330 = 10 year solar payback period. 

P.S.. This calculation assumes that your electricity rates do not change or go up. If it does, your savings will increase as well as your solar payback period.  

*This calculation is taken from an article published on Palmetto Solar.

Do Solar Panels Help Save Money?

If you are thinking how much it costs to install solar panels, it is prime to understand the financial benefits of going solar. 

Solar panels help save thousands of dollars on electricity bills for 25 years or more. On average, a 6 kW system generating 9000 kWh energy/year can save you ∼$1346 on your annual energy bills. Moreover, a solar system with over 30 years of lifespan can save you around $1,346 on annual utility bills.

Solar panels are an excellent solution to lower household expenses related to paying electric bills. The amount of energy produced from the panels is more than enough to offset your grid electricity bills, so the combined costs come down significantly. A residential solar system also enables you to benefit from a time-of-use electricity plan, where you can avoid paying for high electricity prices during peak hours of use. Read here to know more.

Conclusion

Buying a solar system is worth the cost in terms of reducing utility bills, lowering the home's carbon footprint, and enjoying potential savings. If you want to purchase a residential solar system, we recommend getting in touch with the expert solar panel installers at Solarblocks. Here, our team of professionals has more than 25 years of experience in the solar industry. We can assist you in estimating the total cost of installing solar panels and address all your other solar-related queries. We also provide an array of other services like solar battery installation, rooftop repair, maintenance services, etc.

Visit https://www.solarblocks.us/ to know more.