house with solar panels on roof

Solar energy installations have skyrocketed in recent years; it’s likely there are some in your neighborhood. One of the reasons solar power has become so popular is the cost of solar systems has plummeted in the last decade or two. As a result, many more households can afford to install solar.

But just how much will a solar system cost? Many homeowners want to get a sense of the cost before having a solar company inspect their property or giving away their personal information online.

Ballpark Solar System Cost

According to Energy Sage, the average solar system costs about $2.77 per watt installed. This price covers labor, permitting, solar panels, the inverter, and other solar equipment, but prices may vary by the installer, solar panel location, and equipment.

The size of your solar energy system will be determined by your total electricity usage, available space for installing solar panels, and budget. To determine how much electricity you use, review your electric bills for the past year or more.

The average home needs about a 6 kilowatt (kW) solar system, which costs roughly $17,000 before incentives. If you can take advantage of the federal solar tax credit in 2022, you can receive a tax credit for 26% of the total system cost. If you install your system in 2023, then the solar tax credit is 22% of the total cost. Speak with a tax expert to ensure you can take advantage of the tax credit.

Estimates based on a 6 kW solar system minus tax credit by year:

  • 2022: $17,000 – $4,420 (26% tax credit) = $12,580 net cost
  • 2023: $17,000 – $3,740 (22% tax credit) = $13,260 net cost

Factors Affecting a Solar System’s Cost

There are several factors that impact the cost of your solar panel system. Let’s explore them so you know what to expect.

Solar System Size

If your home doesn’t consume a lot of electricity, you might be able to install a solar system that will cover 100% of your needs. Some homeowners install an extra couple of solar panels specifically for charging an electric vehicle.

Before installing solar panels is a great time to examine if there are ways to reduce your home electricity usage. For example, do you have an old fridge that runs and runs to keep your food cold? If you have an electric water heater, installing a water-saving showerhead can conserve both water and energy.

Also, the size of your solar system depends a bit on the climate. For example, a solar system in San Diego, California, will produce more electricity over the course of the year than an identical system in Seattle, Washington.

Solar Panels and Equipment

Many installers will offer a choice in solar equipment, especially solar panels. For example, if you install premium solar panels with a long equipment warranty and higher efficiency solar cells, the price will likely be higher. By contrast, some solar panels will cost less but may also be less efficient and have a shorter warranty period.

Solar System Batteries

Adding batteries to store energy can significantly increase the cost of your solar system. For example, an advanced lithium-ion battery with installation could add about $12,000 to $16,000 to the total system cost before incentives. But, having a solar storage battery would allow you to have backup power when the grid is down.

If you live in an area with time-of-use rates on your electricity, the cost of electricity varies by time of day and season. Typically, rates are highest in the late afternoon and early evening and lowest in the middle of the night. If you have batteries, you can use the energy you store to save money during high-rate times.

If your utility company offers both time-of-use rates and net metering to compensate you for your surplus power, battery storage can increase your savings even more. You can supply surplus power to the grid when rates are highest and pull power as needed when rates are lowest to maximize your solar energy savings on your electricity bills.

Rooftop Solar versus Ground Mount

When possible, the best place to mount a solar system is on the roof of your house. The ideal roof faces south and is in full sun and good condition. Another good location is a garage roof or even a shed. If none of these options is viable, you may be able to install a ground-mount solar system. Unfortunately, this typically increases the cost of the solar system because of the additional material and labor costs. But it may be the best option if the roof is not suitable for solar.

Local Incentives and Utility Rebates

In addition to the federal solar tax credits, some utility companies or local governments offer solar energy incentives. The Arizona Residential Solar Tax Credit, for example, can reduce the cost of a solar panel system by $1,000. Refer to the DSIRE database to determine if there are any local solar incentives in your area.

Also, some solar homeowners can take advantage of Renewable Energy Certificates (RECs). In Pennslyvania, for example, a solar homeowner can receive a few hundred dollars annually in RECs. However, this is more like income after the system is operating and doesn’t offset the cost of purchasing the system.

Alternatives to Buying a Solar System

Buying a solar system isn’t a good fit for everyone. Perhaps you have a shaded property or can’t afford the cost of solar panels. Maybe you’re a renter, so you don’t own the property where you live. If so, joining a community solar project might be a better fit.

This approach allows a group of people and businesses to use the energy from a solar farm to lower their utility bills. Instead of installing solar panels on your property, you would pay the community solar provider a monthly fee for clean solar energy, typically at a discount over grid power. These arrangements often use a subscription model, so participants don’t buy into the solar farm, but they pay monthly fees and can cancel with advanced notice.

Some states have policies that support community solar development, including Minnesota, Colorado, Illinois, Maine, Massachusetts, Maryland, New Jersey, and New York.

Regardless of whether you install solar panels on your home or join a community solar farm, using renewable energy is a great way to reduce your energy bills and greenhouse gas emissions. If you buy a solar system, taking advantage of the solar tax credit and local incentives can reduce the cost of your solar panels by thousands of dollars.

By Sarah Lozanova

Sarah Lozanova is an environmental journalist and copywriter and has worked as a consultant to help large corporations become more sustainable. She is the author of Humane Home: Easy Steps for Sustainable & Green Living, and her renewable energy experience includes residential and commercial solar energy installations. She teaches green business classes to graduate students at Unity College and holds an MBA in sustainable management from the Presidio Graduate School.