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Cost of Solar Panels: Explained

Everything you Need to Consider for your Installation

Published:
Last updated:
Reviewed by
Geoff Edwards
Guide

The cost of solar has fallen rapidly over the years, from about $3.60 per watt in 2016 to about $2.80 per watt in 2020. Costs will continue to fall, however at the same time government rebates are falling as well. Now is as good a time as any to go solar.

There are many questions around cost that a homeowner will have. How much should I be paying for my system? Where should I save money and where should I spend a bit more for peace of mind? And lastly, is it actually worth it?

Different Costs in Different States

The average cost of solar does vary from state to state, but not by a huge amount. The table below shows average costs for a 6kW system in the different states, after the federal tax rebate (22%) is taken out. If we disregard Hawaii, the average prices range from $10,219 to $13,712. Certainly not a big enough variation to make solar financially valid in some states and not others.

StateFinal cost to customer for 6kW system
Alabama$10,691
Alaska$10,494
Arizona$10,670
Arkansas$11,476
California$11,887
Colorado$13,338
Connecticut$12,121
District of Columbia$12,262
Delaware$11,934
Florida$10,858
Georgia$12,355
Hawaii$15,257
Idaho$13,338
Illinois$13,057
Indiana$11,934
Iowa$11,045
Kansas$10,471
Kentucky$10,219
Louisiana$12,215
Maine$12,537
Maryland$12,121
Massachusetts$12,823
Michigan$12,496
Minnesota$13,478
Mississippi$11,515
Missouri$11,280
Montana$12,917
Nebraska$12,340
Nevada$11,513
New Hampshire$13,619
New Jersey$11,326
New Mexico$13,010
New York$12,402
North Carolina$10,951
North Dakota$10,573
Ohio$11,232
Oklahoma$11,440
Oregon$11,747
Pennsylvania$12,028
Rhode Island$12,636
Sourth Carolina$12,870
South Dakota$10,557
Tennessee$10,849
Texas$11,560
Utah$12,028
Vermont$12,964
Virgina$12,308
Washington$10,951
West Virgina$11,515
Wisconsin$13,712
Wyoming$11,201

Of course, these are average figures. A number of factors will influence the cost of an individual system.

The Size of the System

The size of the solar system will obviously have big effect on cost. So how big a system is good? The average size for a system is about 6kW: this is a good place to start. However, many homes might use much more energy and therefore a bigger system might be preferable.

A commonly used ‘rule-of-thumb’ is to use enough panels so that the energy output from the panels equals your energy use per day. You can calculate the energy use per day from your power bill.

The average energy used per day by a typical home in the US is about 29 kWh. For a house using this amount of energy, enough panels to produce 29 kWh per day of energy should be sufficient. However, if you have a huge house, with a heated pool, kids that take long showers and air-conditioning that operates frequently, your energy use per day might be 60 kWh. You might choose a system twice the size of the average system, at about twice the cost.

Of course, how many panels you need to produce the target amount of energy depends on a number of factors, most notably where you live (i.e., amount of sunshine), and which way the panels face (e.g. north, south, east or west). Your prospective installers should model this, hopefully with good software, and show you the energy output you can expect from different sized systems.

The amount of sunshine that will hit your solar panels changes significantly across the US.

Amount of Solar Irradiance Across Mainland USA

Source: National Renewable Energy Laboratories (NREL)

If you live in Arizona you’re going to get about 6.2 kWh/m2 per day of sunshine. However up in Maine you’re only going to get about 3.7 kWh/m2 per day. So for a given amount of energy output, people in Maine will need to put up 1.7 times the number of panels compared to people in Arizona, at about 1.7 times the cost. The good news is that there are large expanses of the US that get very good sunshine, keeping system sizes and costs well under control.

The Type of Equipment

Equipment costs can be around half the total cost of the system (or more for premium gear) so the equipment you choose can greatly influence the total cost.

Nearly all of the equipment cost is made up of the solar panels and the inverter. The table below shows system costs for different types of panels.

MANUFACTURERCOST PER WATTPRICE RANGE (6KW SYSTEM)
Axitex$2.58$13,740 – $17,220
Boviet$2.53$15,180 – $15,180
Canadian Solar Inc.$2.77$14,400 – $18,840
CertainTeed Solar$2.72$15,360 – $17,280
Hanwha SolarOne$2.80$16,800 – $16,800
Heliene$2.94$15,180 – $20,100
Hyundai$3.02$14,880 – $21,360
JA Solar$3.12$17,040 – $20,400
Jinko Solar$2.84$14,760 – $19,320
KYOCERA Solar, Inc.$5.00$30,000 – $30,000
LG Solar$2.76$14,400 – $18,720
LONGi Solar$3.00$15,600 – $20,400
Mission Solar Energy$2.54$13,980 – $16,500
Panasonic$2.84$14,880 – $19,200
Peimar Group$3.00$15,780 – $20,220
Phono Solar$2.93$16,380 – $18,780
Q CELLS$2.52$12,600 – $17,640
REC$2.91$14,640 – $20,280
Risen$2.34$13,500 – $14,580
S-Energy$3.21$15,000 – $23,520
Silfab Solar$2.79$14,520 – $18,960
Solaria$2.80$14,820 – $18,780
SunPower Corporation$3.30$18,480 – $21,120
Talesun Solar Co.$2.76$14,220 – $18,900
Tesla$2.74$14,940 – $17,940
Trina Solar$2.93$15,960 – $19,200
Vikram Solar$3.07$15,840 – $21,000

There is a large variation, from $5 per watt at the top end from Kyocera, down to $2.34 for Risen. However most of the panels range between about $2.50 and $3.00 per watt: not a huge range.

The cheapest option may not always be the best. Choosing a Tier-1 panel is a good place to start and there are certainly many of these that are well priced. The warranty is very important: it’s no use getting cheap panels if their warranty periods are short and things go wrong. At least 10 years manufacturers’ warranty (preferably 15) and 25 year performance warranty are reasonably common.

Inverters have historically been the bugbear of solar systems, i.e., the bit that causes the most problems. This is where it may really not pay to get the cheapest option. There is a considerable variation in price across inverters. An entry level 5 kW inverter might cost as little as $500, while a premium quality inverter might be $1,500 or higher.

European inverters have historically been the best quality however premium Chinese brands have certainly closed the gap in recent times. Again, warranty is very important, as is the presence of a local office to service any warranty claims. A decent inverter should have a 10 year warranty. Also, questioning a bunch of installers and wholesalers can give you a great idea of failure rates amongst the different brands.

Installation Costs

Installation costs are the other major costs with a solar installation, i.e., the price the installers charge to actually put the panels up, put the inverter in, wire the system together and look after all the paperwork with the relevant electricity authorities.

A lot of installers don’t break down the different costs in their quotes: if you are curious you should ask for a cost breakdown.

Installation costs can vary a lot. Again it is a good idea to be wary of cheap offerings. There are lots of ways to cut corners and save time and money on an installation, however doing this can cause problems down the track, including safety issues, and can affect the aesthetics of your installation.

Installers with a long history and lots of good recommendations from previous customers are a good bet, even if they are not the cheapest. Spending a few extra hundred dollars on your system doesn’t affect the economics that much, and may certainly be worth the extra peace of mind.

Installation Costs are a Major Component of the Price of a System

Is it Worth the Cost?

To answer this question, we’ve modelled two residences, one in sunny Arizona, which has a 12.5c/kWh feed in tariff, and the other in not-so-sunny Maine, which has no feed in tariff. So close to best-case and worst-case scenarios. The table below shows the assumptions made in the model, and the payback period for each case. The payback period is the amount of time it takes to pay off the initial investment from savings in power bills.

 ArizonaMaine
Electricity tariff (c/kWh)10.8513.44
Feed-in-tariff (c/kWh)12.50
Internal use of solar %40%40%
System size for 30 kWh per day614
System cost$12,496$31,340
Savings per year$1,188$1,472
Payback period (years)10.521.3

As expected, people in Arizona can get away with a much smaller and cheaper system size than people in Maine, less than half in fact. In Maine it’s going to take about 21 years to pay back the investment. That will leave 4 years on the solar cell performance warranty to make money. Not a fantastic investment, but as pretty much a worst-case scenario in the US, you’re not losing money and actually making a bit while helping the environment.

Things are certainly much better in sunny Arizona, where you can pay off a system in just over 10 years and then have about 15 years to make money.

The feed in tariff is a very important factor in the finances and one in which the US is behind other leading nations in solar. Only around 7 states have a feed in tariff. Contrast this to Australia, where every state has a feed in tariff, and government subsidies are higher, so that homeowners can pay off systems in 3-4 years. This is something that governments in the US could revisit. After all, it seems only right that people get paid for power they are putting back into the grid.

Conclusion

There are certainly many factors that customers should be aware of when it comes to the cost of a solar power system. System size, equipment, and installation labour are the major costs. However, cheaper is not always better and for peace of mind an extra investment could be worth it.

We’ve shown that even in a poor location such as Maine, solar will pay for itself plus a bit more. For most of the US, with more sun and with some states having feed in tariffs, solar is a great investment.

FAQs

Is Solar Worth the Price?

In most parts of the US the answer is yes. People in states like Arizona will pay off their systems faster than people in the northern states, however in most states people will do significantly better than break even.

What Should I pay for a Solar System?

Costs vary depending on what size system you need, where you are located, which equipment you select. An average 6kW system should cost around $11,000 after the federal government rebate is taken out.

Should I go for the Cheapest System?

Almost certainly not. Poor quality installation and poor quality inverters, in particular, will only create problems and headaches down the line. Systems are still very profitable paying extra for quality installers and equipment.

What will the Payback Time be for my System?

This very much depends on where you live. In the sunnier states, payback times of 10 years are possible, leaving about 15 years to make money. At the other end of the scale, in the most northern states it might take 20 years to pay off the investment, leaving about 5 years to make money.

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Author Bio

Geoff Edwards has worked in the renewable energy sector for more than 15 years, initially at the forefront of lithium ion battery technology, and more recently in solar power combined with energy storage. He has over 15 patent applications in various fields. Geoff has a degree and PhD in engineering from the University of Queensland in Brisbane, Australia.

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