As of 2023, the cost of solar panels in the United States has significantly decreased compared to a decade ago. The average cost for a solar panel installation in 2023 ranges from $17,430 to $23,870 after factoring in the federal solar tax credit.
On average, the cost of a solar installation is approximately $20,650. When considering the cost per watt ($/W), the average solar panel price in 2023 is around $2.95/W before incentives.
It’s important to note that solar panel costs can vary widely based on your state and the manufacturer of the chosen solar panels.
In this article, we’ll discuss solar panel pricing in terms of gross cost, which refers to the cost before any solar rebates and incentives. These incentives can help reduce the initial solar cost or provide financial benefits over time.
Factors that Affect Solar Panel Costs
There are several factors that impact the cost of solar panels for your property, including the following:
Labor
The company carrying out the solar installation is a key factor affecting the costs of solar panels. Solar installers have different pricing based on their track record, warranties, and operations.
Obviously, a reputable installer with strong warranties may charge more, but it’s usually worth the investment for better quality.
Location
Solar installation costs can also vary depending on your location, primarily by state. While the range of prices isn’t that huge, differences in system sizes and incentives contribute to these variations.
Through our analysis of quote data from our solar marketplace, we found that Arizona boasts the lowest average cost per watt at $2.44/W, while Michigan has the highest at $3.78/W. However, it’s important to note that comparing system costs between states isn’t always straightforward, as system sizes and energy needs can differ significantly.
Type of Panel
Solar panels made of monocrystalline outperform other types and are typically pricier than polycrystalline panels. However, due to the lower efficiencies of polycrystalline panels, you might require more of them, which can impact your overall installation expenses less than anticipated.
While thin-film solar panels are available, they’re less common in residential installations. Instead, they are more suitable for solar setups on RVs and campers as they offer a compact thin-film system option.
Installation Permits
In addition to equipment and labor expenses, solar permits and interconnection fees are also part of your solar energy system costs.
Usually, you’ll need to acquire specific solar permit documents and pay a fee to link your solar energy system to the grid, a process known as “interconnection.” The Department of Energy’s SolarApp+ aims to simplify and expedite the interconnection process in an effort to reduce costs and approval times.
Ways to Pay for a Solar Panel Installation
Once you’ve determined the cost of solar for your specific project, you need to choose a payment method for the installation project.
There are three main financing options for residential solar systems which are as follows:
Cash Purchase
Opting for a cash purchase is a good choice if you aim to maximize your solar savings, possess sufficient tax liability to utilize the solar tax credit, or have the funds to pay for the solar panel system upfront.
Solar Loan
If you’re unwilling to invest the full upfront amount, yet still want significant energy bill savings and access to incentives, a solar loan is a suitable option.
Solar Lease
A solar lease or PPA is a fitting choice if you prefer system monitoring and maintenance by someone else, are ineligible for tax incentives, or wish to lower and/or stabilize your monthly electricity expenses.
The Key Takeaway
For many homeowners, solar proves to be a valuable investment with the potential to reach the break-even point in as little as eight years. This timeline hinges on your energy consumption and local electricity rates.
Throughout this period, you’ll be producing your own free electricity, offsetting grid electricity expenses, and possibly even earning credits for surplus energy through net metering policies which are subject to your location.
