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A Quick Guide To Solar Panel Cost

Sarah Lozanova8-minute read
UPDATED: November 30, 2023


The number of solar energy installations have skyrocketed in recent years. The industry has experienced an annual growth rate of 42% in the last decade! One of the big drivers has been that solar panel costs have plummeted. But how much exactly do solar panels cost, and how many does a house need?

Figuring out what solar panels will cost for your home can be one of the most frustrating roadblocks. But, there are certain indicators you can look at to get a good estimate of how much generating solar power will cost you.

Understanding The Cost Of Solar Panels for Homes

Let’s examine the cost of a renewable energy system for your home.

  • Solar panels: The greater your energy needs, the more panels you’ll need. The good news is that the cost of solar panels has come down considerably in the last decade. So, the best way to know how many panels you need is by looking at your energy bills and considering your climate. If you live in a sunny climate, you won’t need as many solar panels to produce the same amount of energy as in an overcast climate. For example, an identical solar system in San Diego, California, will produce more solar electricity than a photovoltaic (PV) system in Seattle, Washington, throughout the year.

Also, solar panel costs vary by manufacturer and model. In general, high-efficiency solar modules with long warranties cost more.

  • Inverter: Solar panels turn light into direct current (DC), and inverters turn that into alternating current (AC) that our homes and the grid can use. It is also like the brain of the system and sends data to your solar monitoring system, so you know how much power your solar panel system is producing.
    • Central inverters: One or two large inverters links all the panels together. However, there’s a limit on how many modules the inverter can handle, and the system will produce less solar power if the inverter is undersized.
    • Microinverters: Some solar panels have inverters on each module instead of a central inverter for the whole system. One big advantage is that you can add more panels as needed in the future without worrying whether a central inverter can handle it. This is especially common if a family starts driving an electric vehicle (EV) and consumes more power than before to charge it.
  • Ground mounts: Although most residential solar systems are installed on the roof of the home or garage, some are mounted on the ground or on a pole. Ground-mounts and especially pole-mounts typically increase the total cost of the system due to the additional hardware, labor, and permitting fees.
    • However, if it results in additional energy production, it might be worth the extra cost. In other cases, it might be unavoidable if there are issues with the roof.
  • Solar panel trackers: These devices turn the solar panels to face the sun more directly as it moves across the sky, and they are available in single-axis or dual-axis models. Solar trackers are used for ground-mounted systems only and can increase solar energy production. However, these gadgets also increase the total system cost and require maintenance because they are moving parts. Nevertheless, the additional expense is worthwhile in some cases because it increases power production.
  • Electrical panel upgrades: Your electrical panel distributes energy from the panel to the loads throughout your home. Most homes, especially new ones, do not require an electrical panel upgrade before installing solar panels. However, if you have an old electrical panel or don’t have sufficient amperage to accommodate the energy from your solar panels, an electrical panel upgrade is necessary. Other signs that you need to replace your electrical panel include that the breakers are often tripped, it smells like something is burning near your service panel (also a safety concern), or the panel makes strange sounds.
    • Most homes require a 200-amp panel as a minimum. If needed, upgrading the electrical panel can add $1,000 – $3,000 to the solar installation cost.
  • Solar storage battery: Some homeowners want to have backup power during blackouts, and solar batteries are a great way to achieve this. Also, batteries can reduce electricity bills more for homes with time-of-use rates where the electricity rate varies by the time of day. However, adding a battery can significantly increase the cost of the solar power system. Also, most states have net metering policies that enable homeowners to sell surplus power to the utility grid, so adding a battery doesn’t necessarily increase the utility bill savings.

The additional cost varies depending on the type and capacity of the batteries. Installing PV batteries can add anywhere from $5,000 – $20,000 to the system cost before solar incentives like that federal tax credit.

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How Your Electricity Consumption Affects Your Solar Panel Costs

Many solar homeowners install systems that produce most of their power throughout the year.  However, it’s not typically advantageous to oversize a system and produce more than 100% of the power because of net metering restrictions. In addition, the larger the capacity of the system, the higher the cost. To determine how many solar panels you will need, start by looking at a year of electricity bills.

Home Energy Use

Typically, residential utility bills use kilowatt-hours (kWh), which is a measurement of electricity use over time. A kWh is equal to consuming 1,000 watts for 1 hour. To calculate the daily consumption of a device, multiply the number of hours used per day by its wattage.

For example, running ten 100-watt light bulbs for one hour, will consume 1 kWh. If your refrigerator consumes 500 watts when it runs and it cycles on and off for a total of 2 hours, it will consume 1 kWh. The power consumption for charging an EV varies by the battery's capacity and the current battery level. Charging an EV uses 28.9 kWh for a Mini Cooper SE to 200 kWh for a GMC Hummer EV.

Residential Utility Bills

The average home in the United States uses about 30 kWh daily or almost 900 kWh a month, and the national average cost per kWh is a bit over $0.14 kWh. In 2022, the average home power bill was about $117, but this cost is rising due to electricity rate hikes.

Remember, utility bills vary considerably by area, rate structure, and home energy consumption. For example, Hawaii has the highest electricity rates in the nation at nearly $0.34 a kWh. However, Washington, Utah, and North Dakota have some of the lowest rates, between $0.10 and $0.11 per kWh.

Energy-Efficiency Upgrades Before Going Solar

One excellent way to reduce the cost of your solar energy system is by making your home more energy-efficient. Start by determining if you have appliances that waste a lot of electricity using a home energy-monitoring system.

For example, if you have electric heaters and live in a cold climate, upgrading to a heat pump and air sealing cracks and gaps can save a lot of electricity. If you have an old refrigerator that doesn’t properly seal or runs a lot, consider replacing it with an energy-saving model. In homes with electric water heaters, installing a water-saving showerhead and washing clothes in cold water can save a lot of energy. Whenever possible, replace incandescent light bulbs with LEDs.

Average Cost Of A Solar Panel System

The cost of going solar depends on the system size, where it’s mounted, and if it has batteries. But learning about average costs can be informative to get a sense of how much your solar panel system will cost.

The average home will need roughly a 6-kilowatt solar system. In Las Vegas, Nevada, or Phoenix, Arizona, this system would produce over 10,000 kWh annually. It would generate about 9,000 kWh annually in Denver, Colorado, or Austin, Texas.

According to EnergySage, the average cost per watt in 2022 is $2.77. These prices include all the components, labor, permitting costs, etc. That means the average upfront cost of a 6 kW solar system is nearly $16,620 before incentives. The value of the federal solar tax credit is 30% of the system cost through 2032 and could result in tax savings for homeowners when tax time rolls around.

This price is for a basic roof-mounted rooftop solar system that doesn’t include batteries, solar trackers or an electric panel upgrade might be necessary. A hybrid solar system could add $7,000 to this figure. Adding an advanced solar battery, such as the Tesla Powerwall 2, adds about $15,000 to the total cost before incentives. In some areas, such as California, there are battery rebates available.

Do Tesla Solar Roofs Cost More?

Tesla solar shingles have gained a lot of attention in recent years because of their sleek appearance. In fact, it can be nearly impossible to tell a roof with solar shingles apart from a non-solar roof. Tesla solar roofs contain photovoltaic cells within roofing materials, so these shingles serve two purposes.

Unfortunately, solar shingles tend to be considerably more expensive and have lower efficiency. That means that some roofs just aren’t big enough to generate a majority of their power. Although it does seem practical to have a roofing product that serves a dual purpose, it often isn’t as practical as it seems.

The cost of a Tesla solar roof ranges from about $35,000 – $70,000 depending on the complexity and size of the roof and the energy needs of the home. However, for new homes or properties that need a new roof, it does eliminate the cost of the roof.

Due to their high cost, solar shingles are mostly popular for aesthetic reasons, for solar shoppers that do not like the look of traditional solar panels and are willing to pay the additional cost. However, Tesla also sells its own line of solar panels, and many shoppers wonder if Tesla solar panels cost more than other panels.

Typically, Tesla solar panels are put in by its own network of installers, so it is difficult to determine the cost of the panels themselves. However, the panels have a sleek, all-black appearance, which is attractive to many solar shoppers. But many other solar manufacturers also offer all-black solar panels, including SunPower, LG, Panasonic, Q CELLS, and Trina Solar.

Build Your Solar System With Future Needs In Mind

Because solar systems are designed to last about 30 years, it’s a good idea to consider your future needs before designing your array. If you are planning any significant changes at home that could impact your electricity use, keep those in mind.

Are you planning an addition to your home? This could have a huge impact on energy use due to air conditioning or if there will be additional occupants.

Do you plan to get an EV soon and charge at home? Often, EV owners will add a few extra solar panels to charge their vehicles with solar energy.

Are you swapping out any energy-hogging appliances or converting from gas to electric appliances? For example, replacing a gas clothes dryer with an electric one will increase your electricity consumption. The same is true for replacing a gas stove with an induction range.

Conversely, replacing an inefficient water heater with a hybrid water heater can reduce your energy consumption. Even installing a water-efficient washing machine could conserve energy if you currently use a top loader and wash clothes in hot water.

In some cases, you can plan to add additional photovoltaic capacity later. For example, if you use microinverters or oversize the central inverter and save space on the roof, you can easily add solar panels in the future. Also, some solar batteries are relatively easy to add to an existing solar system.

The Bottom Line

The upfront cost of a solar system varies widely by the components, where it's mounted, the capacity, and if there’s battery storage. It is important to determine if certain upgrades are worth the additional cost.

If your home has a very outdated electrical panel, it might be well worth the expense of upgrading to 200-amp service because it could also make your home safer and increase its resale value. Having ground-mounted solar panels might be essential if your roof is heavily shaded. Having battery storage might be worth the expense if you live in an area with frequent extended power outages.

It’s also beneficial to determine if there are local incentives and rebates through the state or utility companies. Remember, these incentives impact the payback period and might make certain solar upgrades, such as batteries, more affordable.

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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.