Are Solar Panels Expensive? | Quicken Loans

Are Solar Panels Expensive?

The simple answer is yes — at first. Having solar panels installed on your home involves a significant investment upfront. The average homeowner will spend $3 – $5 per watt on their solar panels, resulting in a total price tag between $15,000 – $25,000, though there may be incentives and tax credits available to help lower the overall cost.

With the passage of time, as you pay less each month on electricity from your utility, a good solar system not only pays for itself, it can pay you back two or even three times over.

Estimating the initial cost of a solar system is relatively simple, but each system is unique. There are several factors, which can vary widely from one house to the next, that combine to determine the perfect solar system for your home and therefore how expensive it must be. Factors include everything from the type of solar panel you choose, how many solar panels you’ll need, your location’s sun exposure, available government tax credits and whether you’re eligible for them, and installation costs.

As mentioned above, you can expect to pay about $15,000 – $25,000 before incentives. That may seem like a lot to many, but fortunately, from day one the system begins to pay you back, one reduced or eliminated electric bill at a time. In most states the system pays for itself within 6 to 9 years, and that is when the true economic benefit of solar power begins.

Since the life of a modern solar system is estimated to be about 30 years, you should have about 20 years of “free” electricity once it’s paid off.

Here’s an example of how much someone could save in utilities once their system is paid off:

Let’s assume a household that uses 10,715 kilowatt-hours (kWh) per year in a state where residents pay 15.95 cents per kWh (both figures are U.S. averages in 2022). This homeowner would expect to pay the power company about $1,709 for electricity in 2022.

10,715 x 0.1595 = $1,709.0425

If we project very conservatively that the system pays for itself in 10 years, and that it will work properly for 30 years, we can calculate that this homeowner will actually save more than $34,000 over system life in today’s dollars ($1,709 x 20 years of free use = $34,180).

The Price Of Solar Is Declining In The U.S.

For homeowners who wish to install solar power but have reservations about the cost of solar panels, the time has never been better. Costs have come down dramatically in just the last decade alone. Increased demand and improved manufacturing efficiencies have brought the cost of a solar system down more than 25% on a per-watt basis, from $3.86 in 2014 to $2.70 today. Residents who qualify to receive the federal investment tax credit, and/or any state tax relief, can reduce the cost even further, closer to $2.20 per watt.

This is impressive progress, and there is evidence to suggest that prices can come down more significantly still. In Australia, for example, where solar power is adopted much more widely than the U.S., the cost of a home solar system is down to about $0.70 per watt. This is due in large part because of more streamlined permitting and inspection regulations in Australia.