How Much Does it Cost to Install Solar Panels?

A happy couple looking at their computer screen

Solar power has become popular in the United States, as it provides a reliable, environmentally friendly, cost-efficient source of electricity to any home. But despite all the benefits of solar power, the cost of installing solar panels is often the reason why people hesitate to switch.

So how much does it cost to install solar panels? The cost to install solar panels is computed per watt, and according to the National Renewable Energy Laboratory (NREL), the average cost to install solar panels for residential properties was $2.81 per watt as of 2020. The NREL also shows a decline in the cost to install solar panels in the last decade1.

Let’s dive into factors that can impact solar installation costs and how those costs can be reduced.

Installing solar panels in your home may be one of the top home improvements you can make. Solar panel installation can come at a high price, though, and knowing the process of how the installation works can help you understand why.

  • 1. Consultation and assessment: Once you have chosen a company to install your solar panels, they first assess your property to determine if it is compatible with solar panels. They may also discuss your needs and budget to provide you with a plan.
  • 2. Design: Your chosen company creates a design for your solar panel system. The type and materials to include are based on your needs and budget.
  • 3. Permits: Installing solar panels requires permits from your local building department and other relevant agencies. Your chosen installer also handles this process.
  • 4. Installation: Depending on the design of your solar panel system and your home, installing your solar panels may take several days. This process includes mounting the solar panels on the chosen location, installing the electrical components, and connecting the system to your home.
  • 5. Inspection and interconnection: After the installation, a final inspection is conducted by the local building department. Once the system passes the inspection, the last step is to connect your system to the main electrical grid, and you can start the solar panel system.

If you are on the fence about switching to solar power because of the installation costs, remember that the initial cost to install solar panels depends on several factors, such as your location, home size, and supplier.

A solar technician working on solar panels
A birdseye view of multiple homes with solar panels

Location is one of the biggest factors that affects how much it is to install solar panels in your home. The cost varies because of several factors.

  • 1. Labor costs: The cost of labor varies from area to area, with some having significantly higher labor costs than others. States with higher living costs, such as California and New York, may have higher labor costs.
  • 2. Permitting and interconnection costs: Each state has its own requirements and regulations for installing solar panels. Some states may have higher fees for permits than others.
  • 3. Material costs: The costs of materials also vary from state to state, as the cost of equipment and materials needed to install your solar panels is affected by fees such as tariffs and sales taxes.
  • 4. Amount of sunlight: The energy produced by solar panels is dependent on the amount of sunlight in your area. If you live in an area that sees low levels of sunlight, you may need to compensate by installing more panels.
  • 5. Incentives and rebates: Some states offer rebates and incentives to encourage the use of solar panels. The amount differs and may vary significantly from state to state.

Solar power is at the forefront of the battle against global warming, which is why both national and local governments are offering incentives to promote the use of solar power. These incentives may significantly lower the cost of installing solar panels and make solar power more affordable.

State Incentives

Many states offer some form of incentive to encourage the use of solar power in their area. These incentives may be in the form of rebates, tax credits, or performance-based incentives. For example, some states have a net metering policy that gives homeowners credits for excess energy that is sent to the main grid.

One example of a state incentive is the California State Initiative by the California Public Utilities Commission, which gives rebates of up to $1.10 per watt, depending on the size of the solar panel system in your home. To qualify for the incentive, you must hire a qualified professional to install your solar panels and comply with certain performance and safety standards.

Other states that offer solar power incentives are New York’s NY-Sun program, Massachusetts’ Solar Massachusetts Renewable Target program, and Colorado’s Solar Rewards program.

Federal Solar Tax Credit

The federal government also provides incentives for using solar power through the Federal Solar Tax Credit or Investment Tax Credit (ITC). The Federal Solar Tax Credit allows you to deduct 30% of your solar power installation cost from your federal taxes. Initially, it was scheduled to decrease to 22% in 2023, but the Inflation Reduction Act of 2022 extended the 30% credit to 2032.

When you ask, “How much does it cost to install solar panels?” one thing you need to consider is your home. Some of the household factors that influence the cost to install solar panels include:

  • 1. Size: The cost to install solar panels in your home depends on the size of your house. Typically, larger homes need more solar panels, which means a larger overall expense.
  • 2. Electricity needs: When installing solar panels, you should consider your electricity needs. How much is your utility consumption? If your household uses a lot of electricity regardless of size, you may need a larger solar panel system. The higher your utility needs, the higher your costs may be.
  • 3. Type of roof: The type and design of your roof also affect your cost to install solar panels. It is easier to install on some roofs, such as asphalt shingle roofs, which would be cheaper. However, if you have a tile roof, you may need special mounting and additional labor to install your solar panels.
  • 4. Roof condition: The condition of your roof should also be considered. Repairs or reinforcements may be needed before you can install your solar panels.
Solar panels on a rooftop
Solar panel wires

One major factor affecting solar panel installation costs is the hardware and materials needed. A solar panel system consists of several parts, and your overall cost to install solar panels in your home depends on the type and brand of hardware you choose.

Type of Panels

Generally, more expensive solar panels are longer lasting, higher quality, and more efficient, like monocrystalline panels. However, there is a cheaper alternative in polycrystalline, which is slightly less efficient, or thin-film solar panels. When choosing the type of panels for your home, consider your budget, electricity needs, and the location or roof space.


As with any commodity, brand affects the price of solar panels. Some brands are known for their quality and efficiency. However, they come at a steeper price. Consider your budget and electricity needs when choosing solar panels for your home.

Equipment Quality

Other components in a solar panel system also affect the cost, such as inverters and electrical components. Each of these has its own brands and models that differ in price. The overall cost of your solar panel installation depends on the equipment you choose to use.

The number of solar panels you need significantly affects your overall installation cost. More panels would mean more equipment, longer or more labor charges, and even higher fees for permits.

To determine how many solar panels you need for your home, consider the size and your household’s electrical consumption. To determine your household’s electrical needs, check your electricity bill for the previous year. Compute the average daily usage in kilowatt-hours and multiply it by 1,000 to convert it to watts.

Next, check the solar panels you are considering, particularly their output in watts. Divide your average daily usage in watts by the solar panels’ output to determine how many panels you may need. Remember, though, that the output stated in the solar panel specifications does not account for certain factors, like panel efficiency, location, and shade.

Solar panels close up

If you are considering installing solar panels, there are several payment and purchasing options you can choose from, such as leasing, a power purchase agreement, or buying them yourself and financing the panels.

Consider each option’s gross and net costs. Gross costs include the cost to install your solar panels, the hardware necessary, and any other fees. Net costs take into account any applicable incentives or tax credits.

The major benefit of buying your own solar panel system is complete ownership of the system. This also means you are solely responsible for all the maintenance and repairs, with higher start-up costs. However, you can use the federal tax credit and other incentives to reduce the overall cost. Buying your own solar panel system provides the lowest net cost over the system’s life.

If you can’t afford to purchase the entire system upfront, look into solar financing options. Some solar providers, like Axia, have solar financing partners that allow you to make monthly payments on the system with interest until it’s paid off. Leasing a solar panel system can be cheaper upfront, and the installer is responsible for maintenance and repairs. This net cost of leasing a solar panel system tends to be higher, and the other downside is that you are not entitled to tax credits or incentives.

A PPA, similar to leasing, requires a monthly payment. The main difference is a PPA’s monthly fee is based on the energy produced by the system, as opposed to the fixed monthly fee when leasing. Also, similar to leasing, PPA does not entitle you to any incentive or tax credits, resulting in higher net costs.

Frequently Asked Questions About Solar Expenses

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What is the cost of solar panels after installation?

Maintaining a solar panel system is simple and can be done by you, the homeowner. After installing solar panels, maintenance is often minimal and includes cleaning the panels to remove any debris or dirt that lowers their efficiency. Solar inverters may also need regular inspection and care to ensure they work properly. Fortunately, solar panel maintenance tends to be more cost-efficient than maintaining traditional electrical systems.

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