In 2010, an average homeowner in the United States would have paid around $40,000 (or just under $8.00 per watt) for a full-size solar panel system for their home. Fast forward to 2021, the average cost for a solar panel installation has fallen 50% to roughly $20,000 (or around $3.20 per watt).
Breaking down math is pretty simple. Just multiply the price per watt by the size of the system you need for your home: $3.20 per watt times 6,000 watts (the average system size for a residential home) equals $19,200 — there you have the average cost of a solar panel installation for your home. But where exactly do those numbers come from? And are there any local incentives available to slash that price tag even further? That’s what we’re here to help you understand.
Examining the Recent Growth of the Solar Energy Industry
The solar energy industry has experienced unprecedented growth in just the past 10 years. Why? It’s all thanks to the Solar Investment Tax Credit (ITC) — a federal policy enacted in 2006 that offers discounts to homeowners, business owners and utility-scale solar generators (such as Chariot) who want to install solar panels either on their roof or on the ground — like a solar farm.1 Since then, the industry has experienced an average annual growth rate of 42% and has created tens of thousands of jobs. In fact, according to the Solar Energy Industries Association:
- More than 100 gigawatts (GW) of solar capacity installed across the U.S. as of 2021 — which is enough power to light 18.6 million homes.
- More than 230,000 Americans at more than 10,000 companies are employed by the solar industry.
- The cost of solar systems has dropped by more than 70% over the last decade.
- Prices as of Q4 2020 are at their lowest levels in history.7
Even better, as prices decrease for consumers, the quality, durability, and efficiency of PV technology increase. It’s the ultimate win-win scenario, and it’s one that deserves a critical examination so homeowners can be educated on exactly how they can benefit from getting a solar power system installed on their homes.
How Much Does It Cost to Install Solar Panels?
The national average solar panel cost in the U.S. is approximately $3.20 per watt. There are, however, several factors that can make this cost either go up or down. The two that influence this cost the most are:
- The cost to actually build and create a solar panel; and
- The labor costs for installing the solar system
The latter number can have greater variance because companies charge different installation prices for a variety of reasons, including time of year, location, and transportation costs from their warehouses to your home. What matters right now is that those prices have dropped by 99% since 1980, and they’re projected to drop further — even after the residential ITC expires in 2023.4 Let’s explore a few more elements of these costs now.
4 More Factors that Influence Solar Panel Installation Costs
Even if every solar panel was exactly the same, we’ve found four ancillary costs that impact the panel installation price tag. So, even as production costs go down, you have to pay attention to fluctuations in those charges to estimate your net cost.
Location of Your Home
Let’s get real here: A home in Phoenix will create more solar electricity than one in Portland — whether Oregon or Maine — even if both homes are completely bereft of trees.5 Geography is essential to the efficient generation of solar power. You can always install solar panels on your roof wherever you live, but where you are matters, too.
Roof Shade / Access to Consistent Sunlight
This one is less obvious than you think. Just because it’s daylight doesn’t mean your solar panels receive the same sunlight you received yesterday or the day before. And just because you live in the Southwest, it doesn’t mean your home will automatically be a good candidate for solar panels. You must account for the amount of coverage your roof receives on a regular basis, whether from trees, nearby buildings, or other types of blockages.
Size and Shape of Your Roof
This one is a double whammy. The contours of your roof impact both the number of solar panels you’ll need to generate the necessary energy for your home and the labor involved in installing them for maximum efficiency. For example, gabled roofs with high peaks create lots of nooks and crannies for shadows, and they can be difficult for solar installers to navigate.
Average Monthly Energy Usage
This is the big one, if we’re being honest. Your energy bill will determine the size of the solar system you need — therefore the number of panels you will need. While the average U.S. residential solar system is in the 5-kilowatt range, your family might be especially thrifty, meaning you might need only 4 kW to power your 2,000 square foot home.6 On the other hand, if you have a large family that entertains often and has installed lots of amenities in that same 2,000 square foot home, you might need an 8 kW system — and that will cost more.
Understanding the Solar Investment Tax Credit
As we alluded to earlier, the ITC has been an overall boon to the expansion and health of the solar industry. As of 2021, the ITC reduces the cost of installing solar panels by 26%, and it’s a large reason the solar industry has consistently experienced a 42% annual growth rate for the past decade.
By reducing the upfront solar installation cost, more people have been able to invest in the installation of rooftop solar on their homes and businesses. This constant uptick in the amount of solar panel generation has served as the backbone of solar energy’s growth, which increases the viability and long-term impact of solar power.
Unfortunately, the residential ITC is set to completely expire by 2024, with the ramp down already happening now. Thankfully, solar panel installations costs overall have decreased during the life of the ITC, but the solar panel industry is still preparing for a slowdown in installations in the short-term future. Therefore, if there was any time to consider solar panels for your home, the time is now. The discount is only going to decrease.
Assessing Your Solar Panel Potential
Even for the most eco-friendly among us, converting completely to renewable energy can be very costly. This is especially true for adopting solar power at your home or business. We applaud anyone and everyone who wants to install rooftop solar panels, but we also understand that people need to first investigate the costs and all of the associated details driving those costs.
A good place to start with an online solar installation cost calculator. While some are more detailed than others, most of them ask you a few basic questions:
- Size and type of roof
- Average monthly electric bill and usage
From there, you should reach out to reputable solar panel companies in your area for quotes. As we discussed earlier, the specific details of your home will impact the labor costs of installation, which is the source of any variance you might see in the quotes you receive.
Ultimately, if you value the eco-friendly benefits of solar energy, you should also understand the underlying costs of that value. It’s important you obtain and any all information you can from these companies so you can calculate the costs as effectively as possible. A good solar panel installer will want to explain the pricing in full, including the payback period when your solar system will eventually pay for itself.
Chariot Energy is soon to be one of those providers of residential solar panels! Stay tuned for that announcement, or you can also show your love today without solar panels with one of our fixed-rate electricity plans. They’re powered by 100% solar energy from our solar farm in West Texas. Check out our available plans for your area today!
And if you want to learn more about this topic, check out our article on everything you need to know about solar panels for your home.