In 2008, the average homeowner would have paid around $50,000 (or just under $8.00 per watt) for a full slate of solar panels on their home. Fast forward 10 years, that average price for solar panel installation has fallen to just under $20,000 (or around $3.00 per watt)1 — a 62% average annual decrease in price.
Breaking down math is pretty simple. Just multiply the price per watt by the size of the system you need for your home: $3.00 per watt times 6 kilowatts (kW) (the average system for a residential home) equals $18,000 — and voila. There you have the average cost of a solar panel installation for your home. But where exactly do those numbers come from and is there any way you can slash that price tag even further? That’s what we’re here to help you understand.
Inside the Growth of the Solar Energy Industry
It’s been an excellent decade for solar energy. The Solar Investment Tax Credit (ITC) was passed in 20062 as a discount for homeowners and business owners who wanted to install solar panels on their roofs. Since then, the industry has experienced an average annual growth rate of 50% and has created tens of thousands of jobs. In 2018 alone, more than $17 billion was invested in the renewable technology.
Solar panel installation has risen dramatically in this same time frame, creating record highs in solar energy generation. In Q2 2019, over 2.1 GW of solar photovoltaic (PV) capacity was installed, resulting in a record 37.9 GW added to the utility-scale solar pipeline in the U.S. As a point of comparison, the average home in the United States uses 10,972 kilowatt-hours (kWh) of electricity each year3, which means just 1 GW could power over 90 average homes in a year.
Not only is overall solar capacity scheduled to double by 20244, but prices for installing solar panels on homes are falling across the country. 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 solar panels installed on their homes.
The Basics of Solar Panel Costs
In 2019, the average national solar panel cost in the U.S. is $2.99 per watt1, with a median range of $2.58 to $3.38 per watt. There are two ways this number can be calculated:
- The cost of a solar panel per the number of watts it will generate; and
- The installation labor costs plus the cost per the number of watts a panel will generate
As you might imagine, the former number will be smaller than the other, but it’s also much more fixed on an annual basis. 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 19805, and they’re projected to drop further — even after the residential ITC expires in 2022. 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 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 trees6. Geography is essential to the efficient generation of solar power. You can always install solar panels on your roof wherever you live, but where it sits 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 installers to navigate.
Average Monthly Energy Usage
This is the big one, if we’re being honest. How people use energy in a home truly determines the size of the solar system you need. While the average U.S. residential solar system is in the 5 kilowatt range7, your family might be especially thrifty, meaning you might need only 4 kW to power your 2,000 square foot home. 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. It reduces the cost of installing solar panels by 30%, and it’s a large reason the solar industry has consistently experienced 50% annual growth 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 2022, with the ramp down beginning in 2020. 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.
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 electricity 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.
And if you feel you can’t afford solar panel installation at this time, you can still invest in the future of the solar energy industry by signing up for a fixed-rate electricity plan from Chariot Energy. All of our plans are powered by 100% solar energy generated at solar farms we own, so you can show your love for renewable energy without solar panels. Check out our available plans for your area today!
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.