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In this article: Solar cost overview | Solar installation process | Factors affecting solar cost | Payment methods | The bottom line 

Although solar power is now more cost-effective than ever, it’s essential to understand how residential solar systems operate and what the general pricing guidelines are for equipment and ongoing maintenance. Being armed with this information can help you avoid paying too much for your panels.

As solar energy continues to grow in accessibility and popularity, the average cost of solar panels continues to decrease. According to the Solar Energy Industries Association , the price of a residential solar panel system has dropped by an annual average of more than 60% over the past decade — from upwards of $50,000 for a 6-kilowatt-hour (KWh) system in 2011 to between $16,000 and $21,000 in 2021. 

We at the Home Media reviews team have researched dozens of solar panel manufacturers and solar companies to help break down the typical costs of implementing solar power in your home and to summarize the installation process. If you’re ready to connect with solar companies near you, you can use this online tool to get a free quote.

Switching to solar energy requires an up-front investment in equipment and comes with initial installation costs. But after that initial cost, the only recurring charge is the electricity you use beyond the power your panels generate. Assuming your solar system is the right size for your home and is properly installed and maintained, homeowners typically will see long-term savings on electricity bills and a return on their investment after several years. 

The Solar Energy Industries Association (SEIA) estimates the national average cost of a residential solar panel system at $2.94 per watt.* For context, the per-watt price translates to just under $11,000 for a 5-kilowatt (kW) system, which is the average size of a standard residential solar system in the United States.

The price of solar panels varies by brand and retailer. Keep in mind, however, that solar panels are only a tiny fraction of the total initial cost of setting up a solar system. Installation (including supporting equipment) and ongoing maintenance make up the remaining solar panel system costs. 

The table below gives an overview of solar panel costs by state to help give you a general starting point for panel pricing. For comparison, the Energy Information Administration breaks down electricity prices by state for 2020 and 2021. 

Table courtesy of EcoWatch * Based on a June 2021 report 

The process for switching to solar doesn’t happen overnight. It may take weeks or even months to decide on a solar provider and an additional several weeks to six months before your system is fully operational. The amount of time it takes depends on a company’s availability and schedule, as well as the permitting and inspection processes where you live. The size and type of solar panels you choose can also affect the length of this process.

In general, though, solar panel installation occurs in five steps: survey, design, permitting, installation and connection.  If you’re ready to speak with an installer, enter your zip code here to get quotes from local solar companies near you.

The company you select as your solar provider will arrange for an engineer to complete a site review of your home as the first step to solar panel installation. Many solar providers, such as Momentum Solar , have in-house engineers. Others outsource the job to local contractors. The engineer will review your roof to ensure it can accommodate solar panels and inspect your current electrical system. This home visit will guide the design of your residential solar system.

Following an in-person roof assessment, your solar company will create a customized system for your home. At this point, companies will provide recommendations on specific brands and products and allow you to pick the ones that best fit your budget. You will also have a chance to review and approve the design before the company moves on to the permitting phase of the process.

Solar panel installation can happen only after obtaining essential permits and other paperwork. While this can take several weeks, the good news is that most solar companies will handle this step in the process for you.

Required permits include written permission from your utility company, often in the form of an interlocal agreement. If applicable in your state, the agreement will include enrollment in a net metering program. Net metering credits homeowners who own their solar systems for any excess electricity their panels produce, essentially billing them only for their net energy usage. 

As of 2022, 34 states and Washington, D.C., Guam, Puerto Rico and the U.S. Virgin Islands have net metering programs in place. An additional six states — Arizona, Georgia, Hawaii, Louisiana, Mississippi and Utah — have other available forms of solar energy compensation. Illinois, Indiana, Kentucky, Michigan and New York have or are starting to phase out their net metering programs to another form of compensation. Alabama, Idaho, South Dakota, Tennessee and Texas do not offer net metering.

Your solar company will also need to secure local electrical and building permits. And you’ll want to make sure the solar company can file applications for any state or federal incentive programs to help offset the cost of your solar system.

While installation time depends on the size and complexity of your solar system, the typical time frame is one to three days. Installers will ensure all roofing tiles or shingles are attached, then connect wiring that will feed into your power system. Racks must be installed to support panels properly; then, your panels will be placed onto your roof. Support equipment such as inverters — components that convert the electrical energy from the panels to usable alternating current (AC) power — and batteries, which store excess energy to power your home at night or during outages, will be installed after panel placement.

Assuming your solar power system passes inspection and meets local regulations, your solar system can officially be connected to the power grid. Then, it’s as simple as flipping a switch to begin generating solar energy from your panels.

Various factors can affect the cost of solar panels.

Photovoltaic panels — those typically used in home solar systems — can absorb direct and indirect sunlight so that solar power can be harnessed basically anywhere in the United States. Most solar companies will install monocrystalline panels, whose photovoltaic cells absorb the most energy and can therefore maximize sunlight exposure, no matter where you live. 

However, there are some states that, on average, get the most sunlight year-round, according to the World Population Review :

Not surprisingly, many states on the above list also top the SEIA’s list of top cumulative solar electric capacity, including Arizona, Texas, California, Nevada and Florida. But some states that have the most solar panel systems — North Carolina, New Jersey, Massachusetts and New York, among them — are not necessarily the sunniest.

Simply put, the most significant cost impact in terms of location is not geography; it’s legislation. While sunnier states tend to have more solar power output, states that have solar incentives like a solar investment tax credit and other solar-friendly programs in place tend to have high output levels as well, regardless of sun exposure. 

The layout and age of your roof can affect the price you can expect to pay for panels, as well as your return on investment. Solar panels generate the most energy production on angled roofs that allow for maximum sun exposure to photovoltaic solar cells. Flat roofs require the construction of angled platforms, which will add to your labor costs and increase the overall cost of your solar system installation. 

Your roof’s age and structural soundness are also important factors in solar panel cost. If roof repairs or a different roof material is needed to support panels, each will come at an additional expense ahead of installation and affect your total cost.

The cost of your system is also dependent on the number of panels you need and the type of panels you select. 

The average home solar system is 5kW, although larger homes may require a 6kW system. Assuming your system uses 250-watt photovoltaic panels, that equates to approximately 20 panels per home, at the cost of roughly $11,000. Of course, prices increase from that starting point for larger systems requiring more panels.

Home solar systems also typically require an inverter. Most solar companies will design your solar system with these components included, but selecting specific inverters or batteries, such as a Tesla Powerwall, may increase your overall cost.

If your state doesn’t offer solar rebates, you may still be eligible for state-issued Solar Renewable Energy Credits (SRECs). Some states allow you to earn and sell credits for the electricity your solar system produces through a net metering program. And many states offer a solar investment tax credit or other similar incentives to help offset the total cost of your solar panel system and maximize savings on utility bills. 

The federal government also offers a solar tax incentive. Created in 2005, the federal solar tax credit is available in all states, including those with no SRECs or state rebates. The 26% tax credit applies to solar energy systems installed by Dec. 31, 2022. The tax credit value for residential solar will decrease to 22% in 2023 and end the following year.

Although payment options vary, most solar companies offer at least two of the following choices: purchasing the residential solar panels outright, signing a solar lease or power purchase agreement (PPA) or taking out a solar loan. Keep in mind that a solar lease or PPA will disqualify you from receiving the federal solar tax credit and state incentives since they apply only to the owners of the solar panels.

Solar panels can be a beneficial investment for your home by saving you money long-term on the cost of electricity and increasing the value of your property. However, there are factors that you should consider before making the switch, including how much sunlight directly hits your house daily and the layout and direction of your roof. Residential solar systems in states that are, on average, sunnier will typically perform better, and south-, west- or southwest-facing roofs get more sun exposure. 

You should also take a close look at your monthly electricity bill and compare it against your state’s average energy cost. Solar panels may be a good solution if you have consistently high payments or your cost is more expensive than in other areas of your state. On the other hand, you may not see enough cost savings to justify the expense of installing a home solar system if you have relatively low bills or can find ways to cut down electricity usage significantly.

It’s also crucial to determine what incentives, if any, your state offers for solar energy, including a net metering program and tax credits. Remember that you can only take advantage of these incentives if you own your panels, either by paying for them outright or through a loan, so you need to consider whether your budget allows for a purchase rather than a lease.  Fill out this online form to get quotes from top solar installers in your area.

Devising a price structure based on home size is problematic because other factors, such as sun exposure and electricity usage, are more important when determining the size of a residential solar system. It is best to contact at least three solar panel companies. They can estimate solar panel installation costs based on your home’s location and typical power use. 

The two main disadvantages of solar power are the upfront cost and the limitations home size and location can place on system size. While solar panels can save you money in the long run, they require a hefty initial investment — anywhere from $11,000 to $50,000 — and it can take several years to begin to see any payoff. 

Additionally, the available roof space can severely limit the size of a home’s solar system. This means that homeowners who want to switch to solar may have to utilize a system that isn’t large enough to meet their daily energy needs or abandon the idea altogether. 

On average, it takes between six and 10 years for solar panels to pay for themselves. However, variables such as the cost of your system, the number of incentives you are eligible to receive, the amount of electricity you currently use and the estimated amount of energy your system generates can change this payback period significantly.

A solar energy system can increase the overall value of your home. The installation is viewed the same as upgrades like kitchen expansions, finished basements and updated bathroom fixtures. According to a 2015 study by Lawrence Berkeley National Laboratory , solar increased the value of a home by an average of $15,000. 

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