The Current Average Price of Solar Power Systems in 2023
The past decade has witnessed a drop of more than 70% in the costs of solar power installation. This has been possible due to the positive outlook and cash flow towards renewables. As solar-cell technology improves, and with rising awareness of solar benefits – the competition grows. So, the cost of solar panels shrinks.
With more folks putting their cash in the favor of solar energy, a positive feedback loop is triggered. Hence, now almost every other rooftop can be seen covered with black rectangular sheets of solar cells.
While these facts may trick you into the “Delay and let decay (the cost)” rule, don’t wait too much to invest. No joke – this is the best time to invest in owning a solar energy system.
Based on the recent policies, the prices of solar installation may even grow abruptly in a couple of years. Are you intrigued by the plot twist here? Well, don’t worry because after reading this article you will have understood.
This article discusses various factors that determine the cost of solar panels. We have also covered info about the solar costs in several US states and solar costs with respect to system size. In short, this write-up is your handy guide on the cost of solar systems!
Why is the Cost of Solar Panels Decreasing?
When the first commercial solar photovoltaic (PV) cell was made available in the 1950s, its price was set at $300 per watt capacity. Compare that with today’s $2.5 – $4 per watt capacity of solar cells! The technology, at that time, was aimed at powering small devices.
People at that time would surely look at solar power as only a symbol of their responsibility towards the environment. Who could have imagined that within a half-century this technology will be within everybody’s reach?
The spread of solar technology has really escalated in the past couple of decades.
Researchers at MIT have tried to answer the mind-boggling question: Why have the solar panels cost tumbled? According to their analysis, two major factors seem to have caused it. They are:
- Government policies
- Technological improvements
The role of the authorities – The phenomenon of ‘economies of scale’ can make new tech affordable. The actions of the people in authority can drive markets to invest in the technology and make it cheaper. The US government has successfully been able to set the stage for the solar power industry to flourish. This has been possible thanks to the tempting federal incentives and tax credits.
Upgrade in technology – The authorities alone cannot enforce the trend of solar investment unless the tech is not appealing itself. A device that costs $300 per watt of power simply breaks the equation. Fortunately, the big brains have improved the efficiency of this tech with scientific breakthroughs. The form factor has also been reduced significantly. Moreover, the manufacturing process and tools have also been upgraded resulting in a further decline in solar panels cost.
Earlier we had claimed a potentially sharp increase in the solar panels cost in the future. Remember? We will get to that later in this article.
Average Cost per Watt (System Size)
|Standard size (350-watt panels)||No. of Solar Panels||Average Cost per Watt||Average Total Costs||After 26% Tax Credit (Till Dec 2022)||After 22% Tax Credit (2023)|
The cost of a solar panel system installation is generally expressed in form of the ‘Cost per Watt’. Keep in mind that this cost includes the overall expenses incurred during the process of solar installation. Here is the breakdown:
- Cost of the equipment (solar panels, inverters, wiring, mounting and racks, etc.)
- Labor costs
- Site upgrades expenses
A solar panel system, deployed in a state that supports a net-metering facility, doesn’t require battery storage. However, if the solar batteries are also incorporated, the cost can go up by 40-80%!
Based on fresh data, the average cost of solar per watt in the US is around $2.5-$4. Why the significant gap in the price range? It is because there are several ‘knobs’ that control the net price of a solar installation. They are discussed later in this article.
The current US policies grant the owners of a solar energy system, federal solar tax credit. These federal incentives offset the cost of installation by a whopping 26%! The prices mentioned above have been calculated after accounting for the cut.
There is a bitter truth, however. The investment tax incentive (ITC) of 26% is valid before 2023. After 2022, the ITC will drop to 22%, and in 2024 to 0% (if not revised).
Think about it for a second. You as a potential customer would be expecting a drop in solar panels price in a couple of years. The panels will probably become a little cheaper, but you will miss out on the 26% discount offer. The consequence? – A surge in solar panel installation cost by 2024!
Average Cost of Solar Panels (By State)
The cost of a solar energy system is not the same in all US states.
Every state has its policies that govern the prices. For instance, some states, like Florida, offer generous rebate programs while some states, like Texas, don’t offer any.
Solar Renewable Energy Credits (SRECs) are awarded to residents of some states. The SRECs can be traded with cash. Among the eligible states, the SRECs trading price varies widely. However, SRECs don’t offset the solar panel cost, they can earn you couple hundred bucks over a year.
The geolocation of the state you are living in plays a key role in determining the required system size. How? Because every state receives a different amount of sunlight over the year. If you come from Arizona, your solar energy system will enjoy the most ‘solar juice’ per day. However, if you live in Ohio, your setup will generate (relatively) less energy per day. Thus, based on the given energy demand, you can expect different system sizes in different states.
The list does not end here. The jobs volume varies from state to state. Market competition is not the same everywhere. Local policies and the cost of doing business are also different.
|State||Cost per Watt||After 26 % Tax Credit (6 kW System)||After 26 % Tax Credit (10 kW System)|
Average Cost of Solar Panels (By Manufacturer Brand)
Solar panels are not manufactured on a single technology. The manufacturer brands produce all kinds of solar panels. They come in different sizes, costs, efficiencies, warranties etc. to better suit the unique demands of customers.
We have gathered for you a list. It contains the average costs of solar panels manufactured by well-known brands.
|Manufacturer||Cost per Watt||6 kW System Cost||10 kW System Cost|
Factors Affecting the Cost of Solar Panel
As promised, we are going to share our comprehensive list of factors that affect the cost of installing solar panels on your roof.
Solar Panel System Size
You ask for a quote to find the perfect solar system size that can run your house. The company gets details about your average monthly energy usage. Your electricity bill record gives a pretty accurate estimate. The company also asks about the location of your residence. They perform some calculations and come up with a figure. They suggest a size of say 4 kW or 6 kW or 10 kW etc.
The size of a solar panel system is the amount of electric power that the solar system is capable of generating in optimal sunlight. The required size depends on:
- Your average energy demand in kilowatt-hours
- Your location (sunlight hours per day)
- Type of setup (off-grid, on-grid)
Energy demand and system size are directly related. The amount of sunlight per day that your house receives also determines the size of the system. More sunlight per day means a small size setup is sufficient.
The type of electricity setup also has a say. Off-grid setups are completely self-dependent. They demand a larger system that can generate enough energy to continuously power the residence during cloudy days.
On-grid setups only require enough solar modules that can barely meet the average energy demand. They are connected to the grid through net metering, which helps make savings on your monthly utility bills.
Materials & Equipment
A complete solar panel setup consists of solar panels and/or batteries, inverters, wiring, and mounting material.
Commercially available solar panels are of few types that include:
- Monocrystalline – They are space-efficient and long-lasting but expensive.
- Polycrystalline – Less heat tolerant and efficient.
- PERC panels – Improved and more efficient version of monocrystalline panels.
- Thin-film – Consists of thin flexible layers. Less efficient than crystalline panels.
Solar backup batteries are used to store excess electrical energy for later use. The market is flooded with different kinds of batteries. Lead-acid ones are the least expensive, but they need replacement every 5-10 years. Lithium-ion technology is getting traction these days as it is more energy-dense. They have a longer life; however, the price tag is high. Backup batteries can cost as much as 40%-80% of the system’s cost. If the net-metering system is available, you may not need to get solar batteries at all.
Inverters play the role of converting the direct current (DC) output of the solar panel into usable alternating current (AC) form. String inverters and Microinverters are common types.
The mounting material holds the solar panels at an optimal angle on your roof. If you have a gable or a hip roof, less material might be needed to produce the optimal angle.
A solar panel system is useless without sunlight to power it. The more sunlight your setup receives, the less it costs. If your home is located in some area that encounters a lot of cloudy/rainy days, then going solar may not be very rewarding.
To find out whether your home location is good for solar power production, see the solar potential of your area over the year.
Solar panels work best when they are directly facing the sun. Unfortunately, the sun does not remain at the same point in the sky over a day. The panels are fixed at an angle that gives the maximum average output. The optimal angle is between 30 to 45 degrees for most locations.
An ideal roof angle saves cost on mounting.
Permits and Labor
Though going solar is a commendable effort, you will probably require permits from local government and utilities.
But why? Installing solar panels includes construction and electrical work. This raises safety concerns that need to be eliminated. For that, you would have to file a permit declaring details of your setup. This process incurs some costs.
Setting up the system is not an easy task – it demands professional labor work. Panels need to be mounted in place, extensive wiring is done, and an inverter is installed. In some cases, the rooftop may need fixes and shadings need to be removed. The amount of labor (and the labor costs) varies from case to case.
Purchasing Options and Incentives
Do you know that you can go solar without paying a penny in installing solar panels? There are purchasing options available that help you do just that. However, they have their own downsides. Popular purchasing options include solar leasing and a solar power purchase agreement (PPA).
If you cannot pay the upfront cost in one go, you may even apply for a solar loan.
The US government is kind enough to give a discount of 26% in form of Investment Tax Credits (ITC). This means that if your system’s original cost is $10,000, it will cost you only $7,400 after the application of federal solar tax credit. Remember that you are not eligible for the federal tax credit in case you go with a solar lease or PPA.
Yes, we understand that interesting questions would be coming to your mind. That’s why we have tried to answer some of the frequently asked ones here.
Is 1 kW enough to run a house?
In theory, it is possible to run a house with only a 1 kW solar system if the energy demand is too trivial. However, the energy demand of an average US house is around 900 kWh per month or 30 kWh per day.
To run such a house, the average energy production of the system should be more than 30 kWh per day. A 1 kW system can NEVER meet this demand. Even if it receives peak sunlight for 24 hours a day it still would not go beyond 1kW x 24 h = 24 kWh per day.
How long will it take for solar panels to pay for themselves?
It is called the Solar payback period. The solar payback period depends on many factors including the system’s installation cost as well as your house location. Based on the statistics, it can be around anywhere from 8 years to 15 years.
If your system wins more incentives and SRECs, the payback period will be cut short. Moreover, if your system boasts more sunlight per day, the payback period further shrinks.
How much does it cost to start a solar farm?
It costs a lot. Experts suggest developing a farm that produces at least 1 megawatt or 1000 kW. Such a farm can cost $2 – $3 million in development.
A lot of financial planning is necessary before starting a solar farm; however, the returns are worth it. The recurring revenue will span over years, since a solar panel has a longer lifespan, and require little to no maintenance.
How big is a 1 kW solar panel?
The size of a solar panel depends on its power rating as well as efficiency. Solar panels come in standard sizes. 350 W is a standard solar panel. Its size is about 5.0-5.5 ft by 3.0-3.5 ft.
A 1 kW system would utilize three 350 W solar panels. Therefore, the physical dimensions of a 1kW system will be three times that of a 350 W solar panel.
Without a doubt, the solar industry is flourishing and will continue to do so. Environmental concerns and Eco awareness have helped the masses understand the importance of renewables. All this together with advancements in technology has led the price of solar panels to plummet.
A home solar setup has several components. Each one of them adds to the overall cost of the system. Luckily, in today’s market, there are many options available against each component. The cost of solar installation varies from state to state.
Net metering enables you to save money on your monthly electric bill. Battery storage can also be utilized to save solar power for later use.
To motivate citizens to adopt solar tech, federal tax credit, rebate programs, SRECs, etc. are available. The ITC offers a massive 26% straight off over the solar installation cost. However, the discount offer expires after 2023.