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The Current Solar Electricity Price in 2022 [Price per Watt/kWh]

how much does solar energy cost per kilowatt hour

In deciding whether to switch to solar power or not, you may want to consider the solar energy cost per kWh. Newspapers are full of headlines that the price of wind and solar is now lower per kWh than the price of coal and lignite energy, but just how much does a kWh of clean, solar energy cost?  

In digging into this question and trying to explain the specificalities that should drive your decision on how big of a solar panel system you may want to install, there are a few basic notions to understand. Starting from the price per watt, kilowatt, kilowatt-hours, etc, we will cover a few necessary terms to help you decide better on how much renewable energy you want to power your home

A solar system is a solar panel array that is installed on your rooftop. During the day, when there is a lot of sunshine, the system produces renewable energy. The energy is either used, stored in solar batteries or sent to the grid, which can act as your solar battery and store excess energy you produce

The system is simple enough to be understood by everybody, so you may want to start thinking about electricity produced, the system size, as well as the cost of electricity that your new solar system produces. Price reductions in solar installation have brought the cost of solar down significantly. However, solar systems are far from cheap, so you should understand how much energy production you need for your household. 

Price History of Solar Panels

The first solar panel that was ever installed had an efficiency rate of 1%. Back in 1883, New York inventor Charles Fritts created the first solar panel. The efficiency was very low, and the price very high, so the technology was put away until the mid-20th century. 

In the 20th century, the first silicon-based modules were created. Decades of research made the technology more efficient so that most modern solar panels have an efficiency rate of around 20%. The higher the solar panels cost, the higher their efficiency. 

Advances in solar electricity production also drove down solar costs. Back in 1977, the price of solar panels per Watt of power was $76. Today, the average price is as low as $2-3 per Watt of installed solar capacity. With these prices, the solar savings increase and the solar panel cost is low enough that your solar panels save more than they cost to install. 

So why are solar panels so cheap today? Well, there are several factors to consider: 

The Invention of Solar Panels by USA

Solar panels were invented in the States back in the 1800s. The technology was lucrative, but profits were nowhere to be seen. The cost of solar was simply too high and energy store non-existent. Then, in the 1900s, American scientists created silicon solar panels and made solar power much cheaper. There was still no solar energy market and the few solar panel systems that were produced were mostly of the experimental value. 

The Formation of a Solar Market in Germany

Then, thanks to their renewable inclinations, the Germans created their own solar power market. The regulations started subsidizing renewable technologies heavily and the solar panel costs started going down. 

China made Solar Panels Cheap 

Seeing a great chance in solar power, China started opening their own solar panel factories. The cost of solar kept decreasing and the total cost of solar was at the historic minimum year after year. Utility-scale solar plants started appearing in Germany and the USA which brought solar system cost and installation costs down manyfold. 

UAE made Utility-Scale Solar Panel System Cheaper

In the past two decades, UAE also started investing in solar system technology. Thanks to their massive efforts to decarbonize their economy, large-scale system arrays will be available in the future at less than $0.5 per Watt of installed solar power. 

In sum, the capital costs of having solar power generation have fallen as a result of many different fields working on the technology simultaneously. All the investments have dropped solar cell prices and this drop now trickles down to the rest of the market. As governments rely less on non-renewable energy sources, such as coal, oil and natural gas, the solar industry expands and solar panels’ worth becomes more apparent. 

Yet another reason why governments invest heavily in solar power are low maintenance costs. Unlike a coal power plant, a solar system needs little to no maintenance for energy produced. The last milestone to be crossed in using solar power to power the world is energy storage. Current Li-Ion batteries are simply too expensive, but pumped hydro and thermal energy storage solutions seem to promise good results. 

What is kWh?

To better understand how big of a solar panel system you need in your household, you should pay attention to the kW and kWh. What is the difference? Well, kW stands for kilowatt and it is the measure of electric power that a system produces in ideal conditions. When you buy a solar power system, you buy a specific power, be it 5 kW, 6 kW or even 10 kW. This is how much solar power your solar panel installation can produce. 

kWh or kilowatt-hour on the other hand is the amount of energy your system can produce. This is not the power output at any given moment, but it is rather a measure of how much energy you have at your disposal when the system is running. 

So, a 5kW solar system can produce no more than 5kW of power at any given moment. The maximum (5kW) will be produced during the solar noon, 12-2 PM. However, over the period of an hour, your 5kW solar system can produce anywhere between 0kWh (during the night) and 5kWh (during the solar noon). Overall, a typical 5kW solar system will produce 20 kWh of total solar energy in a day. 

kWh is what you currently pay for your electricity. Your utility company or your solar company sends you a monthly bill that says how many kWh of energy you’ve used that month. The price per kWh on your electricity bills can range anywhere from $0.0771 in Louisiana to $0.3236 in Hawaii. 

Another way to understand the difference between kW and kWh in your solar panel systems is to compare them to your car. kW is how fast your car can go. As you set on a trip, your speed varies based on road conditions (compare it to weather conditions). The kWh, or the total energy produced, is the distance you’ve travelled that day. 

Price Per Watt (PPW)

Now that we understand what kW and kWh mean, it is time to have a look at the price per Watt and price per kilowatt. A kilowatt is simply 1000 Watts. Likewise, a kilowatt-hour is simply 1000 watt-hour (therefore: kilo-watt-hour). When we speak of entire solar panel systems, it is useful to talk about kilowatt-hours because these are large systems with a lot of power. 

On the other hand, when we talk about individual solar panels, their size limits their power and energy output, so most solar companies prefer to use Watts. After all, saying that a solar panel has the power of 350 Watts is easier to understand than 0.35 kilowatts. 

Solar system cost has been declining for several decades now. What used to be $76 per Watt of installed solar capacity has dropped down to less than $3 per Watt of installed DC. The low price is the result of every solar company trying to optimize their production and installation process to minimize the costs and offer great service and produce to the solar market. 

Cost per Watt decline is especially pronounced in utility-scale energy production. While residential solar has become cheaper in the past decade, the scale of business in solar farms yields even lower prices of solar modules for larger solar projects. The national average cost per watt of solar PV is currently $2.76 per watt. This is the historic minimum price. 

According to the National Renewable Energy Laboratory (NREL), a typical U.S. household installs a 5kW solar system. The solar panel cost is a portion of the total price you have to pay for installing solar panels. At the current average cost of $2.71 per Watt, a typical 5kW system will cost you $13,550. 

Price Per Kilowatt-Hour (kWh)

Once we know the power of our system, we can deal with the production. Your solar system will keep producing electricity whenever there is sun and over its lifespan, your residential system will produce a certain amount of electricity. Solar energy cost per kWh is then calculated by dividing your solar system costs by the total energy produced. This gives you the cost of electricity. 

Unlike cost per Watt, which pertains to the power of the system and shows how much money you need for your solar system, the cost per kWh gives you an estimate of how much you actually pay for that electricity. This number, the cost per kWh is then used to compare that price to the price you pay to your electricity company. 

Generally speaking, a typical solar system in the U.S. can produce electricity at the cost of $0.06 to $0.08 per kilowatt-hour. This price is comparable to the prices of solar electricity in Louisiana ($0.0771), where it still makes sense to go solar. However, for the true benefits of going solar, consider going solar in Hawaii. A significantly higher price of electrical power ($0.3236) guarantees a very high ROI – return on investment. 

In understanding the price you pay per kilowatt-hour, you should consider that tax credits (on federal and state levels) will significantly decrease the energy costs and that average prices of electricity are already much higher than solar prices. Solar installers can help you calculate savings on your electricity prices and on your utility bill

Average Cost of Solar Energy 

As the total cost of going solar in the USA has been on the decline in the past decade, the federal tax credit was introduced to bring the average total cost even further down. Solar is now cheaper than coal or natural gas and the national average price for solar panels has dropped by around 80%

Nowadays, solar arrays are not reserved for experimental purposes only, but residential system size is more affordable than ever. A typical 5kW system used to cost $40,000 back in 2010. Today, that same system costs less than $18,000, for a premium product. 

As new breakthroughs are made in the technology, every solar installer will be able to offer even large system-size solar arrays for a much lower price. The increasing efficiency and mass production are sure to bring average prices on both per W and per kWh down significantly. The US Energy Information Administration announces that with reduced prices, the total solar capacity in the USA could increase by 81GW from 2019. 

Installation Cost

Once you have your solar panels and your inverter, it is time to think about the installation process itself. If you choose a good solar installer in your area, you will be given a bulk price: most solar installation companies deal with purchasing, delivering, installing and putting to use your solar panel system. 

According to the NREL, putting racking on your roof and attaching solar panels to the entire system can cost as little as $0.10 per W of installed solar power. For a 5kW residential solar array, this would mean additional costs of $500 or a 3% increase in the total price. Going with a bulk price is always a better solution because you can always include installation prices when applying for solar rebates and incentives. 

Rebates & Incentives

Rebates and Incentives offered for solar installation are generous, but depend on the area you live in. In general, there are federal and state solar rebates, as well as incentives offered in the form of tax exemption for going solar. The Solar Energy Industries Association (SEIA) has detailed information on their webpage, so heading over to their website will give you an exact number. 

Federal Investment Tax Credit 

Federal ITC offers up to 26% off your solar installation cost. Solar panels cost is therefore reduced and you can enjoy solar energy cost per kWh that is 26% lower than otherwise. Your solar power ITC comes in the form of federal tax credits that you can roll over for up to 10 years. Solar energy storage solutions are also included in this Incentive for those who want to go off-grid. 

State Solar Investment Tax credits 

Many states offer solar tax credits. The state of Arizona incentivizes installing solar panels by allowing up to 25% of solar investment value to be returned to the solar customer in the form of tax credits. You can use up to $1,000 tax credit per year. This brings the total solar savings to 51% when combined with the federal ITC. 

One-time Solar Incentives 

Even the private sector has entered the solar market by means of one-time solar incentives. In some areas, you may be eligible for a $500 one-time solar rebate. Solar panels save even before you install them. 

Net Metering 

You can use net-metering to bring the average electricity bill down by a significant portion by simply using net metering. You can start paying less on your utility bill by sending excess electricity to the energy grid which acts as your battery. National average electricity bills spin $117, so solar savings can save you a lot of money over a 20-year period. 

Payback Period

A solar panel system is one of the best investments you can make. The average cost of every kilowatt-hour drops significantly when you have a solar system installed and running on clean energy is a sure way to save you a lot of money. 

The solar payback period is closely tied to the ROI – return on investment. In most US states, the payback period for solar is between 5.5 and 12 years, so going solar makes more sense than investing in stocks and bonds. 

With a payback period of 5.5 years in New Jersey, Massachusetts, and California, your ROI is 18.2% per year. In some other states, the payoff period can be up to 12 years, which translates to an 8.5% annual return. The average payback period for going solar in the US is just above 8 years. 

FAQs

Are solar panels good for the economy?

Yes, solar panels are good for the economy. Solar systems produce durability and sturdiness to your local power grid, they help you save and invest more money than ever and open new job positions. Currently, the USA solar industry employs 230,000 people. 

Is kVA equal to kW?

No, kVA and kW are not the same. kVA is apparent power and kW is actual power. For example, if your wall-mounted battery has 100kVA power capacity, which it can deliver with a power factor of 0.85, this means that you have 85kW of actual power in that battery. 

How many watts is 1kva?

1kVA is 900 watts. That means that 1kVA can power up to 900W of connected appliances. If you are thinking about installing solar energy storage, make sure you understand how many kVAs you need to power all your appliances for a day. 

How much does a 10kW battery cost?

US battery costs are expected to decline in the upcoming years. Currently, a 10kWh battery system with installation could cost anywhere between $7,500 and $12,000 to install and is enough to power a small household for up to a day. Most batteries can be stacked to give you more capacity and power larger homes for longer times. 

Conclusion

Clean solar energy has become cheaper than coal or natural gas. The installation costs and solar panel prices have been on the decline for the past several decades and are expected to keep falling as new breakthroughs are made in the field. With a very low price of every kWh produced by your solar system, now is the perfect time to make a few calls and decide on the solar system size you need. Going solar now is good for your wallet, nature, and future generations, since there is no better way to invest your money. 

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