Solar panels are becoming more affordable each year. According to the National Renewable Energy Laboratory (NREL), the average price of home solar systems is now $2.95 per watt, down from $7.53 per watt in 2010. In other words, the cost of photovoltaic (PV) systems decreased by over 60% in 13 years.

  • You can expect to pay around $17,700 for a 6-kilowatt home solar system in the US.
  • Back in 2010, you would have paid $45,180 for a system of the same capacity. 

While solar PV systems become more affordable each year, electricity prices are on the rise in many states. According to data collected by the US Energy Information Administration (EIA), the average kilowatt-hour price for residential users increased from 10.54 to 15.47 cents between January 2010 and January 2023. This represents a 47% increase in power bills for US homes. 

As electric tariffs increase and the cost of solar panels drops, their payback period becomes shorter. Homeowners are now paying less for their solar energy systems, and they are saving more cents per kilowatt-hour generated.

What Is the Cost of a Home Solar System in 2023?

The installed price of a photovoltaic system depends on several factors: solar equipment brands, local labor costs, system size, local incentives, etc. Here is the average cost per watt of solar capacity, according to four reliable sources:

SourceAverage Cost of Home Solar Systems
Solar Energy Industries Association (SEIA)
Solar Market Insight Report March 2023
$3.30 per watt
National Renewable Energy Laboratory (NREL)
US Solar Photovoltaic System and Energy Storage Cost Benchmarks September 2022
$2.95 per watt
2023 Solar Industry Data
$2.95 per watt
MarketWatch Guides Home
2023 Solar Cost Survey
$2.85 per watt

The SEIA estimates a higher installation cost compared with the other sources. This happens because their analysis focuses on high-efficiency solar panels, which are more expensive. The other three sources consider a wider variety of solar panels, including less efficient modules which are more affordable.

The US offers a 30% federal tax credit for solar photovoltaic and other renewable energy systems, and additional incentives may be available from local governments and utility companies. The table above provides typical solar prices before incentives, which means your out-of-pocket cost can be lower.

The solar federal tax credit is a nationwide incentive for homeowners and businesses. If you install a PV system, you can claim 30% of its cost as a federal tax deduction. For example, a 5-kW rooftop solar system with a price of $15,000 gets a tax incentive of $4,500.

Solar Installation Costs: System Sizes From 4 to 10 KW

NREL and EnergySage both report an average solar cost of $2.95/watt. Based on this figure, you can expect to pay the following prices for PV systems ranging from 4 to 10 kilowatts.

Solar System SizeTypical Cost30% Federal Tax CreditNet Cost after Tax Credit
4 kW$11,800$3,540$8,260
5 kW$14,750$4,425$10,325
6 kW$17,700$5,310$12,390
7 kW$20,650$6,195$14,455
8 kW$23,600$7,080$16,520
9 kW$26,550$7,965$18,585
10 kW$29,500$8,850$20,650

Note these are average values, and you can get solar quotes with prices higher or lower than $2.95/watt. Other than size, there are several factors that influence the installed cost of solar power systems, including:

  • Roof material and geometry
  • Solar panel brand
  • Solar inverter brand
  • Type of installation: rooftop, ground-mount, canopy, etc.
  • Local labor costs
  • Local incentives: tax credits, tax exemptions, solar rebates, etc.

The ideal size of your solar power system depends on the energy needs of your home. If your system is too small, the electricity generated will only cover a small fraction of your monthly power bills. On the other hand, an oversized system represents wasted capital, since it generates more electricity than what your home needs. 

A qualified solar company can calculate the optimal size of your photovoltaic system based on home energy consumption and local sunshine.

The square footage of your home is also important, since larger homes tend to use more energy. However, this is not always the case: a large home with energy efficient appliances might use less electricity than a medium-sized home that wastes a lot of power.

How Many Solar Panels Do I Need? Estimating the Size and Cost of your Photovoltaic System

Only a professional solar installer can calculate the size of your PV system accurately. However, there is a way to estimate the size required based on annual electricity bills. You can use the World Bank Global Solar Atlas to check the productivity of solar panels in your location, and estimate the required kilowatts and number of panels.

According to the US Energy Information Administration (EIA), the average American home consumes 10,632 kilowatt-hours (kWh) per year. With the Global Solar Atlas, you can estimate the system size needed to cover this consumption:

  1. Zoom into your location and click on the map.
  2. The Atlas will display a lot of information about local solar resources, but for now we need one value in particular: Specific Photovoltaic Power Output or PVOUT
  3. This value is measured in kWh/kWp: annual kilowatt-hour output (kWh) per kilowatt of peak solar capacity (kWp).
  4. For example, if the Atlas shows a PVOUT value of 1,460 kWh/kWp in your location, each kilowatt of solar PV capacity yields 1,460 kWh/year.
  5. Divide your total consumption by the PVOUT value, and you will get the required system capacity in kilowatts.

In this example, a homeowner with a consumption of 10,632 kWh/year and a site with a solar productivity of 1,460 kWh/kWp needs 7.3 kilowatts. 

  • At the average cost of $2.95/watt reported by the NREL, a 7.3-kW solar system has a total price of $21,535.
  • After subtracting the 30% federal tax credit, the net price drops to $15,074.50

The number of solar panels needed for a given system wattage depends on the individual wattage of each panel. Generally, the solar modules used in residential installations range from around 330 watts to 400 watts. You can estimate the number required by simply dividing both values, as you can see in the following examples:

Solar Panel WattageNumber Needed for 7.3 kW (7,300 W)
340 W7300W / 340W per panel = 22 panels
370 W7300W / 370W per panel = 20 panels
400 W7300W / 400W per panel = 19 panels

Professional solar installers conduct a detailed assessment of your property, including your monthly power bills and local sunshine conditions. Having this information, they use design and simulation software to calculate the optimal layout and capacity of your solar energy system. 

The simplified calculation explained above does not replace a professional design, but it gives an idea of the system size and investment you can expect.

Estimated Solar Installation Costs for Different Home Sizes

Larger homes tend to use more electricity, and this means they need more solar panels to cover their consumption.

  • However, you cannot estimate the size of a PV system based on square footage alone, since there are other factors that affect consumption.
  • For example, a 2,000-sq.ft. home with ENERGY STAR appliances and a well-insulated envelope may use less energy than a 1,000-sq.ft. home with inefficient appliances and plenty of air leaks.

According to the latest Residential Energy Consumption Survey (RECS) from the US EIA, the average electricity consumption of homes is 9.26 kWh per square foot per year. The following table estimates the annual consumption for homes of different sizes, and also the solar system size needed to cover than consumption.

Home SizeTypical Electricity Usage(At 9.26 kWh per sq.ft.)Solar PV SystemSize RequiredInstalled Cost After30% Federal Tax Credit
1,000 sq.ft.9,260 kWh / year6.34 kW$13,092
1,500 sq.ft.13,890 kWh / year9.51 kW$19,638
2,000 sq.ft.18,520 kWh / year12.68 kW$26,184
2,500 sq.ft.23,150 kWh / year15.86 kW$32,751
3,000 sq.ft.27,780 kWh / year19.03 kW $39,297

Like in the previous example, we assumed a solar productivity of 1,460 kWh per kilowatt of peak capacity, but this varies depending on local sunshine. You can check the actual PVOUT value for your site using the Global Solar Atlas, as explained in the previous section.

The calculations above also assume you want to cover 100% of your electricity consumption with solar panels. If you want to reduce the cost of your project, you can install a smaller system that only covers part of your annual consumption.

NOTE: Home electricity consumption depends on several factors other than square footage. For example, homes in warm regions tend to use more electricity due to air conditioning.

Solar Panel Installation Costs by State in 2023

The typical cost of a residential solar system also varies depending on its location. MarketWatch Guides conducted a solar cost survey across all states in 2023, and they estimated the following costs per state:

StateCost per WattCost of 6-kW Solar SystemCost after 30% Solar Tax Credit
New Hampshire3.07$18,390$12,873
New Jersey2.95$17,670$12,369
New Mexico2.38$14,280$9,996
New York2.77$16,620$11,634
North Carolina2.63$15,750$11,025
North Dakota2.54$15,240$10,668
Rhode Island2.87$17,220$12,054
South Carolina2.66$15,960$11,172
South Dakota2.50$15,000$10,500
Washington (State)2.82$16,890$11,823
Washington, DC3.29$19,740$13,818
West Virginia2.84$17,040$11,928

The table above provides the cost per watt, and the typical price of a 6-kW solar system before and after the federal tax credit. Keep in mind that states, counties, cities and local utilities often have solar incentive programs for homes and businesses. If you can qualify for these incentives, your home solar system will have a lower net cost.

What Is the Payback Period of Solar Panels in the US?

Local electric tariffs are the main factor that determines the payback period of solar panels. Assume that two solar systems in different cities generate 10,000 kWh per year, but one user is charged 10 cents/kWh by the local power company, while the other pays 30 cents/kWh.

  • The first user will save $1,000 per year, while the second user will save $3,000 per year with the same amount of solar generation.
  • If both solar installations had the same cost, the second user will recover the investment three times faster.

At the average solar cost of $2.95 per watt, you can expect to pay $17,700 upfront for a 6-kW system, and $12,390 after the federal tax credit. The following table compares the payback period you can expect with different electricity prices, assuming this system generates 9,000 kWh/year.

Electricity Price6-kW Solar PV System Annual SavingsUpfront Cost After Federal Tax CreditPayback Period
10 cents/kWh$900$12,39013.8 years
15 cents/kWh$1,350$12,3909.2 years
20 cents/kWh$1,800$12,3906.9 years
25 cents/kWh$2,250$12,3905.5 years
30 cents/kWh$2,700$12,3904.6 years

To put these numbers into perspective, consider that quality solar panels can last more than 25-30 years. Even under the less favorable scenario in the example above, the payback period of the solar power system is much shorter than its expected lifespan.

Local solar incentives beyond the nationwide tax credit reduce the upfront cost of a PV system, shortening its payback period.

How Much Does a Solar Battery Cost in 2023?

The main factor that determines the cost of a solar battery is its energy storage capacity, but you can generally expect to pay $10,000. For example, the Tesla Powerwall 2 has a price of $9,200 in 2023, according to the official company website. When you consider installation costs, the final price is around $11,500.

According to the latest solar cost analysis by the NREL, a lithium-ion battery system with a power output of 5 kW and a storage capacity of 12.5 kWh has a modeled market price of $18,791. This means you can expect to pay slightly over $1,500 per kWh of storage capacity, before subtracting the 30% federal tax credit and other incentives.

Depending on how you plan to use your solar panels, installing a battery system can be optional or necessary. If your only goal is saving on electricity bills, there is no need to store energy and a battery is optional:

  • When your home uses electricity generated by the PV system, those kilowatt-hours are not added to the monthly consumption measured by the power meter.
  • When your solar panels generate surplus electricity, it gets sent to the grid. The local power company measures that consumption and it gets subtracted from your bill. This concept is called net metering, net billing or solar buyback.

Solar panels alone can lower your electricity bills, and a large enough system can offset 100% of your consumption. However, if you intend to use your photovoltaic system as a 24/7 energy source, installing a battery system becomes mandatory.

  • Solar panels have a variable power output, and most of their electricity is generated during the hours around noon.
  • If you intend to use solar energy at night, it must be stored in a battery.

By themselves, solar panels cannot be used as a backup power source during blackouts. Their electricity output is variable, and you need a sustained voltage source for your appliances during a power outage. This can only be accomplished by adding a battery to your solar power system.

Home batteries qualify for the 30% federal tax credit just like solar panels, but only if their energy storage capacity is at least 3 kWh (3,000 watt-hours).

Comparing Solar Purchasing Options: Loan, Lease and Power Purchase Agreement (PPA)

Solar panels offer an attractive return on investment in the US, especially in regions with expensive electricity. The upfront cost of a photovoltaic system can seem high, there are three main ways to avoid this expense:

Purchasing OptionDescription
Solar loanYou use a loan to cover the upfront cost of a solar energy system, and you pay off the loan with the monthly savings.
Solar leaseYou sign a contract where you agree to lease the solar panels during a specified period of time.
The company providing you the lease owns the solar panels, and they are responsible for maintenance and repairs.
Power Purchase Agreement (PPA)A solar PPA is similar to a lease, but the payment is different. Instead of paying a fixed monthly lease, you are charged for each kilowatt-hour generated.
The solar PPA price is set lower than local electric tariffs, and your savings are equivalent to the difference between both tariffs.
For example, if the electric tariff is 20 cents/kWh and you sign a solar PPA at 15 cents/kWh, you save 5 cents/kWh. If the solar PV system generates 10,000 per year, you save $500.

With all three solar purchasing options, the upfront cost is replaced with monthly payments and you save on power bills right away.

  • Ongoing savings can be used to cover loan payments or lease/PPA fees, while leaving net savings from the first month.
  • Since you reach positive cash flow from the start, the payback period of your solar energy system is reduced to zero.

Solar loans have a major advantage: you own the photovoltaic system outright, and you get the 30% federal tax credit plus any local incentives. However, solar loans are only feasible if you can qualify for a low interest rate, and this normally requires a high credit score.

Solar leases and PPAs make the system provider responsible for maintenance, but they also retain ownership. This means they are legally entitled to the federal tax credit and other incentives. Generally, the monthly payments in a solar lease or PPA are higher than what you would pay with a low-interest solar loan.