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Solar Panel Installation Cost

Latest Update:

by Simone Garneau

One of the great things about solar power is that the fuel cost is essentially zero. Nada. Zip. However, you still have to pay for the panels, and the expertise that's required to install them on your property. Here are the top three facts to know about the cost of solar panel installations.

Cost breakdown

The cost of installation of a residential photovoltaic system is determined by two major cost categories: hardware and "soft costs".

The hardware category includes modules (also called solar panels), inverters, racking systems, and other electrical and structural components (lovingly called "balance-of-system" or BOS hardware). The cost of solar hardware has decreased significantly in the last few years, and today, hardware costs account for about 32% of the total installation cost.

The second major cost component, the so-called "soft costs", includes labor, contractor profits, contractor overhead, permits and customer acquisition costs. All of these items add up to about 68% of the installation cost.

Fact #1: The average solar installation cost in the U.S. is $2.80 per watt (2017 data).

Cost breakdown

Itemized list

Item Cost per watt Legend
Profit $0.34
Overhead $0.31
Customer acquisition (Sales & Marketing) $0.34
Permitting, Inspection, Interconnection $0.10
Installation labor $0.30
Sales tax on equipment $0.09
Supply chain cost $0.42
Electrical BOS $0.24
Structural BOS $0.11
Inverter $0.19
Module $0.35
Total $2.80
Data Source: National Renewable Energy Laboratory, U.S. Solar Photovoltaic System Cost Benchmark: Q1 2017 Benchmark

Evolution of residential solar PV system costs (2009-2017)

Since 2009, the cost of residential solar panel systems has decreased by a whopping 60%. Combined with the 30% federal tax credit, this reduction in overall installation costs has been a major catalyst for the growth of the solar industry.

Intense competition and economies of scale in the solar hardware market led to plummeting prices for solar panels followed by large reductions in inverter prices and, more recently, in racking system prices. However, after years of steady decline, costs are now leveling off.

The next challenge in cost reduction is decreasing the share of "soft costs". However, cost items such as labor, profit and overhead tend to be much more "sticky" than hardware costs. Although further consolidation in the industry may bring further reductions in this category, the rate of decrease is likely to be less dramatic.

Fact #2: In the last few years, we haven't seen the dramatic price drops that we saw earlier in the decade. If you're playing the waiting game with the expectation of further cost reductions, you may be losing out on significant savings today.

Period Cost per watt
Q4 2009 $6.96
Q4 2010 $6.1
Q4 2011 $4.31
Q4 2012 $3.77
Q4 2013 $3.31
Q1 2015 $3.09
Q1 2017 $2.80
Data Source: National Renewable Energy Laboratory, U.S. Solar Photovoltaic System Cost Benchmark: Q1 2017 Benchmark

Understanding the comparative cost of solar

Although cost per watt is a handy indicator for understanding how much solar panel installations cost, it should be used together with another cost metric: levelized cost.

Levelized cost takes into account the location of the installation as well as the expected lifetime of the solar panels. It is generally expressed in dollars (or cents) per kWh. This is a very useful metric, as it allows us to compare the cost of solar to the status quo - your current utility rate. When the levelized cost is the same or less than the utility rate, we have "grid parity".

We prepared these handy maps for you to compare the levelized cost of solar to your utility in your state or province.

Fact #3: Ultimately what really matters is how much solar power costs compared to your utility. See how your state or province compares by clicking on the map below.

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United States

Cost of residential solar power is less than the average utility rate in all U.S. states after the federal tax credit. Learn more.

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Canada

A number of provinces are offering solar incentives, making solar energy in Canada more attractive. Learn more.

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Australia

Plenty of sun, and high residential electricity prices make solar an ideal choice in all Australian states. Learn more.

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Written by Simone

Simone Garneau is the co-founder of Sunmetrix, an online consumer education website for residential solar energy. The goal of Sunmetrix is to help homeowners go solar and save money with our Solar Cashback Program. In addition to the 200+ articles about solar energy, Sunmetrix offers homeowners three main resources: a Consumer Report for solar energy, Discover, to preview solar energy for your home, and GO, the only solar energy test drive experience.

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These Terms and Conditions apply to the Sunmetrix CASH-BACK Program (the “Program”). By completing the INSTALLER registration, making a Solar Quote Request, or otherwise participating in the Program, INSTALLERS and QUOTE-REQUESTERS agree to be bound by these Terms and Conditions.

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b. INSTALLER: The solar PV installation company either selected by the QUOTE-REQUESTER or by Sunmetrix.

c. QUOTE-REQUESTER is a potential residential solar customer that meets all of the following criteria: (1) owns his or her own house in a state/province where the INSTALLER operates; (2) is a legal resident of the United States or Canada; (3) is 18 years of age or older; and (4) otherwise meets Sunmetrix’s requirements, as may be updated by Sunmetrix from time to time.

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