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Solar panel cost by state

California leads the country in solar energy generation, but many other states are quickly expanding their presence in the solar industry. As more consumers invest in home solar systems, the cost of solar panels have lowered across the country by as much as 70 percent. 

The cost of solar panels varies by state and is influenced by the factors we discussed above. But the energy savings are impressive no matter the location. Following are the top states for solar generation and how much consumers can save by investing in solar panels.

Cost of solar panels per square foot

On average, a solar panel system costs 15 watts per square foot. However, measuring by square foot is not the most efficient way to estimate solar panel cost, so most solar installation companies will offer a quote measuring the cost per watt instead. That’s because the capacity of a solar panel – or how much electricity it can generate – is the main factor when it comes to how much a company charges.

Most home solar systems will cost about $3 – $5 per watt. With the average solar system resting at 5 kWs, that means that the average home solar system costs between $15,000 – $25,000. Factoring in tax credits, this cost drops to between $11,100 – $18,500.

Price factors for a home solar system

There are several factors that influence the total cost of solar panels in 2021. Here is a breakdown of the most common solar features that can impact the total solar cost.

  • Solar equipment. The brand and capacity of solar panels that you choose will influence the total cost. Keep in mind that the capacity of a solar panel – measured in watts – directly correlates to how much a solar company charges for it. Thoroughly research the different brands of solar panels to find the best one for you.
  • Installation costs. The cost for a solar company to install solar panels for your home normally accounts for about 13 percent of the total system cost. Based on the average cost of a home solar system, installation costs normally range from $1,500 – $2,500.
  • Roof and home maintenance. Before installing solar panels on your roof, you’ll need to make sure it can handle the weight and installation of the solar system. If your roof is older or requires maintenance, you will need to account for that cost. Your solar installer should be able to assess the integrity of your roof, although you should consider having a third-party maintenance company inspect it, too.
  • Other soft costs. There are several other cost factors to consider, including sales tax, supply chain costs, permit fees, and installer profit.

 

 

Cost of solar panels vs. fossil fuels

Factoring in tax credits can significantly reduce the total cost of a home solar system. But the savings can continue into long-term energy costs, too. The U.S. Solar Energy Technologies Office (SETO) launched its SunShot Initiative in 2011, aiming to bring solar costs down for consumers. So far, the initiative is on track to bring the residential solar rate down to 5 cents per kWh by 2030. 

How does that translate into energy bills? Our Choose Energy analysts compared the average rate consumers pay for traditional energy to the residential solar rate projected by SETO. Using each state’s average electricity consumption, here is how traditional energy costs compare to solar energy costs.

Paying for solar panels

Despite the substantial cost savings that come with investing in home solar panels, many consumers worry about how to cover the upfront costs. It’s true that the cost of solar panels is one of the drawbacks to investing in solar energy. Thankfully, there are methods of bringing down the total cost of residential solar panels.

The federal solar tax credit

Currently, there is a federal tax credit in place that pays back 26 percent of the total cost of a home solar system. The Solar Investment Tax Credit (ITC) was created in 2005 to help lower the overall cost of solar panels and make them more affordable for consumers.

The federal tax credit is currently set at 26 percent, but it’s important to note that the percentage has gone down in recent years. It was initially set at 30 percent in 2019 and plans to reduce to 22 percent in 2023. As of now, the solar tax credit will expire in 2024 unless Congress renews it.

Solar leases

Another solar option with a lower upfront cost is a solar lease. With a residential solar lease, you pay a monthly fixed rate to a solar company. This company maintains ownership of the panels and system, but you are able to power your home using the electricity the panels generate. 

Keep in mind that solar leases lead to lower-cost savings in the long run compared to purchasing solar panels. With a solar lease, you will also not be eligible for the federal tax credit or many other incentives and rebates.

Solar PPA

A solar power purchase agreement (PPA) offers an additional alternative to paying for solar panels upfront. Solar PPAs work much like a solar lease, but the rate you pay each month to the solar company is determined by how much electricity your panels produce. The more energy they generate, the more you will pay every month.

Solar tax credits and rebates by state

Many states offer solar tax credits and rebates that can be paired with the solar ITC. Some of the top states for solar incentives include:

  • California solar tax incentives: California offers a net metering program, which allows consumers to sell any extra solar power generated by their home solar panels back to the power grid.
  • Texas solar tax incentives: There aren’t any state-wide solar incentives in Texas, but there are many local options available. For example, Austin homeowners are eligible for a $2,500 rebate for investing in solar panels.
  • North Carolina solar tax incentives: In North Carolina, cities and counties can offer low-interest loans for energy-related projects, including solar panels. The state also allows a property tax exemption to ensure that consumers’ property tax does not increase after installing solar panels.
  • Arizona solar tax incentives: In addition to the federal solar tax credit, Arizona residents who purchase solar panels can receive up to $1,000 back through the Residential Arizona Solar Tax Credit. They will also be exempt from sales tax on their purchase and their property taxes will not increase.
  • Florida solar tax incentives: Consumers in Florida who buy a home solar system won’t be charged sales tax for the panels. Florida residents are also eligible for net metering programs, so they can sell excess electricity back to the grid.

Are solar panels worth the cost?

So, are solar panels worth the upfront cost? The bottom line is yes. Investing in home solar panels will lead to substantial energy savings over time because you can power your home using electricity that you generate yourself. 

Solar panels also allow for increased energy independence. This is important because you will not need to rely as heavily on the power grid and will be protected from energy price increases during times of high demand and power outages in your area.

Finally, residential solar systems generate clean, renewable electricity. Green energy sources such as solar power are much better for the environment because they do not emit greenhouse gases like carbon dioxide into the atmosphere.

Overall, the energy savings (and environmental benefits) of investing in solar panels make them well worth the upfront cost. And as the overall price of solar systems continues to decrease, home solar panels will become even more affordable for consumers in the coming years.

[Chatchawal Phumkaew]/Shutterstock