Solar Panel Cost in 2025: Is it Worth it to Install a Home Solar System?

While considering switching to solar energy, the solar panel cost is the key consideration that may impact your decision. In fact, it may require a higher upfront cost to install solar panels; however, the cost-benefit analysis reflects that investing in solar is totally worth it. The skyrocketing energy costs, surging utility rates, and frequent power outages are the major drivers for shifting to solar power. An average homeowner is paying around $250/month for electricity. While with a home solar system, they can expect to reduce their electric bills by up to 95% with an average payback period of 6-7 years.

And do you know that the prices of solar panels and accessories have decreased, making it one of the vital factors for increasing residential solar installations. According to a report, over 7.3 million homeowners have already switched to solar, and the number is increasing every day. Moreover, the federal tax credit and state solar programs make your solar journey more affordable even during the times of new solar tariffs and the changing policy era. Also, the upfront cost of installing solar becomes less intimidating when you understand the cost breakdown and compare the potential benefits. Let’s explore how much solar panels cost and smart strategies to lower these expenses.

How much does a solar panel cost?

The average size of a residential solar panel system is 6 kW-10 kW; however, it may vary according to your energy needs and type of solar installation. Also, the cost of a solar panel depends on how you buy it. If you purchase from a full-service installation company like Solar SME, you will likely get a lower price for each panel than buying from a retailer. But if you finance your home solar system through solar loans, the cost may be high due to the increasing interest rate. However, whether you choose to buy or take out a loan, you will be eligible to reduce your solar installation cost with 30% federal tax incentives and your state solar incentives. Although if you go with a solar lease, you can reduce your electric bills too, you will not be able to take advantage of solar programs and tax credits.

Solar Panel Cost Trends Over Time

With the industry development, the price of solar panels has decreased over the last ten years. The graph depicts a sharp decline of around 50% in the cost of installing residential solar panels. Although due to new solar tariffs by Trump, we can expect higher costs, there are still incentives like the solar investment tax credit, local solar programs, and low-interest loan programs to help you go solar with ease.

Solar Panel Installation Cost Breakdown

The exact cost of a solar panel system depends on various factors, like the solar brand, type of solar panels, and installation company. However, you may expect that almost 50% of the cost covers solar panels and other equipment, including inverters, racking or mounting, and backup solar batteries. The labor cost, taxes, solar permitting and inspections, and the solar installer service contribute to the remaining cost.

It is very important for a solar buyer to understand the solar panel cost breakdown for making a wise decision. For example, you can see that solar panels only contribute 20% of the total system’s cost, and if you choose cheap solar panels to reduce your upfront cost, it will impact the overall expense of your solar project. In most cases, this may lead to a low ROI if your home solar panels do not perform efficiently. So, it is always recommended to opt for a top-tier solar system and a trusted solar installer like Solar SME to take out most of your solar investment. Also, you can lower your solar installation costs with 30% FTC and state solar rebate programs.

How do I calculate the cost of solar installation?

There are two main methods you can use to analyze the cost of your solar panel system:

Price Per Watt ($/W): For comparing multiple solar quotes.
Cost Per Kilowatt-Hour (cents/kWh): For comparing the cost of solar vs. grid energy.

Solar Price Per Watt Calculation

Price per watt ($/W) makes it easy to compare several solar quotations in terms of total wattage, solar panel brands, etc. You can calculate the price per watt using the simple formula.

Price per watt = Gross System Cost/System Size (in DC Watts)

While

Gross System Cost = Includes all expenses related to material, taxes, permits, warranties, and solar service cost

System Size (in DC Watts) = Panel DC Watts x Number of Solar Panels

Cost Per Kilowatt-Hour (kWh) Calculation

A kilowatt-hour is an energy unit, and it is equal to consuming 1,000 watts of power over one hour. While price per watt is useful for comparing quotes, kilowatt-hour cost reflects the value of a solar energy system as compared to the grid. The formula is

Cost Per Kilowatt Hour = Net Cost of the System / Lifetime Output

What factors impact the cost to install solar panels?

We are exploring some key factors that may impact a home solar energy system cost. These include:

Location:

Two location factors, the energy costs in your state and the sun hours, will impact how much solar panels cost and potential savings. If you live in a state with much higher electric prices, going solar may help you save more. Also, the number of solar panels is also a key factor for the system’s cost, and you will require fewer solar panels comparatively if you reside in a sunny state like Texas, Arizona, or New Mexico. Furthermore, if your state offers solar incentives and rebates, you can further lower your installation expenses and enjoy long-term savings.

Energy Requirements:

An average home in the U.S. consumes around 855 kWh monthly; however, your energy needs may vary if you have a big home or more family members, large appliances, or an electric vehicle. Also, you will require a large home solar system to fulfill your power requirements. A larger system means more solar panels and a higher price. But there is a converse relationship between system size and price. Like, if you buy a big solar panel system, you will get a low per-unit price. It’s a normal trend: when you buy in bulk, you save on per-unit cost.

Purchasing Option

The way you choose to use solar energy impacts the overall cost. If you buy a home solar system with cash, you may need to pay a higher upfront, but you can reduce your expenses with tax credits and incentives. Also, you will be eligible for solar programs like net metering and SRECs that further help you to maximize future savings. However, if you lease a solar system, you need to pay monthly to the leasing company for using solar energy. It’s the same as paying the electric bill to your utility. With this, you may lower your energy bills, but you cannot avail of additional solar benefits like solar owners. So, between solar buy vs lease, experts always prefer to buy a solar energy system either with cash or a solar loan instead of leasing. Learn more about when solar leasing is a good option for you!

Solar Brand and Type

Solar Installation Company

Your solar installer plays a vital role in making your solar investment worth it. They may charge you a bit more, but they assure you of an efficient solar system, premium warranties, the system’s safety, and above all, peace of mind. So, it is advisable to choose a local solar installer near you for quality installation and peace of mind. Solar SME is a Tesla-certified solar panel installation company offering affordable solar and backup solutions with flexible financing options and leading warranties.

Is solar worth the price tag?

The straightforward answer is YES. If you do a cost-benefit analysis, the average solar payback period is 7 years, and after that, you will enjoy free electricity for the future. If increasing solar panel cost is a consideration, 30% tax credits, local rebates, and performance-based incentives (PBIs) are still available to offset it. Moreover, there are no hidden solar panel costs, and they require very little maintenance. Overall, a typical homeowner may expect to save $31,000 to $120,000 over 25 years with solar.

Solar SME, a certified solar installer, can assist you with tailored solar and backup solutions and flexible financing options. Get an instant quote of your solar savings with our smart solar calculator.

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Solar Panel Cost in 2025: Is it Worth it to Install a Home Solar System?

How much does a solar panel cost?

Solar Panel Cost Trends Over Time

Solar Panel Installation Cost Breakdown