Cost of Solar Panels (Price Breakdown)

The cost of solar panels varies throughout the world.

In fact, it is not just the price of solar panels themselves that vary, but installation costs can have tremendous differences depending on your location. 

Solar photovoltaic module prices have dropped by 89% since the year 2010 and by 2030 you can expect solar PV prices to drop by another 34%. By 2050, these prices should drop by a total of 63%.

With all this being said about the future, what if you want to install a solar panel system today, how much will that cost you? 

In this article we aim to break down all the factors that determine how much your solar panel system will cost you. 

How much cheaper are solar panels?

In 1954 Bell Laboratories invented the first solar cell which became available to the public in 1956. 

The cost was astronomically high at about $300 for a one-watt solar cell. By 2019, the average cost per watt was $3.05 in the United States. 

$300 in the 1950's is the equivalent of $1,865 in 2019 (This means a common 320-Watt Solar Panel would of cost you $596,800 back in the 1950's).

Taking all these metrics into account means the price per solar watt has decreased by over 600 times. 

Below we have included a chart outlining the cost per watt over a decade. You can see that in 2010, a residential solar system consisting of 22 panels would of cost you $7.53 per watt. 

The average wattage of a solar system is between 1kW and 4kW (this greatly depends on where you live though, the more sun you have, the smaller your solar system can be). 

Let's use 3kW as an intermediary.

3kW = 3000 watts, this means that in 2010 a 3kW solar system would of cost you $22,590. 

Today, in 2021 you will pay around $2,81 per watt. Therefore, for the exact same solar system, 10 years later (today) you would pay $8,430 (after tax incentives). Also, keep in mind that solar panel technology has gotten much better over the years, so not only is your system cheaper, but it is also more efficient. 

cost of solar

What is the average cost of going solar?

The cost of solar really all comes down to where you live. It is well known for that the United States has quite high prices when it comes to installing a solar system compared to Australia for example.

Besides your country, there are two other price dictators. 

That is:

  • Your monthly energy consumption
  • The direct peak hours of sunlight your home receives

Obviously, the energy you consume every month determines the size solar system you will need to offset your electricity usage.

Without sun, you do not even need to bother with installing solar panels on your home. However, some locations are much sunnier than others. The more sun you receive, the less solar panels you will need to generate the sufficient electricity. 

With this in mind, it is impossible to give you an average cost of an entire country. But we have made a table below which shows the average cost of installing solar per state:

Solar panel pricing in U.S. states (Before federal tax incentives)

 

How to work out the cost of your solar system?

Working out the cost of your solar panel system can in fact be quite a fun experiment. 

In this section we aim to take you through the entire process in a simplified way.

STEP 1 - FIGURE OUT HOW MUCH ELECTRICITY YOU USE.

First and foremost you need to figure out what your current monthly energy consumption is, to do this, grab your most recent power bill and see how much energy you used for the last month.

Most energy bills will display the kWh used at the bottom of the document with the cost of electricity multiplied by that. 

In the example below you can see that we used 1000 kWh for that month and were charged $134,35. 

STEP 2 - WORK OUT HOW MUCH SUNLIGHT YOUR AREA RECEIVES

In order to know the cost of your solar system, you first need to figure how many peak hours of sunlight your area receives. 

Keep in mind though, that peak hours of sunlight do not equal the time between sunrise and sunset. 

Peak hours of sunlight equal the amount of time the sun reaches an average of 1000 Watts per square meter. 

So in summary, peak hours of sunlight equal the amount of time the sun is at its most powerful allowing the solar panels to be at their most productive. 

If you live somewhere like California, an area with a very high peak sunlight rate, your solar system will not need to be as big, thus it will end up costing less.

However, if you stay in a less sunny place you may need more solar panels in order to produce the same amount of electricity you would with less panels in a sunnier location. 

(Another important factor to consider is the angling of your roof. The amount of shading it has can also affect the number of solar panels needed and once again, this can increase or decrease the price.)

To figure out the peak hours of sunlight your area receives you can use a websites such as National Renewable Energy Laboratory.

To make the process slightly quicker for you, we have listed the peak hours of sunlight for the following states:

State

Average peak sunlight hours

Arizona

6.5

California

5.82

Colorado

5.37

Florida

5.44

 

STEP 3 - CALCULATE THE SIZE SOLAR SYSTEM YOU NEED TO GO OFF-GRID.

Once you have established the amount peak hours of sunlight your area receives, you can figure out what size solar system you'll need. 

To begin you need to figure out how many average peak sunlight hours you get in a month. 

Simply multiply your daily sunlight hours by 30. 

For this example, we will use Arizona. So, we multiply 6.5by 30 to get 195.

Next, we divide your monthly electricity usage (let's use 1000kWh) by those monthly sunlight areas. 

So, 1000 kWh divided by 195 sunlight hours equals 5.1. This basically means you will need a 5.1 kW solar system in order to produce enough electricity to cover your monthly energy consumption while living in Arizona.

Below we created a chart which shows you the size solar system needed in various states based on the average peak monthly sun hours. 

State

Average Daily Sun Peak Hours

Average Monthly Sun Peak Hours

Solar System Size

Arizona

6.5

195

5,1kW

California

5.82

175

5,7kW

Colorado

5.37

161

6,2kW

Florida

5.44

163

6,1kW

 

Once you have performed these 3 steps, you will have an idea of what solar system size you will need (in kW). 

From here, all you need to do is multiply your needed kW size by 1000 to get the total amount of watts.

Once you have this you can use our average cost per watt table to figure out how much solar will cost for you. 

Below we have made a table which you can use for a basic idea of your solar panel cost. (This assumes you use 1000 kWh a month and doesn't include tax incentives.)

State

Average Daily Sun Peak Hours

Average Monthly Sun Peak Hours

Solar System Size

Cost of solar

Arizona

6.5

195

5,1kW

$11,934

California

5.82

175

5,7kW

$16,017

Colorado

5.37

161

6,2kW

$19,592

Florida

5.44

163

6,1kW

$15,555

 

Remember you can simply replace the 1000 kWh with your own monthly energy usage to get your own data. To do this, go through our step by step process above and enter your own data where relevant.

Final thoughts

Lastly, we would like to leave you with the potential savings installing a solar system could have. 

This example is from a house situated in Los Angeles:

A 3.5kW solar system will cost $15,263 (before federal tax incentives)

Total payments over 20 years:

Maintenance: $0

Remaining utility bills assuming 2.2% annual price increases: $3,898
Total: $15,263 + $3,898 = $19,161

State and Federal Incentives

Federal Investment Tax Credit (ITC): $3,968
State tax credit: $0
$19,161 – $3,968 = $15,193

Total 20-year cost with solar

Includes above costs and incentives: $15,194

Total 20-year cost without solar

Assumes 2.2% annual increase in electricity prices: $29,520

Total 20-year savings

Net present value at 4% discount rate: $6,152

$29,520 – $15,194 = $14,326

You would save $14,326 in 20 years by installing a 3.5kW solar system.

Installing a solar system will likely have a massive impact on your savings over the years. Based on the data above, if you aim to save money over time and have enough capital, installing a solar system is indeed a no brainer. 

It is also important to remember that all the costs involved in this article are based on people living in the United States. Other countries like Australia and India offer much cheaper solar solutions.

We do foresee the cost of solar panels decreasing even more than they already have in the foreseeable future. So if you can't afford them today, make plans to save for the future. 

Besides the obvious cost benefits, installing solar panels is also good for the environment. 

According to Climatebiz:

"If all solar viable homes were to install a solar system, the amount of avoided CO2 emissions from the electricity sector in Los Angeles would be the equivalent of removing 4.2 million metric tons of Co2, or 891,000 passenger cars off the road."

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