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Cost Of an Solar Panel Installation Grid-tie solar installations are connected to the utility company’s power lines. If the home or business needs more electricity than it can produce it draws energy from the grid and if it is producing excess electricity, it injects it into the electrical grid. Electricity added to the grid is credited to the homeowner or business’ electricity bill. When power is drawn from the grid, this electricity credit is reduced. This process is called “net-metering” and is accomplished with a bidirectional or smart meter. There are also grid-tied installations that reserve power in a battery backup that is used during power outages. The solar panels charge the batteries so that continuous power is available, even if the utility grid is down. When the outage is fixed, net-metering resumes.

Note: This data does not take tax, installation, battery backup systems or racking into consideration and are before deducting any rebates or tax credits. They are based on 5 hours of insolated sunshine per day. Off-grid systems are usually implemented in locations that are too remote to receive service from a utility. These systems can generate AC power that can run regular appliances and electric devices. They store power in batteries that are used to supply power when sunlight is not available. Those that generate DC power are used to power remote telecommunications gear, appliances used in boats and recreational vehicles as well as farm equipment. DC is less expensive than AC because it does not require an inverter. AC systems can power common home appliances.

Note: This data does not take tax, installation, battery backup systems or racking into consideration and are before deducting any rebates or tax credits. They are based on 5 hours of insolated sunshine per day.


Average Cost and Factors that Affect it To determine how much it would cost you to get solar panels installed to cover part or all of your electricity bill, you need to determine the following information:    

How many kilowatt hours does your home use per month? (see electricity bill) How much roof area do you have to install panels on? (south facing roof is ideal) How many sun hours does your location get per day on average? (averaged over the course of a year) How much can you afford to invest in offsetting your energy bill?

Sun Hours Per Day (Insolation) for United States

Statistics An average home in the United States requires approximately 20 to 24 kWh of electricity every day. An array of panels able to produce this much power has a size of 4 kW or more (based on 5 sun hours per day) and ranges in price from $15,000 to $20,000 installed (not taking any incentives into consideration). Based on current pricing (as of July 2012), a 24 panel 786 kWh grid tie system would be approximately $8,630 before any applicable financial incentives. This price does not take the cost of installation or racking into consideration. Comparing worldwide prices (2009 data), the average cost per watt installed of a 2-5kW residential solar power system was $4.70 in Japan, $7.70 in Germany and from $5-$11 in the United States based on a report by Renewable & Sustainable Energy Reviews. Prices vary based on building and system configuration, the type and brand of equipment used and what company does the installation. The type and quality of panel as well as the size of the array affects the final price of an installation. Manufacturers price their panels based on their efficiency and longevity. Panels that retain their efficiency longer are usually more expensive.


Monocrystalline panels are the most costly but generate the most watts per area, so you will need fewer panels and not as much space. Building integrated panels are also on the expensive end, but they are a good choice if appearance is important. You location can also have a big impact on the final price of a solar energy project. Federal and local governments in many countries offer financial incentives to make buying and installing systems more affordable. Prices also depend on local weather conditions. Due to limited sun hours per day, the cost per kilowatt installed is higher than in sunnier countries like Mexico.

Payback Period Breakdown The decision to install a solar energy system is often driven by environmental concerns and/or economic incentives. Either way, it offers an ROI in line with other home improvement and remodeling projects. To calculate the payback period for a solar energy project, first find out the final installed cost per watt, the electricity cost per kWh in the area, and the average number of sunlight hours in the location. Once you know this information, you can use the graph below to figure out approximately what the payback time would be. The following chart displays how the value of electricity generated (cents per kWh) and the cost per watt paid to install a solar energy system (dollars per watt) affect the payback period. The less expensive the system was to put in and higher the electricity rate is in the area, the shorter the payback period is. For example, if the average electricity rate in your area is $0.30 per kWh and the system was $4 per watt to install, then you can expect the payback time to be just under 10 years. Payback time can be affected by financial incentives, the financing rates and weather conditions. Locations such as the UK, Germany and Japan get much less sunlight (as low as 2.5 sun hours per day) which can increase the cost per watt to $8 and the payback period to 25 years.

Financial Incentive Programs


The US federal government, the UK government, and many other governments around the world offer business and residential tax incentives and rebates on the purchase and installation of solar energy systems. The federal tax credit covers a substantial portion of the cost of installation. State and local governments and local utilities also offer rebates and credits to help defray costs. Depending on your location, financial incentives and rebates can cover between 10% and 60% of the total. Details for the 30% federal residential renewable energy tax credit (and many other incentives) can be found here: http://energy.gov/savings/residential-renewable-energy-tax-credit Many countries have also enacted feed in tariffs that help guarantee a reasonable rate of return on renewable energy projects, which encourages the development of an investment in renewable energy sources. These programs typically involve solar energy system owners being paid a much higher rate per watt they add to the grid than the price they pay for buying electricity from the grid. They essentially sell all the power they produce to the utility/government at a high price and buy back what they need at a much lower cost. Some banks allow solar system installations to be rolled into a mortgage or offer special rates and terms to finance installations. Over the last 20 years, the cost of solar energy systems has decreased by a factor of 7. As the residential and commercial demand for solar kits increases and the efficiency of the technology improves, they will continue to drop and overall return on investment will rise. Source: Peak Solar

Cost of an solar panel installation  

A detailed information about the cost of installing a solar panel kit

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