How Much Does Solar Cost? Is it Worth the Price?

DecisionData Team
February 24, 2017

There are two costs associated with solar. Let's start with what's called the direct cost. These are costs related primarily to the purchase and maintenance of the system. For this we turn to the US Department of Energy's most recent report. According to the report the average cost of solar for homes (between 2.5 and 10 kW) has been falling rapidly, but has been fairly stable recently at about $4.19 per watt.

Average Residential Solar Costs

The most-common home size for a residential system is 5 kW (5 kilowatts, or 5,000 watts), which would equal $21,000. If you buy the system outright or get a loan to pay for it, you're eligible for federal tax credits of up to 30% of the cost of the system until 2019. Thus the final price for a 5 kW home system would be just about $14,700. This is the primary direct cost without state incentives. While there may be some system maintenance over the life of the system, it shouldn't cost much.

If you're not sure how many kW your system should be, a professional can help you. If you want to figure it out yourself, try reading this.

Indirect Residential Costs

DecisionData is built upon open and transparent data. We wouldn't be doing our jobs if we just left it there and ignored the rest of the costs that you could end up paying. Indirect costs vary by situation, but may include the following:

Property Taxes in Some States

You pay property taxes based on the value of your home. Solar panels increase the value of your home. Thus, solar will increase your property taxes. If you assume the average national property tax rate, you're looking at about $1,500 in property taxes each year. Luckily, most states have laws that allow you to exclude the extra property value from your solar system when calculating property tax. States with decent rules for excluding all or part of the value are:

Alaska, Arizona, Colorado, Connecticut, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Rhode Island, South Dakota, Tennessee, Texas, Vermont, Virginia, Washington D.C. and Wisconsin

Come on, California, get with the program.

Interest on Loans

Most people don't have $15k sitting in their bank account, so a loan is the most likely method of financing. You can read more about other payment options here. A standard personal loan might have an interest rate between 5% to 22% depending on your credit (as of February 2017). Origination fees can cost another 1% to 6%. If you make minimum payments (about $100) throughout the life of the loan, you'll pay $8,583 in interest over the life of the loan. Your final 20-year cost for solar with a loan would be about $23,430 if you have excellent credit.

Before you run screaming, remember that the interest on secured loans are generally tax deductible. We therefore recommend getting a construction loan that is secured by (tied to) your home. Construction loans tend to have a lower interest rate, especially if you have a lot of equity in your home. If you already itemize on your taxes, the savings on solar can be significant. Tax math gets messy and varies by person, so we'll leave that to your accountant or tax software.

Savings on Solar: is it Worth It?

Actual savings will depend on things like how much sun you get, how much electricity costs, state tax credits, and how quickly electric costs are rising. Find your city and read more about local factors here. For now, let's assume you live in a state with no state tax credits, but with a property tax deduction. Using just the amount of sun and the cost of electricity, 85% of people would save in 20 years without a loan. Including all incentives, we estimate solar pays for itself with no loan for about 90% of Americans outside Alaska. Not bad.

If you do get a loan, the pre-state-incentive number drops. Without state incentives and interest tax deductions it would only be worth it in 20 years for about 11% of Americans, all of them living in California, Arizona, Texas, New Mexico, Colorado, Hawaii, Utah, and Oklahoma. The sunniest parts of Kansas and Florida may also work. Of course state tax credits and policies can easily make the difference. We estimate that about 30% of Americans will break even with a loan in 20 years after all costs and incentives. Again, we're assuming no change in electricity rates, so it might actually be better than that.

These figures are calculated from a number of sources gathered by zip, city, and state. You can get more detailed info about your city by requesting a quote below or finding your city with the link above.


Get a quote to see what it would cost you.

Note on Commercial Solar

Commercial solar is much trickier to calculate because there are so many case-by-case variables to consider. E.g. retail locations may get better deals than industrial locations in many states. State incentives are also more complicated, often based on square footage or industry. Your best bet is to get a quote to see your actual costs.