The Economics of Solar Panel Installation – Understanding the Costs

A solar system is a significant investment before any federal or state incentives. However, it starts paying you back immediately through reduced or eliminated energy bills.

Market conditions, including competition between installers, work volumes, overhead business expenses, labor costs, and various state and local policies, can all dictate solar panel costs.


The most essential part of any residential solar system is the solar panels. A few different kinds of boards are readily available. However, choosing monocrystalline or polycrystalline solar panels is advised if you want to get the most return on your investment. Polycrystalline is more cost-effective and uses smaller fragments than monocrystalline, which is formed of pure silicon.

The size of your system is another aspect that will affect the cost of solar panel installation. A more extensive system is more expensive, but it will also produce more electricity on average per watt. You can learn more about calculating your home’s right solar system size using an accessible design and savings estimator tool.

Other factors that affect your solar installation costs are the type of inverter you choose, the labor required for the installation, and permitting and interconnection fees. Additionally, if your electrical panel needs to be upgraded to accommodate the extra load of solar power (and prevent tripping breakers and other issues), that will also add to the cost.


The inverter is your solar energy system’s most expensive and prone-to-failure component, so its quality can significantly impact your overall costs. Similarly, the type of racking system installed can also affect installation prices. Microinverters, for example, are more expensive than string inverters. However, they offer a 25-year warranty, which can lead to more electricity production.

The brand of the solar panels you choose can also significantly influence the price. Premium solar manufacturers have a higher cost per panel but deliver better efficiency and customer satisfaction results.

Depending on your state and utility policies, you may qualify for federal tax credits and rebates that offset the upfront investment of installing solar panels. In addition, many cities and utilities have policies like net metering that allow you to sell back excess electricity to the grid in exchange for a credit on your future electricity bills or a one-time payout. This can significantly shorten the time before your solar energy system pays for itself.


Solar panel installations require a significant amount of wires. This cost can be mitigated by utilizing the existing electrical infrastructure for PV systems instead of installing new cables.

Many solar companies offer financing options that make it easier for customers to get started. These options often include monthly payments lower than a customer’s current electricity bill.

Many of the initial upfront costs can be offset by federal and state incentives and rebates that reduce the overall price of solar. This can dramatically shorten the payback period and increase the overall ROI. In addition, many states offer programs like net metering, which allow homeowners to sell excess electricity back to the grid and receive credit on their utility bills for the power they generate.


In addition to the decades of free electricity solar panels provide, many states and local communities offer various incentives for homeowners who invest in this clean energy solution. These programs can shave thousands off the cost of the solar system.

The type of solar panel installation you choose also affects costs. For example, installing panels on a flat roof requires less labor than installing them on a sloping rooftop. Similarly, the racking system you use is another significant factor in the overall cost of your solar panel installation.

Solar panels require very little maintenance after they are installed. They may need to be cleaned periodically during snow or inclement weather, but that’s it. Solar electricity, a sustainable and clean energy source, decreases your carbon footprint.

Installing your solar panel system correctly the first time is essential. In the long term, doing this can save you money because it will guarantee that your solar system is producing the required quantity of electricity and that all of its parts are in good working order.

Other Equipment

Installing a solar panel system requires additional equipment, including inverters and a generation meter. The generation meter tracks how much electricity the solar panels generate and sends that information to the utility company for billing purposes.

Solar energy costs have declined recently as technology advances, but a complete system still requires a significant upfront investment. Using state clean energy incentives and federal tax credits can minimize out-of-pocket costs.

Shopping around for quotes from multiple contractors to compare prices and customer reviews is recommended. Sites compare solar companies and allow users to filter results by certifications, Better Business Bureau profiles, and other factors.

The type of roof is another crucial factor. The amount of sunshine that reaches the panels is increased with an unobstructed south-facing top. If a rooftop is not an option, solar panels can be installed on racks fixed to the ground. Although professional service is rarely needed for solar panels, you should be prepared to spend for an annual check and cleaning.