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Why are solar panels so expensive?

Sticker shock can be real when it comes to a solar panel system: a full solar installation for an average home can cost tens of thousands of dollars! In this article, we’ll dig into why solar panels are so expensive, from equipment costs to installer margins and more.

Key takeaways

  1. There’s much more than the cost of your actual solar panels that goes into the cost of a solar installation.

  2. On average, solar panels themselves only constitute about 12 percent of the cost of a full system installation.

  3. “Soft costs” – AKA the non-material parts to a solar installation like labor and profit, add up to more overall cost than “hard cost”, which is the actual equipment cost.

  4. The best way to save on solar is to compare custom quotes on the EnergySage Marketplace – sign up for free to get started today.

How much do solar panels cost?

In 2022, a 10 kilowatt (kW) solar panel installation costs about $20,498 on average ($2.77/W). That’s after factoring in the 26 percent federal solar tax credit, but doesn’t include any state or local solar incentives. 

This number can look like a high price to pay for solar, but over the course of the 25 to 30 year lifetime of your system, you’ll save tens of thousands of dollars on electricity, offsetting your initial investment.

Why are solar panels expensive? The nuances of hard and soft solar costs

So why does solar cost $20,000 or more to begin with? The answer is surprisingly simple: you’re buying much more than just your physical solar panels when you go solar. In fact, solar panels themselves only make up about 12 percent of the total cost of a solar panel installation. The other 88 percent comes from other equipment like inverters and wiring, as well as elements like labor, installer profit, and supply chain costs.

There are two main groups to categorize the various costs associated with going solar into: hard costs and soft costs. In general, hard costs come from physical equipment and materials (like your actual solar panels), and soft costs come from everything else, like installation fees and permits.

Hard costs

Solar hard costs include any and all physical materials that make up your solar panel system. According to the National Renewable Energy Laboratory (NREL), hard costs make up about 44 percent of total system costs once you account for added costs due to the supply chain. This includes:

  1. Solar panels: 12%

  2. Inverters: 10%

  3. Racking and mounting equipment: 3%

  4. Wiring: 9%

  5. Supply chain: 9%

Importantly, these are averages for the whole U.S., and the percentages for each category will always vary from installation to installation. For example, choosing a more expensive panel brand will increase the weight of the solar panels portion, and a simple installation on a single-plane roof might decrease the weight of the racking and mounting equipment portion.

Soft costs

Solar soft costs are everything else – the costs not associated with a physical piece of equipment that becomes part of your solar installation. According to NREL, soft costs actually make up the majority of solar panel system costs, at about 56 percent. This includes:

  1. Labor: 7%

  2. Permitting and interconnection: 8%

  3. Sales and marketing: 18%

  4. Overhead: 11%

  5. Profit: 11%

Just as with hard costs, these percentages are national averages and will always vary from installation to installation. A high-quality installer with excellent workmanship warranties will cost more than an average company, and a company with higher sales volumes might add a lower profit margin on top. It depends on many factors – from your individual installation company to local regulations and the economic climate.

The cost of solar has dropped dramatically

As recently as five years ago, solar panels were almost 13 percent more expensive, and prices for solar have been falling for much longer than just five years. In fact, according to the Solar Energy Industries Association (SEIA), solar costs have fallen by 70 percent since 2010! These price declines have come as the solar industry matures. Just like with computers over the past decades, as it becomes easier to manufacture high-quality products, costs have come down over time.

Maintenance costs for solar panel systems

One factor that doesn’t have much impact on the cost of solar is maintenance. In general, solar panel systems require very little maintenance over their lifetimes. You may decide to pay for a professional cleaning once every now and then, and that can cost a few hundred dollars, but generally, you shouldn’t worry about upkeep.

How to lower your solar installation cost

Solar panels have a high upfront price tag, but it’s worth it. If you’re looking to lower your upfront cost, you have a few main options:

1. Finance your solar panel system

If upfront cost is a concern, there are alternatives to paying for solar in cash. Solar financing options like solar loans and solar leases are viable options to help you lower your upfront costs.

2. Install a smaller system

Knocking a few kilowatts (kW) off of your system size is one way to get a lower overall price. However, if you can’t offset all of your electricity usage, you’ll be missing out on savings over your system’s lifetime.

3. Choose less expensive equipment

Another system design choice you can make is to use less expensive equipment. For example, SunPower solar panels are some of the priciest options, but if you value overall price enough, it might be worth it to install a less expensive (but still high-quality) brand of panel. The same logic applies for inverters, racking and even your installation company.

Concerned about the upfront cost of solar? Check out community solar

A community solar project is a large, central power plant whose electricity is shared by multiple properties. Community Solar provides many of the benefits of rooftop solar, but there’s no upfront cost and less commitment required. By subscribing to a local community solar farm, you’ll still reduce your electric bill and climate impact without installing a single solar panel! Visit the EnergySage Community Solar Marketplace to explore projects near you.

4. Use EnergySage to shop for solar!

The best way to lower your solar installation cost? Shop on EnergySage! Typically, EnergySage solar shoppers find prices up to 20 percent lower than market averages. When you compare quotes on the EnergySage Marketplace, installers compete for your business with customized, competitively priced solar quotes. Sign up today for free to get started.


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