Solar Tribune

Costs and Savings of Solar

The improving economics of solar panels continue to draw in more and more homeowners to the residential solar marketplace.

Let’s take a look at some of the basic financial considerations to keep in mind when considering a residential solar energy system.

How Much Will I Pay?

The price of installing a solar energy system in the U.S. varies based on location, but here are some baseline assumptions to help get an idea of what the average residential solar energy system will cost you.

-Avg. price of solar install (per kWh): $2.80-$3.80

     Multiplied by

-Avg. size of a solar energy system: 5 kWh (5000 watts)


Estimated upfront cost (before tax credits): $14,000 to $19,000

Owners of solar energy systems are able to shave off a good bit of the initial upfront expenses thanks to attractive federal and state tax credit programs. For instance, the federal Investment Tax Credit (ITC) allows owners of solar panels to deduct 30% of the install costs from their federal taxes. Visit our solar incentives page to learn more about solar-based tax credits and incentive programs.

After accounting for the ITC, the average upfront cost of a solar panel install can be reduced down to $9,800-$13,300. Additional state tax credits can drive that cost even lower.

There are a number of websites, like and, that offer a more detailed state-by-state snapshot of what a solar energy system is likely to cost you based on where you live. To compare the prices of solar companies us our quote tool, see our guide to the Top 10 Solar Companies in the U.S.

How Much Will I Save?

Regardless of whether you buy or lease your solar panels, you will enjoy serious energy cost savings over the life of the panels that will make your investment more than worth it.

Your annual energy savings from having a solar energy system will vary based on your location, electricity usage, and other factors. Still, the typical payback period for a residential solar system is between 5-10 years.

-Average annual electricity use in U.S. (2016): 11,000 kWh

      Multiplied by

-Average national electricity rate (Sept. 2017): $0.13 per kWh


Average annual household expense on electricity: Over $1,400

Using those assumptions, a solar energy system that costs between $9,800 and $13,300 after federal tax credits would pay for itself in under 10 years. From there, your solar panels would essentially be making you money by reducing your future electricity costs. Solar panels can typically last for 25-30 years, so your savings could potentially be significant.

Assuming annual home electricity costs of $1,400, a 5 kWh solar energy system costing $9,800 would be paid for in 7 years, while a system costing $13,300 would be paid for in 9.5 years.

After payback, a typical 5 kWh system with a useful life of 25 years would result in energy savings ranging from $21,700 to $25,200. The post-payback savings of a system with a 30 year useful life would be even greater, ranging from $28,700 to $32,200.

Solar homeowners can further improve their financial picture by taking advantage of net metering, a process that allows you to sell excess energy back to the grid.

It is worth noting that the above calculations are based on a static assumption of annual household electricity costs being $1,400. In reality, the cost of residential electricity continues to outpace the rate of inflation, with no signs of letting up. Since 2003, the average price per kWh of residential electricity increased by almost 50%.

Utility rates will assuredly continue to increase, which only further underscores the tremendous cost savings that can be realized by embracing solar energy.

The numbers are clear, both now and into the future – solar panels are a wise financial investment for the energy-conscious.