The growth of the solar panel industry is undeniable, when compared to other technologies in the share of total U.S. electrical generation, solar has risen from just 0.1% in 2010 to 5% today. As the popularity is growing, the cost is shrinking. The cost for residential solar panel systems has dropped a remarkable 67% since 2010 according to the National Renewable Energy Laboratory (NREL). The current industry average cost is between $3 to $4 per watt with the average size of a solar panel system being between 5 and 6 kilowatts (1000 watts). Here’s the breakdown of what it typically costs to install a system.
$3.26 (per watt) x 5,000 (watts) = $16,300 per system
This is the average before the subtraction of 30% of labor and installation costs from the ITC tax credit.
When it comes to solar panel installations, there are two costs to factor: Hard costs and soft costs. We'll discuss the differences between both below.
In the chart below you can see the overall cost decrease. Notice that the reduction comes mainly from the price of the panels themselves rather than the soft costs. The soft costs typically account for 64% of a new solar system.
Solar Panel Installation Hard Costs
The hard costs account for the hardware of a system: the physical products that are installed. In fact, the solar panels themselves only cost about 25-30% of the total system cost. The other hard costs include
- A solar inverter
- Solar mounting and electrical equipment
Solar Panel Installation Soft Costs
Soft costs are comprised of the administration costs for the company, customer acquisition, marketing, system design, permits and fees for connecting to the grid, and the labor for installation. Though the soft cost price has declined about 50 percent since 2010, the U.S. Department of Energy Solar Energy Technologies Office estimates that it will need to drop another 60-70% in order for solar to be a more affordable electricity option across the country.
The soft cost price percentages in relation to the total price are small but add up and are necessary to keep installation businesses up and running.
The truth is, now is the best time to look into switching to solar. The federal solar tax credit has gone through several revisions in the past few years. Since its inception in 2005, the credit was to end for residential solar customers in 2024. However, the Inflation Reduction Act reinstituted a 30% incentive for another ten years. Additionally, this act made significant investments into American solar manufacturing, which means we can expect prices to sink even lower. Because of this, the long-term savings of solar are more in reach than ever.
Solar panel installation costs can vary as every state and every solar installation company differs. At SOAR Energy, we only seek to work with the best solar panel installers to assure long-lasting satisfaction and benefits. Get a customized savings plan to see what solar panel installation costs will be in your area and see if solar is right for you.