Why Are Solar Panels So Expensive? Solar Costs Explained

Why are solar panels so expensive? You probably asked yourself this question after learning the steep price of installing them at home. After all, one of the benefits of solar energy is saving money, not spending more!

In essence, the large investment homeowners have to make when installing solar panels stems from two factors: the cost to manufacture solar panels and the cost to install them

If you’re one of the people who wonder, why are solar panels expensive? and want to know if there’s any way you can reduce the cost, keep reading this article. 

What Are the Costs of a Solar Installation?

So, why are solar panels expensive? There are many reasons why solar panels are so expensive. And one of the variables that have a direct correlation is the installation cost.

The national average cost to install solar panels in the U.S. is about $15,000 ($3 per watt), excluding solar tax credits and other incentives, which can reduce costs by 30%. This average cost can be broken down into two large categories: hard costs and soft costs. 

Hardware is usually the largest expense, accounting for 46% of the average solar panel, and covers the following solar equipment: 

Type of Panels: The more efficient the solar panel, the more expensive it is. 

Type of Inverter: Solar panels produce electricity as a direct current, so you need a solar inverter to convert the electric power into an alternating current, which is suitable for home appliances. 

Type of Mounting System: To be installed safely on your rooftop, solar panels are mounted on special racking. A more complex mounting system will increase your costs. 

Another part of the equation is soft costs, which surprisingly account for 54% of why solar panels are so expensive. When we talk about soft costs, we mean all the costs your installer must incur, from marketing and permitting fees to installation labor and inspection fees.

Here’s a detailed breakdown so that you can understand the cost to install solar panels better.

What is the breakdown of cost in an installed residential solar system?Cents/Watt
Tier 1 Solar Panels0.67
Inverter0.26
Racking and Balance of System0.26
Sales and marketing0.39
Installation0.62
Permitting and Inspections0.13
Installer Margin0.26

Cost to Manufacture Solar Panels 

The cost to manufacture solar panels is directly influenced by the technology being used to produce them. 

As you might know, most solar panels are made of solar cells. The production of these cells takes the manufacturer a great amount of energy and investment as it’s necessary to shape raw silicon (a conductive material) into uniformly sized silicon cells. Most manufacturers in the market produce monocrystalline or polycrystalline solar panels

Both are great options when going solar, with the main difference being the type of silicon cells they are made of. 

Monocrystalline solar panels are mostly regarded as a premium solar product. This is because they have solar cells made from a single crystal of silicon. As the cell is composed of a single crystal, it gives the electrons more room to move for a better flow of electricity. The advantages of monocrystalline panels are higher efficiencies and appealing aesthetics.

Polycrystalline solar panels have solar cells made from many silicon fragments melted together. Because there are many crystals in each cell, there is less space for the electrons to move. Polycrystalline solar panels generally have lower efficiencies and tend to have a blue hue instead of the black hue of monocrystalline ones. The main advantage is the lower price tag. 

(See Also: Panasonic vs LG Solar Panels, Which One Should You Go With?)

Does the Installation Company Affect the Price?

In short, yes. While there’s a fixed average price for solar arrays in the US, there’s a large portfolio of solar companies in the country (31,162 to be precise), and each one offers different pricing options. 

The process of looking for the best solar company is tedious, and most homeowners usually need to check with several installation companies before committing to work with one. 

To make things a little easier, here are a few tips to help you find the best deal. 

  • Start by comparing the top installers in your area by considering what type of solar company they are, their review score, and how much they charge depending on the services they offer. 
  • Use an online solar marketplace to compare solar companies and find the most suitable one for your needs. In these websites, you can obtain competitive bids from multiple installers. This is also an excellent way to reduce the company’s “soft costs’ ‘ relating to marketing expenses since the installer isn’t investing time or money to get you as a customer. 
  • Take into account solar incentives when finding the best deal is solar incentives. To attract customers, most solar power companies often offer incentives, which can have a positive impact on the final price of your solar array. 

How Much Does it Cost to Maintain a Solar Installation?

Most solar systems require minimal maintenance to function properly, and homeowners need to take care of a few maintenance routines every year. To keep your investment in solar operating at peak performance, most solar panel companies recommend scheduling an annual inspection and twice-yearly panel cleanings.

Annual inspections are carried out by a local solar installation company and cost roughly $150 per inspection, across the nation. This is a service homeowners shouldn’t skip since annual inspections flag additional repairs you may need.

The second maintenance service homeowners need to schedule is solar panel cleaning. Most companies charge around $10 to $20 per panel to free panels of dirt and debris. If we use these estimates, homeowners with ten rooftop solar panels would spend $100 to $200 each year to keep their system running smoothly. A family with 30 solar panels would spend an average of $450 and $750 to have their solar panels cleaned and inspected. However, the price may vary depending on factors, such as roof slant, home height, and system size.

Beware that extra repairs may be necessary if your solar panels have been severely damaged due to hard weather conditions (by heavy snowfall, for example). 

How Much Will I Save With Residential Solar Power?

The easiest way homeowners can see how much they save with solar energy is through their utility bills.  

If you have installed a typical 6kW solar panel in the United States, your average annual savings will be about $1,500. The good news is that the average American family actually spends the same amount when using fossil-fueled sources, so your solar array covers 100% of your needs!

You can also know how much you’ll save by calculating your solar payback period. The payback period refers to how long it takes you to get back the initial investment through the savings you make on your electricity bills. Calculating payback time is easy as you just need to divide the initial cost by the annual savings.

On average, a 6 kW solar panel installation costs $12,600 (applying the 26% federal tax credit), and the average annual savings are around $1,500. Using these estimates, the average solar system payback period in the US is currently around four to eight years.

As you can see, there are many factors that influence the price of solar panel systems. 

Another option that we discussed in a different article is the question of Leasing vs Purchasing Your Solar Panels. Check out this article that we wrote to help you navigate this question.

Hopefully, this article has helped you understand the question, “why are solar panels so expensive?’ and the main factors that influence their elevated price, like the cost of installation and the cost of manufacturing.

Besides the benefit of just being more knowledgeable about solar panels, knowing about these costs – or at least being aware of them – can help you get the best deal for your home, too.  

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