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What is the Cost of a Solar System?  

Close up of new building with black solar panels

The price of solar systems has been falling fast over the last decade or more. While solar panels were prohibitively expensive once, they are now much more affordable. The actual cost of solar systems has dropped by over 80% since 2010. But, inflation has driven up the price of silicon, silver, and glass. With supply chain problems too, solar systems could see price increases.

However, when looking at the breakdown of the total cost of having solar panels installed, you need to look deeper than just the price tag itself. A typical residential system will, on average, cost $3 – $5 per watt, according to NerdWallet. This means a 5kW solar system would cost up to $25,000. But, different-sized homes need suitable systems, and many will cost less than this. 

Also, there are many other aspects to take into account. This is an estimate of the gross price, but there are rebates and incentives to factor in. Plus, there are hidden benefits that can be realized later on.

How can you break down the price of solar power?

It would be easy to get a quotation from a solar panel installation company and accept that is the final cost. But, for a more accurate picture, you need to delve much deeper.

The true solar cost breakdown will include such areas as labor, sales tax, and potentially, rebates and tax credits. Below are a number of the factors surrounding solar costs.

  • Solar system cost
  • Type of solar system
  • Labor
  • Net metering
  • Sales tax
  • Property tax
  • Rebates
  • Utility bills
  • Tax credits
  • Value of your property

Solar system cost

Obviously, this is the biggest cost when installing a solar system. You will be making a considerable investment when you install solar, and this is a concern for anyone switching to greener energy. Homeowners are increasingly opting for the affordable and efficient Gold Coast Universe Solar 5kW solar system for its performance and long-term savings on bills.

Labor charges

You will likely receive a quote including labor charges, but you could lower this by carrying out the installation yourself. However, it is probably best left to professional solar installers.

The type of solar system

The system you choose will affect its price. Depending on the brand, and the efficiency of the panels, prices can vary quite substantially.

You may be able to benefit from a shared solar system in some circumstances though. Living in a condo is good during high inflation periods which are currently occurring. And you can make condo living more affordable by recruiting neighbors into a shared solar panel installation.

Now the costs involved are out of the way, you can look in a little more detail at how you can reduce the price of a solar system. This is where you can truly break down the cost of a modern solar installation.

You may benefit from net metering

When you use electricity you pay your provider for only what you use. But, when you generate solar energy it is possible to produce more than you need. If your system is out-performing your needs then you can sell the excess electricity to your provider. For this to work your system must be an on-grid type. 

Sales tax is non-existent in some states

Nearly all states in the US have a sales tax, with the highest being 7.25%. The majority of states also have a rule in place that removes sales tax from solar panel purchases. 

Five states, though, have no sales tax at all, therefore anyone buying a solar system there should find the asking price lower than the average.

 Newly build houses with solar panels attached on the roof against a sunny sky

No increases in property tax

When you make significant improvements to your home, your property tax will rise accordingly. However, If you move quickly you can benefit from current rulings that allow solar panels to be added to a home with no additional property tax increases.

These tax exemptions differ across the country and some are due to expire this year, while others are in place until 2025.

Utility suppliers and local government rebates

Many places have some rebate systems operating. A number of local energy departments have devised programs to incentivize those from lower-income households to switch to solar power. 

Depending on your income and location, you could benefit from a rebate worth between 40% and 60% when a solar panel system is bought and put into place. There is usually a cap on the maximum rebate allowed, but this still allows thousands of dollars in savings.

Some utility suppliers also give rebates when customers install solar panels. The amounts range from hundreds of dollars to thousands depending on who your provider is. This is a serious factor when looking at what a solar system truly costs.

Utility bill reductions

Even if you don’t power your home solely from solar energy, you will still see savings on your electric bill. It has been estimated that electricity will rise by up to 35% in 2023. And this is likely to see a continued rise in solar panel installations. 

Between 2020 and 2021, solar panel installations grew by 34%. This is only taking into account residential systems, not commercial buildings. As the cost of living bites harder and harder, utility bills will become harder to pay. This has led to many people struggling through cold periods scared to use heating.

An efficient solar energy system will reduce the need for electricity bills, and once it has paid itself off will become profitable.

You can claim federal tax credits on solar energy systems

The US government is an advocate of green energy, and they have in place a tax credit system for solar panels. If you decide to switch to solar you can claim a 30% tax credit on the purchase price. One more serious factor when determining what solar panels actually cost.

Your home may be worth more

Not everyone finds solar panels particularly attractive, but the benefits do appeal to many house buyers. If you would like to make your home more eco-friendly, then using sustainable energy is a key area. Energy-efficient homes sell for more, and they spend less time on the market as buyers are more and more seeing this as an essential feature. 

What is the cost of solar power in general?

So, as you can see there is far more to the eye when pricing up solar panels than what the manufacturer is charging. The system you choose will be a major factor, as will the number of panels you need. But, aside from paying for installation, there are a few ways to reduce the overall cost.

To break down the cost of any solar installation you need to calculate along these lines: The cost of your solar system + labor – qualifying rebates – federal tax credit – net metering credits – the cost of electricity = true cost.

But, even then you need to take into account the higher savings you make when the system has paid for itself, and the potential rise in your property’s value. The lifespan of your system will account for how much you save also.


Although you will initially be faced with a price that may be worrying, a solar panel system will eventually pay for itself. Once this happens it will technically turn profitable, especially if you are using net metering.

Another benefit of a solar system is that you will be doing something to improve the environment. When you use green, sustainable energy, you are helping to improve air quality and reduce gas emissions. This is something that can’t be included in the cost breakdown of a solar installation but is still invaluable.