Why are solar panels so expensive?

Are solar panels expensive? Yes! In fact, the average cost of installing solar in the U.S. is about $20,498 in 2022!

Going solar might be one of the most effective ways to power your home with clean, renewable energy, but all that efficiency comes at a price. But while the sticker shock is definitely real, there is a reason for all the expense. Here is why solar panels are so expensive.

The cost breakdown of solar panels

As you might expect, solar panels are high-tech pieces of equipment. There’s a lot that goes into the manufacturing and installation of panels, all of which add to the overall cost. Of course, Uncle Sam also wants to have his say, so be sure to leave some room for permitting and inspections on top of everything else. 

If you want to know where all your hard-earned dollars go when you install solar on your home, here’s a quick solar cost breakdown.

High-cost manufacturing processes

High-tech means difficult and expensive manufacturing processes. Just to build a solar panel requires advanced manufacturing techniques along with expensive raw materials, like lithium for the solar batteries and high-grade silicon for the panels themselves.

Here’s a quick rundown of the main components that go into creating a fully functional solar array:

• Solar panels
• Inverters
• Racking and balancing system
• Wiring
• Solar batteries (if applicable)

If the little cell phone in your pocket costs $1,000, just imagine the cost of pure silicon solar panels, high-tech inverters and balancing systems, and enough wire to wrap around your house a few times — and that’s not even counting for high-capacity solar batteries.

Once all is said and done, the hardware alone makes up about 46% of the cost of installing a solar array.

Installation and labor

It’s not easy to install all that high-tech equipment. It takes teams of skilled professionals to handle such delicate equipment and ensure it’s installed properly. That’s why the installation and labor can easily make up almost a quarter of the entire cost of going solar.

Installer margins

The solar company you choose to procure and install your solar panels is a business, after all. They need to make money, too. In addition to the hardware and labor costs, there’s going to be a small installer margin to keep the company running.

In most cases, installers charge about 10% to keep their business afloat. It’s not a massive addition to the cost of going solar, but it’s still something! 

Sales and marketing

Businesses also want to get their name out there. Whenever you see billboards along the road, ads on the side of your social media feeds, or marketing interruptions during your favorite radio channels, a business paid for that — and solar installers are no different.

Since they already spent money on sales and marketing, they need to recoup their costs (just like any business). It’s estimated that about 15% of the cost of a solar installation goes toward sales and marketing endeavors. 

Permitting and inspections

Finally, installing a solar array is a serious project that requires safety and zoning considerations. That sounds like a job for the government! And as with any activity involving the government, there’s going to be an additional cost. 

Around 5% of a solar installation goes toward inspections and getting the proper permits. It’s not much, but it still adds a bit to the final bill.

Tips to reduce the cost of solar panels

Solar panels are expensive, but that doesn’t mean it can’t be affordable. In fact, the cost of solar has drastically decreased over the past several years. Since 2010, the cost of installing a rooftop solar system has dropped by over 80%!

Of course, saying it’s much cheaper than it used to be doesn’t really help with a $20k-plus sticker price, but there are ways to reduce the cost of going solar to make it fit into just about any budget:

Shop around

The fastest and easiest way to reduce the cost of going solar is to simply shop around. 

Like any product, different installation companies charge different prices. Take your time to shop for the one that offers the best deal.

Remember, the best deal isn’t always the cheapest. You get what you pay for. If you choose the cheapest option, you’ll likely end up with low-quality equipment that either isn’t efficient, won’t last, or a combination of both!

Do your research to find the happy balance between cost and quality. Spending a bit more on quality will pay off in the long run.

Look for incentives

Going solar is good for the environment and the country. To make solar more affordable for homeowners, the federal, state, and even local governments across the U.S. offer several incentives to reduce the cost of solar. 

The most popular solar incentive is the Federal Solar Tax Credit (ITC). It’s a 26% tax credit on any solar system installed by the end of 2022. (It drops to 23% in 2023.) That means if you spend $20,000 on a solar installation, you get a $5,200 credit when tax time rolls around!

There are also tons of state and local incentives available, including many low-income solar programs for earners that make below the average income in an area, so make sure you do your research before installing solar. Take advantage of all the incentives you can to reduce the cost of going solar.

Choose an affordable solar alternative

Installing panels on your home or property isn’t the only option for going solar. There are plenty of affordable solar alternatives that don’t have the massive sticker shock of a complete installation. One of the most popular is community solar.

With community solar, you can enjoy clean, renewable energy without the massive up-front cost or even installing panels on your home. For a small monthly subscription, you can get solar energy sent straight to your home to lower your energy bills (and help save the environment).

If you’re interested in going solar or joining a community solar project near you, find out what the best option is for your location and see how much you can save!