Upfront Cost and Payback Period
Installation costs varies by location, but it is generally around $2.80 to $4 per watt for residential installations, and $2.20 to $3.00 per Watt for small commercial installations.
Price per Watt usually goes down when adding panels, with a minimum of 8 panels. There is typically a base price for standard equipment installed on an asphalt shingle roof with at 18° to 30° tilt, plus adders for equipment upgrades or roof conditions.
The price sheet that salespeople quote from may look something like:
SolarEdge HD Wave ac-coupled inverter with Hanwha 400W panels
8 panels (3,200W) $3.80/Watt or $12,160
12 panels (4,800W) $3.40/Watt or $16,320
16 panels (6,400W) $3.00/Watt or $19,200
20 panels (8,000W) $2.80/Watt or $22,400
24 panels (9,600W) $2.70/Watt or $25,920
Panasonic 400W panel upgrade, add .20¢/W
Enphase microinverters, add 25¢/W
SolarEdge EnergyHub DC-coupled inverter, add $1,875
Roof slope of 31° - 35°, add .10¢/W
Roof slope of 36° - 40°, add 20¢/W
Concrete tile roof, add 20¢/W
Metal roof, add 20¢/W
Flat roof, add 30¢/W
Over 2 stories, add 10¢/W per story
Mesh critter guards, add $250 per array
Ground mounting & 20' of trenching, (12kw minimum) add .90¢/W
EnergyHub inverter, Backup Interface & LG-10 Battery, add $14,000
EnergyHub inverter, Backup Interface & LG-16 Battery, add $18,000
This assumes a Northern California location. For Southern California, subtract 10¢/W. For Arizona, subtract 20¢/W. For Michigan, add 25¢/W.
Cost per Watt is a convenient metric to compare installer quotes. The most important number is ultimately cost per kWh the system generates compared, to what your utility charges. Solar enables you can lock in kWh cost for 25 years or more, while utility rates steadily rise 2% to 6% annually.
Battery backup installation cost depends primarily on the chemistry used and kWh storage capacity. A popular package for SolarEdge customers is a LG-16 battery paired with a SolarEdge Backup Interface & upgraded, DC-coupled SolarEdge Energy Hub inverter. This 16kWh of storage package can range from $17,000 to $24,000, or $1,557 to $1,063 per kWh.
All cost estimates are before the 30% federal tax credit on solar and battery installations, any manufacturer rebates, and any state or regional incentives.
Payback period wiil depend on installation cost, solar access, cash vs financing, and whether your utility employs Net Metering or Net Billing. A typical 6.4 kWh system in Northern California had a payback period of 5.5 years when under Net Billing. This increased to 8 years after Net Billing was implemented in April of 2022. Your installer will perform an analysis using remote tools like Aurora or OpenSolar to lay down panels on available areas. The software will account for solar access, equipment efficiency, roof tllt, etc.
Net Metering vs Net Billing
The cost of installation varies by location, but it is generally around $2.80 to $3.80 per watt for residential installations, and $2.20 to $2.90 per watt for small commercial installations.
Net Metering credits excess solar energy at the same rate as energy being consumed. Homeowners generating excess kWhs receive a credit on their energy bill at the same rate as when they purchase kWhs. This uses the grid like a battery, storing power on long, sunny days and buying back at night and in winter when, energy consumption far exceeds production. The credits roll over monthly, and there is a annual True-up bill. If your system is sized correctly—equalling consumption—your True-up should be at or near $0, even though solar self-consumption may be 50% or less.
Many utility companies, especially PUCs (Publicly Owned Utilities) have complained that solar installs use the grid extensively without paying, transferring grid maintainance costs to those without solar. Some have successfully lobbied the regional authorities to replace Net Metering with Net Billing. Most recently, California implemented Net Billing in April of 2023.
With Net Billing, homeowners sell excess production to the grid at a predetermined rate roughly equal to what the utility would pay a large energy generator a rate much lower than when the homeowner purchases energy from the grid. Excess solar energy is essentially “billed” to the grid at this lower rate. The diffence is stark, 6¢ - 8¢ with Net Metering vs 16¢- 38¢ per kWh with Net Billing. If your utility employs Net Metering, go solar before circumstances change!
By intention, Net Billing pushes solar installations to include battery backup and store excess production, rather than giving it away cheaply. That expensive battery option starts to make more sense, and impacts the payback period much less, if at all.
Increased self-consumption through local battery use reduces pressure on the grid. With those pressures increasing to accommodate EVs and the overall energy transition, relieving the grid and your reliance on it simply make sense for everyone.
The Falling Cost of Solar
If you had a solar quote years ago, those numbers are no longer accurate. Everyone's solar access has essentially increased, making formerly difficult scenarios like a east-west roof orientation pencil out nicely.
According to the National Renewable Energy Laboratory, the average installed cost of solar photovoltaic systems in the United States decreased by about 70% from 2010 to 2020, making solar energy more accessible and affordable.
Manufacturers improved the efficiency of solar panels, increasing the amount of energy generated from each single panel, and made them more durable and reliable, reducing maintenance and repair cost. Inverter manufacturers have improved the efficiency of solar inverters, reducing the amount of energy lost during the conversion process. More affordable and efficient battery storage systems has also contributed to the cost reduction of solar installations.
As demand increased, production of solar panels, batteries, and racking became more efficient due to economies of scale, reducing per-unit cost. And as more solar installations are completed, installers became more experienced and efficient, reducing installation costs.
The rise of solar financing options made it easier for homeowners and businesses to install solar systems with little to no upfront costs. Third-party ownership models, such as solar leases and power purchase agreements, allow customers to pay for the power generated by the solar system rather than owning the system outright.
Federal and state tax credits and rebates have incentivized homeowners and businesses to invest in solar energy, making it more affordable. Some states and municipalities have implemented net metering policies, which allow solar customers to sell excess energy back to the grid, further reducing the cost of solar energy.
As technology advances solar installations costs will continue to decrease, though not as rapidly.