Home Articles Residential Solar Panel System Installation Costs by States and Expected Savings

Residential Solar Panel System Installation Costs by States and Expected Savings


Electricity prices are consistently rising across all states in the US. Fortunately, the residential solar installation costs are dropping considerably, as the solar sector is becoming more competitive. Solar power installation is more or less like transforming your home roof into a mini power plant. It will generate renewable energy and give you relief from ever-increasing utility rates.

You can plan to switch to solar panels because if you reside in states like Massachusetts, Minnesota, or New Mexico, where the rates of electricity are high ranging from $4.18 to $4.81 per Watt. You can expect to save on ongoing costs by going solar, because the effective costs can be lowered to about $3.66 to $3.92 per watt. Even if your utility costs are not that high, you can still save money by going solar.

  • Short-term saving – If your loan payment is lower than the current costs, you will start saving from day one of installation.
  • Long-term saving – As soon as, the solar loan gets paid off, there will be no more electricity costs thereafter. You can save thousands with solar systems in your lifetime i.e. 25+ years. 

To enjoy the consistent saving, you will also need to consider the solar panel system installation costs. These costs include two components –

Hard costs

It is the overall expense for installing physical components of the solar system, including the solar panel cost. The breakdown of the hard costs include –

  • 25% – Solar Panels
  • 10% – Inverter
  • 10% – Installation Charges
  • 10% – Wirings, mounts, & electrical components

Soft costs

The soft costs include –

  • 2% – Permit fee
  • 2% – Authorizing installation interconnection labor
  • 6% – Transaction Costs
  • 5% – Sales Tax
  • 9% – Installer profit
  • 11% – Installation Labor
  • 9% – Customer Acquisition
  • 9% Indirect Corporate costs
  • 12% – Supply Chain Costs

The soft costs percentage is extremely low, but adds up to 64%. Soft costs are associated with payments towards solar energy companies, marketing and customer acquisition, fees & permits to connect with the grid, system designing, and installation labor costs. Steps are being taken by some energy companies to lower the soft costs. It is done by organizing and streamlining the processes. Reduction of soft costs allows them to attract more customers. 

Solar incentives mean reducing the overall installation cost 

The solar incentive programs designed by the government are mainly to encourage homeowners to switch to clean and renewable energy sources. Solar Investment Tax Credit, the State Tax Credits, and Rebates are the switching to solar incentives that can reduce the overall installation cost. Homeowners can save more money in the long run by enlisting on special programs from utility companies, which allow them to earn through Net Energy Metering.

What is Net Energy Metering?

Switching to solar does not mean you will get disconnected from the grid [utility company]. With Net Energy Metering, you can earn energy credits for the energy solar panels generate. During the day, solar panels collect sunlight that gets converted into AC energy, which powers your home. 

Nevertheless, you will be unable to use all that energy generated during the daytime, as kids are at school and you are at work. You will have plenty of surplus power generated. This extra energy gets fed to the grid. Your meter will operate backward and thus you will gain credits at retail value from the utility company. 

At nights, the solar panels don’t generate energy but the utility company will repay the accumulated energy credits. Meter keeps track of energy sent to and got back from the grid. 

If your energy usage is equivalent to the energy generated from your solar panel system, then there will be zero electricity bills to pay. Thus solar system when connected with the net metering will reduce or nil your electricity costs. 

A rough estimate of the solar panel system cost 

Currently, the overall cost has dropped to 61%. In short, the average PPP or Price per Watt ranges around $3 – $4. At $3.50 PPW, a 5kW solar panel system size can cost around $17,500. This number is without the 26% Federal Tax Credit and other benefits associated residential solar rebates. This can make the overall installation cost drop down to below $15,000.

Here is statistics on Market Price per Watt on solar installations in different states – 

  • Arizona – $3.61/W
  • California – $4.31/W
  • Connecticut – $3.65/W
  • Florida – $3.45/W
  • Massachusetts – $4.18/W
  • Maryland – $3.93/W
  • Minnesota – $4.61/W
  • New Hampshire – $3.72/W
  • New Mexico – $4.82/W
  • Oregon – $3.79/W
  • Texas – $3.83/W
  • Wisconsin – $3.29/W

Expected payback period

After solar incentives and tax credits, a residential solar system installation costs around $15,000 to $20,000. An average home can save $2,000+ on yearly utility bills. For solar panel system installation in 2021, the payback period will be approximately 7 to 10 years. 

Also don’t forget that electricity costs will be consistently increasing, which will give you more savings. Thus the payback time will come sooner. As soon as you reach the payback period, you will keep saving for the solar panel system’s lifetime – i.e. more than 25 years!