Explained: Why Are Solar Panels Expensive?

et's face it: plugging into solar power can cost a bundle. The high cost of PV panels often remains the main or even the only barrier for householders who want to power their homes with clean and renewable energy. Some people may even claim the price is not at all justified, as they don’t believe the savings solar panels offer are worth the initial investment. Now it's time to break down how solar panel pricing works and what determines the cost of a domestic solar system.

Why is going solar expensive & how much do solar panels cost?

So why is switching to solar expensive? To begin with, the solar industry relies on cutting-edge technologies and utilizes sophisticated manufacturing processes. The total cost of a solar system is made up of two components: hardware costs and soft costs. Hardware costs include the cost of solar equipment: PV panels, inverter, racking and mounting system, wiring, battery (if any), etc. The hardware usually represents about 46% of the total cost of solar, with 25% falling on solar panels and 10% on the inverter. The remaining 11% come from the cost of the electrical equipment and mounting. Soft costs are associated with installation labor, taxes, obtaining appropriate permits, and all operating business expenses such as administrative costs, sales, and marketing.

According to Solar Energy Industries Association (SEIA), the average cost of solar in the US is $2.94 per watt, which means a standard residential 5kW solar panel installation will cost around $16,000. But the price range is rather wide spanning from $3,500 to $35,000 depending on a complex array of factors. Now let's take a look at what affects solar costs and what to focus on when choosing a solar system for your home.

Solar panels are good because they harness renewable energy, reduce electricity bills, and decrease carbon emissions, contributing to a cleaner environment.

Cost of solar power by solar panel type

Crystalline silicon panels dominate the solar market with a share of about 95%. They fall into two main categories based on manufacturing technology: monocrystalline and polycrystalline. They differ in cost quite substantially, so you should carefully examine the pros and cons of each type to make an informed decision.

Apart from crystalline PV panels, there is one more panel type you can opt for, which is thin-film solar. A second-generation technology, thin-film solar cells are manufactured by depositing one or more thin layers of photovoltaic material on glass, plastic, or metal. These cells are sometimes 20 times thinner than traditional monocrystalline and polycrystalline options, which makes them flexible and lightweight.

How much do monocrystalline solar panels cost?

Monocrystalline panels are the most expensive solution currently available for residential solar shoppers. Monocrystalline cells are made from a single large crystal of silicon of high quality. This manufacturing method allows for maximum efficiency: monocrystalline panels can convert up to 24% of sunlight into usable energy.

The excellent performance results in costs higher than other solar alternatives: a 5kW system with mono-Si panels will cost between $5,000 and $7,500. One can also choose newer technologies such as PERC solar offering higher efficiency due to an extra layer added to the cell, or bifacial panels collecting the light from both sides of the panel. However, these cutting-edge solutions will certainly command a fair chunk of your wallet since they generally cost twice as much as conventional monocrystalline solar panels.

Are polycrystalline solar panels cheaper?

Polycrystalline panels, on the other hand, consist of multiple crystal grains of silicon combined in a single solar cell. These panels typically have lower efficiency ranging from 15% to 17% since the grain boundaries within make it harder for the electrons to travel within a cell and generate energy. As a result, poly-Si solutions are also less space-efficient, as you will need to install more panels for the desired energy output.

But despite a number of limitations, polycrystalline panels will put less pressure on your budget. Their average cost varies from $0.90 to $1 per watt or $4,500 to $5,000 for a 5kW domestic PV system.

How cheap are thin-film solar modules?

Thin-film technology offers quite a list of benefits, including great flexibility allowing the panels to fit most roofs, an easier installation process, and reduced production costs. But there’s a price to pay: thin-film solar panels are only around 11% efficient. But having said that, the technology is developing at a rapid pace, with TF cells already reaching lab efficiency of over 22%.

The average cost of thin-film panels is $0.70 to $1 per watt or $3,500-$5,000 for a 5kW solar power system, which makes them the least expensive solar solution so far. However, they are much less space-efficient and therefore rarely used in residential contexts.

Key factors affecting the price of solar

PV panel type is a big thing when it comes to understanding solar pricing. But now let’s dig a little deeper and see what else can affect the final cost of solar.

How much solar energy and solar panels do you need?

The cost of your PV system is directly linked to the number of panels required to meet your energy needs. To find out how many panels you have to buy to power your home, calculate your annual electricity consumption - the amount of energy you use over a year. Measured in kilowatt-hours (kWh), this number encompasses all your home electric appliances, such as lights, refrigerators, heating and cooling systems, chargers, etc. In the US, an average household consumes approximately 11,000 kWh of electricity per year.

Another important figure here is solar panel power rating, or in simple words, the wattage of a solar panel. It is measured in watts (W) and represents the amount of energy a PV panel can produce under ideal conditions. On average, residential solar modules have a power rating of between 275 and 400 watts.

You will also need to know a solar panel production ratio -  the estimated amount of energy a PV system produces over time (kWh) divided by its actual wattage (W). This number is largely based on how much sunlight your panels receive and normally ranges between 1.2 and 1.4. To find out how many panels you need, all you have to do is divide your annual consumption by the production ratio and then by the power rating. An average household needs 20 or 24 solar panels to cover 100% of energy usage.

How much solar radiation does your property receive?

Even though solar panels can work even in cloudy weather, they are still much more effective under direct sunlight. So if your roof is often shaded or obscured, you will have to install more panels for the needed output, which will certainly push the cost up.

You have to estimate the duration of the shading on your roof per day. Your solar installer will help you calculate the amount of shade falling on your roof every single hour by tracing the position of the sun. Based on this data, you may also be offered to purchase microinverters instead of a cheaper string inverter to minimize the shading losses, which would add up to the total solar cost.

The invention of the solar panel revolutionized energy production, harnessing sunlight to generate electricity sustainably and efficiently.

What solar equipment beyond solar modules do you have to buy?

While solar panels are still the most significant part of hardware costs, other elements of the solar system can greatly affect the final price. For example, you can choose a string inverter, which is connected to several solar panels downgrading the performance to the least efficient one. These inverters cost $0.75 per watt on average and are suitable for most residential systems.

But if your roof is partially shaded you may want to install microinverters instead. They are attached to each individual solar panel and thus keep the energy production of each panel at the maximum. Microinverters normally cost more than string inverters - $1.15 per watt on average.

If you want to augment your solar system with battery storage, be ready to pay a large premium.  The cost of most residential batteries currently ranges from $8,000 to $10,000, with some of the most expensive options reaching $22,000.

How can you reduce your solar costs with solar incentives?

As national and local governments seek to encourage homeowners to tap into solar energy, they offer a series of generous incentives and rebates. With the US solar tax credit, for example, homeowners can claim 30% of the cost of their solar energy installation. Some states and utilities also offer separate tax credits for going solar on top of the federal program.

By combining all these saving opportunities you may be able to offset a large proportion of your solar costs, so you should explore all the possibilities and apply for the programs you are eligible for.

Conclusion: There's a lot to factor in when costing up a solar installation

This is only a partial list of aspects you should take into account when estimating the cost of going solar. As you can see, it can vary greatly depending on how large you need your solar system to be, what challenges your location might pose, and what incentives you qualify for.

If you want to determine exactly what amount of investment a solar system would require in your case, you should research the technical possibilities and limitations of your property as well as the cost of the existing solutions on the solar market. And don’t hesitate to ask your solar installer to help you with your calculations.

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