Solar panel cost in 2025: It may be lower than you think

If you've been putting off solar because of sticker shock, this might change your mind: Most homeowners save $37,000 to $148,000 over 25 years. While your neighbors watch their utility bills climb year after year, your panels generate free electricity for decades.

The typical home requires about 12 kilowatts (kW) of solar energy to meet its electricity needs, which costs an average of $29,649 before incentives, according to EnergySage data. Depending on where you live, state and local programs can knock thousands off that price, and if you finance with a loan, many homeowners see immediate positive cash flow when their energy savings exceed their monthly payment.

Understanding solar costs means looking beyond sticker prices. Right now, systems average about $2.53 per watt before incentives. But this number varies depending on your location, roof characteristics, and the equipment you select. Your state's averages matter more than national numbers, and factors like shading, roof complexity, and local incentive programs all play a role in your final price.

Average cost of an 12 kW solar panel installation in 2025

If you live in a hot state and require a lot of air conditioning, you'll probably need a lot of solar panels. As we explain more below, most solar installers charge less per watt for larger systems, so your "unit" price could be quite low. 

We generally see this trend on EnergySage (though there are some outliers), with lower $/W pricing in warmer states and higher $/W pricing in colder states: Arizona has the lowest average cost of solar, while Wyoming and Nebraska have some of the highest prices. But, because you probably need a larger system in sweltering Arizona than in cooler Maine and New Hampshire, you may end up paying a similar price overall. 

There’s a lot that goes into the sticker price a solar installer charges you. Panels are just one part of the equation. It’s also worth understanding the costs that come from the business operations an installer needs to account for to stay afloat.

*Based on a $29,649 12 kW system before incentives. These are averages for the whole U.S. Costs will always vary from installation to installation. 
**Based on a 2021 study by the National Renewable Energy Laboratory (NREL). 

Solar equipment costs

The panels themselves are probably the first thing that comes to mind when you think about going solar, but solar panels represent less than a third of the total solar equipment costs. You can expect all required solar equipment, including supply chain costs and sales tax, to cost $13,650—about 46% of the total system price.

This price depends on the brand and quality of the equipment you select, and sometimes the bigger price tag is worth it: Investing in high-quality equipment can lead to better long-term savings. But reaching for the highest-priced panels often isn't the best choice. There are many high-quality options with varying price points. 

The type of panel you install also directly impacts the quality of your installation. Monocrystalline solar panels offer the highest efficiency and power output and are used in most home systems today. They're often more expensive than polycrystalline solar panels, but you need to buy more polycrystalline panels for the same amount of power, so your overall installation costs may be similar. Thin-film solar panels are the cheapest type of panel, but they aren’t often used for home installations due to their low production. They're a great option for RVs, campers, and DIY home setups.

Inverters can cost almost as much as solar panels depending on the type you select. They convert the direct current electricity your solar panels produce into alternating current that household appliances use. Microinverters and optimized inverters are similar in price but cost a few thousand dollars more than string inverters. If you have a complex roof with multiple planes or shading, it's usually worth it to select a pricier microinverter or an optimized inverter to maximize your system's production. 

Racking and mounting equipment attaches solar panels to your roof, but it's a relatively low-cost portion of the installation. You'll also need wiring to connect your rooftop system to the grid and your electrical panel, which can add a few thousand dollars. 

Installer costs

Another piece of the solar installation puzzle is the company performing the job. Solar installers charge varying amounts for their services. The final price they offer depends on their track record, warranty offerings, and internal operations. A well-regarded solar installer with premium warranty offerings will often charge more–and it will usually be worth the money. 

Installer costs are about the same as equipment at around $13,650 or 46% of the total installation. Labor is only about 7% of installer costs and profit is generally around 11%. Your biggest installer costs go toward sales, marketing, and overhead.

Permitting and interconnection

Permits and fees can add a few thousand dollars to your installation, accounting for about 8% of the total cost. You'll usually need a few solar permit documents, which your installer should handle. You'll also have to pay a fee for interconnection, which is the process of connecting your solar energy system to the grid. 

There’s some exciting work happening to lower the costs and the interconnection timeline. The Department of Energy’s SolarApp+ aims to make the interconnection process cheaper and quicker for everyone.

Besides the equipment and installer you select, the price you pay heavily depends on other factors related to your electricity use and property. The system size you need to cover your electricity usage, your roof's characteristics, and your location all significantly impact your cost of solar.

System size

It's pretty simple: Bigger solar panel systems produce more electricity and cost more money. But there’s also a Costco-esque relationship between system size and price, where larger systems generally have a lower average $/W. It’s like buying food in bulk: The overall price is higher, but the per-unit price is lower. It's not an exact science, but there's a pretty clear trend.

*This number doesn't match the average cost of solar because that number includes all quotes, not just those for 12 kW systems.

It's worth it to get a larger system that covers all your electricity use. You’ll cut your utility bill and save more money as a result. Zero-down, low-interest solar loans are also becoming common. They make it easier to buy a solar panel system that can fully offset your electricity bill so you can start saving immediately.

Roof and home characteristics

The complexity of your solar installation impacts the price you pay. The more direct sun exposure to your roof, the fewer panels you'll need to cover your electricity bill. If you have a south-facing roof that slopes at a 30-degree angle and has full sunlight exposure, installing solar on your home will be relatively easy and cost-effective.

If your roof has multiple planes, dormers, or skylights, solar will require more equipment and labor, driving up your costs. Big trees shading your roof will also set you back $300 to $1,500 to remove them or cut them back. 

You probably don't think about your electrical panel too much, but it's another key component of a solar panel installation. Sometimes, you might need to upgrade or rewire your electrical panel to go solar, which can add a few thousand dollars to your bill. As a rule of thumb, your electrical panel should be at least 200 amps to go solar. 

Location

Solar installation costs can vary depending on where you live. Some areas require larger system sizes to produce the same amount of energy as those with more daily sunlight. Other areas have higher electricity needs due to extreme temperatures. And, in some areas, you'll have access to better incentives, like state rebates and tax credits that can significantly lower your costs.

Solar is worth it for most homeowners because it eliminates or significantly reduces your electric bill. It's most helpful to think about solar panels as an investment. It takes an average of 10.5 years to earn back the money you spend on installing solar panels. After that point, the electricity from your solar panels is free. 

Most homeowners will save $37,000 to $148,000 over 25 years with solar. Your savings depend on a few factors, including your electricity rates and the cost of your system. You can calculate your break-even point, or solar payback period, by dividing the final cost (the total cost of your solar panel system minus any upfront incentives) by your annual financial benefit (the amount you save on electricity combined with annual incentives). The faster the cost of electricity increases, the shorter your payback period and the greater your savings will be.

Lower solar prices also drive shorter payback periods. Ten years ago, a home solar installation cost $3.36/W according to the National Renewable Energy Laboratory. That's 28% more than what we see on EnergySage right now. Solar prices did increase slightly in the last three years, primarily due to the pandemic-related equipment shortages felt in many industries. But, as of 2025, solar prices are the lowest they've been, so it's a great time to get quotes.

Solar incentives can help make solar a worthy investment

Tax credits, cash rebates, net metering, performance-based incentives (PBIs), and solar renewable energy credits (SRECs) are all ways you can get money back on a solar installation. Your eligibility for these types of incentives depends on where you live. Utilities, cities, and states can all offer solar incentives to people living in their service areas.

You shouldn't face any hidden costs with a solar installation, but there are a few additional expenses you may consider.

How you pay for solar impacts your total cost and long-term savings. There are three main ways to pay for home solar: 

• Purchase it with cash. Paying for your system upfront eliminates interest costs and gives you the best long-term savings. You'll own the system immediately and benefit from any available state or local incentives.

• Take out a solar loan. A solar loan may be right if you don't want to pay for a system upfront, but value ownership. Some solar loans don't require any money down, allowing you to start saving on day one. Since you'll own your system, you'll receive any available incentives. However, interest payments will reduce your overall savings compared to a cash purchase.

• Sign a solar lease. A solar lease or power purchase agreement (PPA) can be a smart choice if you want to keep your capital flexible for other investments or if you don't have access to state incentives. With these agreements, you pay $0 down and let the solar company handle maintenance. Since lease and PPA projects still qualify for the federal tax credit, a competitive provider should pass those savings to you through lower monthly rates. While your long-term savings will often be lower than with ownership, you'll preserve capital and start reducing your electricity bills immediately.