Solar System Cost For Home
The Solar Market Insight Report is a quarterly publication that describes the current state of the US solar industry, providing the latest data on installation volumes and costs.
The Solar Energy Industries Association (SEIA) and leading consultancy firm Wood Mackenzie work together on each edition of the SMI report, and the Q3 2022 edition was published on September 8.
Here we will summarize the main points from their latest report, focusing on the residential solar market.
- Across all market segments, the US solar industry deployed 4.6 gigawatts (GW) of capacity during Q2 2022, and the accumulated solar capacity throughout the country now exceeds 130 GW.
- To put this figure into perspective, the US now has enough photovoltaic capacity to provide electricity for 23 million households.
- Residential solar panel system costs increased by ~6% in Q2 from Q1, averaging $3.25 per watt installed, before incentives.
- A typical 6-kW PV system now costs $19,500 before the incentives.
Solar PV remains the fastest growing electricity source in America, representing 39% of power generation capacity installed during the first half of 2022.
Wind power was in second place, representing 28% of new power plant additions, while natural gas was in third place with a 26% share.
All other generation sources account for the remaining 7%. Solar and wind power combined account for two-thirds of generation capacity installed during Q1 and Q2 2022.
Did you know? Three states have taken the lead in solar installations between 2022 and 2022: California, Texas, and Florida.
During the first half of 2022, California installed 2,127 MW, Florida installed 1,325 MW, and Texas installed 1,231 MW.
April-June 2022: Another Record-Breaking Quarter for Home Solar Power
Home solar power has been breaking records in the US for five consecutive quarters. According to the latest SMI report, homeowners added 1.36 GW during Q2 2022, which represents nearly 180,000 solar installations.
The following table summarizes the solar PV capacity added by the residential sector during the last five quarters, which adds up to 5,808 MW.
|Quarter||2021 Q2||2021 Q3||2021 Q4||2022 Q1||2022 Q2|
|Home Solar Capacity Installed||974 MW||1,073 MW||1,156 MW||1,247 MW||1,358 MW|
Large-scale solar projects have been disrupted by supply chain issues, high inflation, and other external factors. The residential solar market has been affected much less, showing steady growth and breaking records for five quarters in a row.
Over 50% of residential solar systems are being installed in three states, which added a combined capacity of 704 MW between April and June 2022.
California installed 459 MW of home solar power, Florida installed 134 MW, and Texas installed 111 MW.
According to SEIA and WoodMac, the two main factors driving home solar installations are high electricity prices and frequent blackouts.
Although the outlook is positive for home solar power in the US, the Solar Market Insight Report also identifies key challenges to overcome.
In general, installations have been slowed down by inventory shortages, skilled labor shortages, and slow utility permitting and interconnections.
In the case of California, home solar installations are expected to slow down next year as a consequence of the new net metering policy (NEM 3.0).
The power bill credits given for surplus generation will be drastically reduced, and new fees will be added for solar panel owners.
High inflation has also been a hurdle for the solar power industry, but this is compensated by rising electricity prices.
Solar panels have become more expensive during the last few quarters, but the cost of the electricity they save has increased at a faster rate.
Typical Price of a Home Solar System: Latest Data (2023)
SEIA and WoodMac gather all types of information from the US solar industry, and this includes the typical prices per market segment.
In the latest SMI report published in September, they estimated an average cost of $3.25 per watt for home solar systems, which means you can expect to pay around $19,500 for a 6-kW photovoltaic system.
The following table summarizes the reported prices for the last five quarters, along with the percentage increase in each case:
|Quarter||2021 Q2||2021 Q3||2021 Q4||2022 Q1||2022 Q2|
|Home Solar PV Cost||$3.03/W||$3.06/W||$3.10/W||$3.07/W||$3.25/W|
|% Change from Last Quarter||+3.1%||+1.0%||+1.3%||-1.0%||+5.9%|
The total price increase in 2022 Q2 from 2021 Q2 is $0.22 per watt installed (+7.3%). However, if you check electricity price data from the Energy Information Administration, you will notice that the US average home tariff increased from 13.85 to 15.42 cents/kWh during the same period (June 2021 – June 2022). – This represents an 11.3% increase in kilowatt-hour prices over 12 months, which exceeds the 7.3% cost increase for solar panels.
To summarize, solar panels have become more expensive recently, but the savings they offer have increased by an even higher percentage. Electricity prices are rising faster than solar PV system prices, which means their payback period is actually becoming shorter.
The Solar Market Insight report calculates average solar cost based on high-performance PV modules such as those with monocrystalline PERC cells. Their estimate considers all the costs involved in a home solar installation:
- PV modules
- PV inverter
- Electrical balance of system
- Structural balance of system
- Direct labor
- Design and engineering
- Permitting, interconnection and inspection
- Customer acquisition and origination
- Overhead and margin
You may find other sources that consider a wider variety of solar panels in their estimates, including cheaper and less efficient options, and this results in a lower average price.
Depending on where you live, you may end up paying a much lower price per watt of solar panel capacity. The prices reported by the SEIA don’t consider financial incentives like cash rebates, tax exemptions, tax credits, and Renewable Energy Certificates (REC).
Did you know? Financial incentives are given to the legal owner of a solar PV system. This means you can claim the incentives when purchasing a home solar system in cash or with a bank loan.
You get no incentives when using leased solar panels or when signing a Power Purchase Agreement (they are claimed by the solar lease/PPA provider).
US Solar Power in 2022: Main Challenges and Opportunities
2022 has been a unique year for the US solar industry, bringing both major challenges and excellent opportunities.
The SMI report also provides a market analysis, forecasting how the solar industry could behave in the near future based on these external factors.
The Inflation Reduction Act, which was signed on August 16, provides generous incentives for solar power and renewable energy in general. There is a long list of incentives for homeowners, but the main points can be summarized as follows:
- The solar federal tax credit was increased from 26% to 30%, which was the incentive rate available before 2020.
- The federal tax credit was also extended for 10 years. The expiration date is now January 2035 (previously January 2024).
- Energy storage systems now get their own federal tax credit, completely independent from the solar tax credit. Previously, only energy storage systems getting 100% of their charge from onsite solar panels would qualify, limiting their applications
There are now federal tax credits for solar manufacturers, which can help reduce the cost of US-made solar products. Before the IRA, tax credits were only available for end users: homeowners and businesses who installed solar panels.
SEIA and WoodMac estimate that US solar installations will increase by 40% above their previous forecast for 2023-2027, because of the Inflation Reduction Act. — This represents an additional 62 GW of capacity that would not have been developed without the incentives introduced by the Act. In the case of residential solar power, the growth outlook has been adjusted upward by 7 GW.
However, the US solar industry faced uncertainty related to import tariffs during the first months of 2024.
The Department of Commerce started an investigation related to import tariff circumvention in four southeast Asian countries: Cambodia, Malaysia, Thailand, and Vietnam.
According to a petition filed by a small US-based solar manufacturer, Chinese companies were allegedly using these four countries to avoid anti-dumping and countervailing duties (AD/CVD). — These countries provide 80% of US solar imports, and the industry was suddenly dealing with the possibility of new import tariffs up to 250%.
US solar installations were drastically slowed down during the first half of 2022, since many shipments were suspended until the import tariff issues were clarified. Fortunately, the Biden Administration announced in June that no new tariffs would be imposed for two years.
US solar companies don’t have to worry about new AD/CVD tariffs in the near future, but those who depend on imports are facing another challenge: Compliance with the Uyghur Forced Labor Prevention Act (UFLPA), which came into effect on June 21.
- To bring their solar panel shipments into the US, they must prove that no forced labor is involved, and this includes the extraction of raw materials.
- Since PV manufacturers depend on multiple sources when processing solar-grade polysilicon, obtaining the documentation necessary to meet the UFLPA is very difficult.
Home solar installations have been affected less by these issues, since installers can simply switch to local module brands when imported products are in short supply.
Large developers don’t have this flexibility, since utility-scale solar farms are much more sensitive to price and switching to another brand is unfeasible when thousands of PV modules are already on the way.