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Key Points
- The price of solar includes soft and hard costs, including design services, local permitting, panels, installation labor, components, and maintenance.
- Solar incentives and rebates such as the Residential Clean Energy Credit make solar less expensive.
- Buying options for solar panels include cash, financing, leasing, or a Power Purchase Agreement (PPA).
Solar costs FAQs
Calculate your payback period by dividing the total system cost or quote by your average annual electricity bill (average monthly bill times 12 months). If you apply for the 30% federal tax credit, multiply the total cost by 70%.
Payback period in years: Total cost ÷ annual electricity cost = number of years
Payback period with tax credit: (Total cost x .7) ÷ annual electricity cost = number of years
The average payback period is 6–10 years. Solar panel return on investment is based on total cost and your average monthly electricity bill. Suppose you have a lower total cost and a higher monthly electricity bill. In that case, your payback period will be shorter than someone with a higher total system cost and a lower monthly electricity bill.
You can pay for solar panels in various ways, such as:
• Cash
• Financing
• Lease
• Power Purchase Agreement (PPA)Cash and financing are the only options that let you claim the 30% Residential Clean Energy Credit. Leasing and PPAs may be less money down but you will have a minimal return on investment.
Solar financing means paying for a solar system by borrowing money from a bank or other lending institution. Financing options include a solar loan, a home equity loan, or a home equity line of credit (HELOC). Financing takes the total cost of the solar system and breaks it into monthly payments with interest. A down payment may be required depending on the financing terms.
