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Founded in 2005 as an Ohio-based environmental newspaper, EcoWatch is a digital platform dedicated to publishing quality, science-based content on environmental issues, causes, and solutions.
A recent study from EcoWatch of 1,000 homeowners found that solar panels are becoming an increasingly popular energy alternative in the U.S., mostly due to homeowners looking for ways to lower their utility bills amid rising electricity rates.
The average cost of electricity rose from 13.2 cents per kilowatt-hour (kWh) in 2020 to roughly 14.8 cents in 2022. That might not sound like much, but that’s the difference between an average monthly utility bill rising from roughly $118 to $136 in just three years. And it’s only expected to keep rising in 2023.1
Homeowners are feeling the increase, with 79% of survey respondents admitting they’ve experienced financial stress due to their electricity bills. And, perhaps as a result, close to 42% of survey respondents said they’ve considered installing solar panels.
However, 60% of solar respondents said they think solar is too expensive. The price of going solar is also the top reason non-solar homeowners said they wouldn’t consider installing solar panels.
Are there ways to lower the costs?
Disclaimer: This article is for informational purposes only. It should not be relied on for and is not intended to provide accounting, legal or tax advice.
While the price of standard electricity rises, the average cost of solar panels has actually dropped more than 60% in the last decade.2 Still, there’s no denying it’s a hefty investment.
According to our internal data, the average-sized residential solar system in the U.S. comes with a $23,940 price tag. But that’s before applying any solar incentives.
For example, the Solar Investment Tax Credit (ITC) allows homeowners to deduct 30% of the total cost of their solar project from the federal taxes they owe. That lowers the average cost of a solar panel system to around $16,758.
Homeowners may be eligible for additional financial incentives that lower the cost of going solar, like state tax credits, rebates and net metering programs that grant solar users credits for the electricity their panels produce.
Other factors go into the cost of solar panels — like system size, geographic location and solar panel brand — that you can customize to better fit your budget.
Plus, pinned up against the rising cost of electricity, homeowners who go solar are expected to save more than $22,300 in energy costs over their lifetime.
Many homeowners see the average price tag of about $24,000 and assume that going solar is out of reach. But there are many ways to utilize solar energy on a budget, including:
We’ll discuss all the ways you can make solar more affordable in detail below.
Joining a community solar project is a great way to save on monthly electric expenses without having to front the cost of owning a solar panel system.
Community solar is a term used to describe solar panel systems that are shared by multiple consumers — that could be homeowners, renters or businesses. Everyone pays a share or subscription, and the electricity savings and other benefits are split among the community.
It seems not many people know about community solar. Our EcoWatch survey found that 41% of respondents had never heard of community solar, and another 33% had heard of it, but don’t know what it is.
There are two ways to join a community solar project: Purchasing an ownership share or paying a subscription.
No matter which option you choose, the electricity produced by the shared solar panels will be measured and subtracted from your utility bills at a percentage that corresponds to your membership.
Read more about community solar here.
Another way to save on solar is to join a group purchase by way of a solar cooperative, better known as a solar co-op. Through a solar co-op, 20 or more homeowners decide to go solar together and are often able to secure a discounted group rate from a solar installer.
When you join a co-op, you’re not only saving on a solar installation by attracting competitive bids from installers, but you’re also still able to capitalize on the financial benefits of being a solar owner (which we’ll discuss in more detail in the next section).
Aside from savings and financial incentives, an added benefit of going solar through a solar co-op is that the process is typically facilitated by a solar advocacy group, like Solar United Neighbors (SUN). Working with a group like SUN eliminates any of the complications that can arise from going solar and makes the process as smooth as possible.
Read more about the difference between solar co-ops and community solar here.
Most homeowners don’t have tens of thousands of dollars readily available to spend on a solar panel system, so many of them turn to solar loans to finance the expense.
Solar loans work similarly to car loans. After selecting a provider and solar equipment to install, you take out the loan to purchase a solar energy system and repay the borrowed money over time.
The typical solar loan payback period ranges between five and 10 years, allowing a borrower to enjoy over a decade of free renewable energy generated by their system after paying it off. Many loan providers offer low monthly payments or zero-money-down options depending on your situation. Here are the most common types of loans:
There is no shortage of solar loan providers, so don’t be afraid to shop around and find the best loan and interest rate. Your solar installation company will be your best bet, but you can also ask your local bank or municipality to learn more about your options.
Read our guide on solar loans.
As we touched on earlier, there are solar incentives available to homeowners who install solar. Depending on where you live, combining these incentives can lead to tens of thousands of dollars saved on your solar panel purchase.
All U.S. homeowners who install solar panels are eligible to receive the ITC, which leads to a 30% deduction on the total purchase price from your federal tax return. With the average system cost just shy of $24,000, most homeowners usually see a credit of around $7,000 when tax season comes.
In 2022, the Biden administration increased the ITC back to 30% of the total solar equipment purchase for installations through 2032. The expiration date for the credit was also pushed back from 2024 to 2035. However, it will decrease from 30% to 26% in 2033 and 22% in 2034, so it’s best to install sooner rather than later to get the biggest benefit.
Some states offer their own additional incentive programs for adopting solar similar to the ITC. These state tax credits cover a predetermined amount of the net cost of a solar energy system, usually between 10 and 40%, capped at levels ranging from $1,000 to $5,000.
Read about the top 10 best states for solar incentives.
Okay, so net metering doesn’t exactly lower the cost of your solar panels. But, it can lead to increased energy savings over time and therefore a shorter payback period for your solar system.
In short, net metering allows you to earn credits from your utility company for the excess energy your solar panels produce and send to the grid. Net metering laws vary across the nation, and the incentive amount can even vary by utility.
In most cases, you won’t be paid out in cash for your excess energy. But you can use the credits to use when your solar panels aren’t producing enough electricity to power your home, like at night or during inclement weather. So when you get your monthly bill, your net metering credits will be subtracted from your overall electric grid usage, leaving you with a much lower — or perhaps eliminated — utility bill.
Visit our page on net metering to learn more.
Many states and local municipalities offer property tax exemptions for renewable energy systems. Again, this won’t reduce the cost of your solar installation, but you will be spared from paying property taxes on your solar panel system, which is especially great because solar panels boost the value of your home.
Currently, 25 states also offer sales tax exemptions on solar equipment.3 With most states having sales taxes hovering around 4 to 7%, this can save homeowners over $1,000 on an average-sized solar system.
Click to read more about solar tax incentives.
Another way to shorten the solar payback period is by earning solar renewable energy certificates (SRECs). As of 2022, 38 states allow solar panel owners to earn SRECs for each megawatt-hour (or 1,000 kWh) of clean energy generated.4
Public utilities will purchase SRECS from you — in cash — to comply with the state’s Renewable Portfolio Standard (RPS) policies.
SRECs are a pretty sweet deal for homeowners, as you can just sit back, relax, and let your solar panels earn you cash.
Pro tip: When receiving a free quote for a solar panel installation, always ask your installer what incentives, rebates or discounts you may be eligible for and about the financing options available.
EcoWatch surveyed 1,000 homeowners across the U.S. to gather findings about solar panel ownership. For the purpose of the survey, all respondents owned their homes even if they had outstanding debt on their mortgage loans.
The age of survey respondents ranged from 18 to 54, with the majority falling in the 25 to 44 age range. The sample size was about 52% female and 48% male. The majority of respondents had a household income between $25,000 and $49,999.
This survey was conducted between July 14–15, 2022, using Pollfish.
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