The solar industry has seen exponential growth in the past decade and it is not going anywhere. Installations of PV systems grew by 130% in 2021 and are expected to grow even more in the coming years.
In that regard, the question is not whether or not people want to invest in a renewable energy system, but how much they can afford to invest. Installing solar panels in your home will be expensive, as you are probably well aware.
However, there are many different ways that you might be able to get them for free which we will outline in this article.
How Much Does It Cost To Install Solar Panels
Of course, when you consider how much one can save on energy costs, the initial investment might seem like a small price to pay. The average cost of a solar panel installation is about $15,000 for a 3kW system, which includes the solar panels themselves, mounting hardware, an inverter, and all necessary electrical components.
Solar panel costs by state
Solar panel costs in the United States are typically comprised of the purchase of equipment and installation services. If you want to learn more about local incentives and tax credits in your area, visit the Solar Energy Industries Association website.
The majority of the time, it is in your best interest to take advantage of state clean energy programs whenever possible because it lowers your upfront costs and reduces your payback period. The state with the most environmentally friendly policies is Washington, followed by Oregon and New Hampshire, according to our research.
| State | Starting cost for 6-kW system* | Average cost per watt** | 2020 federal tax credit value (26%) | 2021 federal tax credit value (22% |
|---|---|---|---|---|
| Alabama | $13,706 | $2.45 | $3,564 | $3,015 |
| Alaska | $13,454 | $2.41 | $3,498 | $2,960 |
| Arizona | $13,680 | $2.67 | $3,557 | $3,010 |
| Arkansas | $14,713 | $2.63 | $3,825 | $3,237 |
| California | $15,240 | $2.68 | $3,962 | $3,353 |
| Colorado | $17,100 | $2.44 | $4,446 | $3,762 |
| Connecticut | $15,540 | $2.86 | $4,040 | $3,419 |
| District of Columbia | $15,720 | $2.88 | $4,087 | $3,458 |
| Delaware | $15,300 | $2.65 | $3,978 | $3,366 |
| Florida | $13,920 | $2.41 | $3,619 | $3,062 |
| Georgia | $15,840 | $2.33 | $4,118 | $3,485 |
| Hawaii | $19,560 | $2.67 | $5,086 | $4,303 |
| Idaho | $17,100 | $2.52 | $4,446 | $3,762 |
| Illinois | $16,740 | $2.57 | $4,352 | $3,683 |
| Indiana | $15,300 | $2.49 | $3,978 | $3,366 |
| Iowa | $14,160 | $2.53 | $3,682 | $3,115 |
| Kansas | $13,353 | $2.39 | $3,472 | $2,882 |
| Kentucky | $13,101 | $2.34 | $3,406 | $2,882 |
| Louisiana | $15,660 | $2.38 | $4,072 | $3,445 |
| Maine | $16,073 | $2.87 | $4,179 | $3,536 |
| Maryland | $15,540 | $2.74 | $4,040 | $3,419 |
| Massachusetts | $16,440 | $2.87 | $4,274 | $3,617 |
| Michigan | $16,020 | $2.66 | $4,165 | $3,524 |
| Minnesota | $17,280 | $2.74 | $4,493 | $3,802 |
| Mississippi | $14,763 | $2.64 | $3,838 | $3,248 |
| Missouri | $14,461 | $2.59 | $3,760 | $3,181 |
| Montana | $16,560 | $2.42 | $4,306 | $3,643 |
| Nebraska | $15,820 | $2.83 | $4,113 | $3,480 |
| Nevada | $14,760 | $2.61 | $3,838 | $3,247 |
| New Hampshire | $17,460 | $2.83 | $4,540 | $3,841 |
| New Jersey | $14,520 | $2.77 | $3,775 | $3,194 |
| New Mexico | $16,680 | $2.44 | $4,337 | $3,670 |
| New York | $15,900 | $2.86 | $4,134 | $3,498 |
| North Carolina | $14,040 | $2.49 | $3,650 | $3,089 |
| North Dakota | $13,555 | $2.42 | $3,524 | $2,982 |
| Ohio | $14,400 | $2.50 | $3,744 | $3,168 |
| Oklahoma | $14,667 | $2.62 | $3,813 | $3,227 |
| Oregon | $15,060 | $2.50 | $3,916 | $3,313 |
| Pennsylvania | $15,420 | $2.38 | $4,009 | $3,392 |
| Rhode Island | $16,200 | $2.69 | $4,212 | $3,564 |
| South Carolina | $16,500 | $2.62 | $4,290 | $3,630 |
| South Dakota | $13,535 | $2.39 | $3,519 | $2,978 |
| Tennessee | $13,909 | $2.49 | $3,616 | $3,060 |
| Texas | $14,820 | $2.60 | $3,853 | $3,260 |
| Utah | $15,420 | $2.66 | $4,009 | $3,392 |
| Vermont | $16,620 | $2.85 | $4,321 | $3,656 |
| Virginia | $15,780 | $2.66 | $4,103 | $3,472 |
| Washington | $14,040 | $2.73 | $3,650 | $3,089 |
| West Virginia | $14,763 | $2.64 | $3,838 | $3,248 |
| Wisconsin | $17,580 | $2.60 | $4,571 | $3,868 |
| Wyoming | $14,360 | $2.57 | $3,734 | $3,159 |
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While this might seem like a high price tag, it is quite low compared to what consumers were paying just five years ago and that trend is expected to continue downward.
Despite this, people still have fears about investing in solar panels because they see it as an expensive upfront cost without much security in their payback period. Fortunately, there are many incentives from the government that help alleviate these concerns.
However, before you start checking the nearest government rebates to see if you qualify for any, we would suggest that you first do some research to see what conditions apply. We will provide a list of all the incentives that are currently available in the United States, as well as some that might be coming soon.
1. Federal tax credits
One of the best ways for people to finance their solar panels is through federal tax credits from a state’s energy department. These energy departments provide a rebate or credit to people who invest in renewable energy systems such as solar panels and wind turbines.
Subsidies can range between 3% and 30% of a system’s total cost. The only downside to this tax credit is that it is only good for five years.
To learn more about federal tax credits for solar panels, you can find a list of all 50 states’ solar rebates and credits here.
2. Solar Renewable Energy Certificates (SRECs)
Solar Renewable Energy Certificates (SRECs) are traded nationally and produced in each state by one or more utilities. They represent the environmental attributes of the clean energy generated by a solar panel system installed on your property.
In other words, they are given to you when you purchase a solar panel installation with the amount varying based on how much renewable energy your system produces during its life span. The SREC system currently incentivizes installed solar energy systems with a value estimated to be worth $.18 per watt.
There are two types of SRECs:
a.) Rate-based SRECs
A rate-based SREC represents the amount of clean energy your solar panel system produced during the calendar year 2014 and is credited as a cash payment at the end of December that year to every household and business in all rate classes having signed a solar purchase contract. The payments differ by size of the installation but generally range from $110 to $215 for residential customers and $148 to $245 for commercial customers (depending on the value of your installation). All other individual ratepayers may also receive these credits.
b.) Performance-based SRECs
This type of solar energy credit is based on a system’s historical production capability for the reporting year. The amount of SREC is determined by a utility and gives every residential ratepayer and commercial user $.101 per kilowatt-hour back in cash each January.
So, if your system produced 6,000 kWh in 2014, you would receive an SREC certificate worth $6 paid to you at the end of that calendar year via check in the mail. These certificates are not issued until after ensuring that all customers have signed contracts for their systems and those contracts are recorded on our website.
The system’s performance is determined from the actual production of the solar panels and not directly from the amount of renewable energy produced.
3. Property tax exemption for solar panels
Approximately 24 states currently offer a property tax exemption for solar panels installed on your home. The details of these exemptions vary from state to state, with some only exempting you from additional taxes, while others can eliminate your current bill. Some states have already expired their exemptions for new installations, so check out our list below to see what exemptions are still in effect:
4. Property tax credit
California and New Jersey currently offer a property tax credit worth up to $2,500 per system installed. Connecticut also offers a property tax credit worth up to $2,000 for systems installed after October 1, 2011.
4. Necessary interconnection fee waiver
Connecticut has two possible avenues for homeowners to acquire a necessary interconnection fee waiver for solar panels. The first option is if you bought your home before June 15th, 2009, the Electric Service Protection Rule (ESPR) may apply which provides an exemption from the interconnect charge that utilities are authorized to charge. The second option is if you applied for a residential property tax exemption (see above) you will be eligible to receive a waiver on the interconnection charges associated with the installation of your solar panels.
5. New Jersey discount
New Jersey provides a $1,000 rebate for qualifying residents who install solar panels on their homes. The grant applies only to installed systems up to 3kW in size. It also does not apply to commercial customers or renters in residences using solar energy systems for space heating and domestic water heating, which are offered by some other states’ Energy Departments. To apply, your system should have been ordered and delivered between July 1st, 2012, and December 31st, 2013. Although this program is currently active, it is not open to additional eligible applicants.
6. Property tax exemptions for solar panels
In Texas, a property tax exemption of up to $1,000 per system applies in the residential portion of a single-family residence along with its accessory structures. The exemptions are available to both homeowners and their spouses and do not take into account the total value of the home or land you own.
The only requirement is that you have at least one foot of space on your property dedicated solely for energy production (such as a solar panel installation) that has been certified by an accepted third party (such as the Solar Energy Industries Association).
7. Performance-based exemption
In Maryland, property tax exemptions for commercial customers equaling at least 10% of the total assessed value of the business are available. The performance-based exemption is valued at 50% of the residential portion of your property’s assessed value and can amount to $3,000 per year.
8. New York rebates and credits
New York offers $2,000 in cash and a $1,50 rebate on your utility bill for installing solar panels on your home. There is also an additional potential $2,400 tax credit worth 5% of the cost of each photovoltaic system installed more than 5 kW that goes toward financing a new commercial or educational facility.
9. Maryland rebate program
The Maryland Solar Program (MSP) offers rebates worth $0.20 per watt for residential installations, while those up to 2.5kW in size earn a rebate of $2,000. Commercial customers participating in the MSP can get reimbursed an additional 20% on the installed cost of their solar panels. The total combined rebate amount cannot exceed 50% of the cost, with a maximum benefit of $1.80 per watt for residential customers and $4,000 for commercial customers.