Solar, with the assumptions shown
Most solar quotes hide the payback assumptions that make the number look good. This calculator exposes them: your real derate factor, the inverter replacement nobody budgets for, and what happens to the maths when your utility credits exports below retail.
Solar Panel Cost Calculator
System size 7.4 kW · $2.85 per watt · payback 11.4 yrs
Twenty-five year view
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Planning estimate only. Not a quote, and not tax or investment advice. See how we calculate this.
The short answer
Residential solar is quoted per watt, and full-service installers commonly quote $2.40 to $3.60 per watt before incentives. A typical 7 kW system therefore runs roughly $17,000 to $25,000 gross. The three things that actually decide whether it pays — far more than the panel brand any salesperson wants to discuss — are your electricity rate, your local sun hours, and your utility's export credit rules.
Last reviewed · Methodology
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How system size is calculated
Sizing is arithmetic, not salesmanship, and you can check any proposal against it:
- Annual consumption. Monthly bill ÷ your rate per kWh × 12. Better still, take the actual kWh figure from twelve months of bills — bills include fixed charges and taxes that distort the estimate.
- Peak sun hours. Not daylight hours. It is the equivalent number of hours per day at full 1,000 W/m² irradiance, ranging from about 3.2 in the Pacific Northwest to 6.0 in the desert Southwest.
- Derate factor. Real systems produce roughly 80% of their nameplate rating. Losses come from inverter conversion, wiring, soiling, panel temperature, shading and module mismatch. A proposal assuming better than 0.85 is being optimistic.
System kW = annual kWh ÷ (peak sun hours × 365 × 0.80)
A home using 11,000 kWh a year at 4.5 peak sun hours needs about 8.4 kW to offset all of it — roughly 19 to 21 modern panels, and about 450 to 550 square feet of unshaded roof.
What you are paying for, per watt
Hardware is a minority of the price. This surprises most people, and it explains why two quotes with identical panels can differ by $6,000.
| Component | Share of cost |
|---|---|
| Panels | ~25% |
| Inverters & optimisers | ~10% |
| Racking, wiring & electrical | ~12% |
| Installation labor | ~15% |
| Permitting, inspection & interconnection | ~8% |
| Sales, marketing & customer acquisition | ~18% |
| Overhead & margin | ~12% |
That customer-acquisition line is the reason local installers frequently beat national brands by 20% or more on identical equipment: door-to-door and lead-generation costs are real and they are in your price. Get at least three quotes and insist each states the exact panel model, inverter model, and system size in DC watts.
Incentives: verify before you count on them
This is the part that changed
The federal residential clean energy credit (Section 25D), long available at 30% of system cost, was curtailed by 2025 federal legislation, with the residential credit scheduled to end for systems placed in service after the end of 2025. Rules for third-party-owned systems, leases and business-owned installations sit under different sections and were treated differently. This area has changed repeatedly and may change again.
For that reason this calculator defaults the tax credit to zero rather than quoting a figure that may not apply to you. Enter a percentage only after a tax professional has confirmed your specific eligibility, and be sceptical of any sales proposal that assumes 30% without evidence — an assumed credit that never materialises is a five-figure hole in your payback.
State and utility incentives, by contrast, are alive and highly local. Look for state tax credits, performance-based incentives paid per kWh produced, solar renewable energy certificates in states that have them, upfront utility rebates, property tax exemptions so your system does not raise your assessment, and sales tax exemptions. Your state energy office and your utility's own site are the authoritative sources; an installer's summary is a sales document.
Net metering is the whole ballgame
What your utility pays for power you export decides your economics more than any equipment choice.
- Full retail net metering credits exports at the same rate you pay. The best case, and increasingly rare.
- Net billing / avoided cost credits exports at wholesale, sometimes a third of retail. Many states have moved this way. It can roughly double a payback period and it changes the optimal system size — under net billing, oversizing to export is value-destroying.
- Time-of-use rates mean the value of a kWh depends on the hour. West-facing arrays that produce into the evening peak can beat south-facing ones on revenue despite producing less total energy.
- Grandfathering matters enormously. Many states lock existing customers into the rules in force at interconnection for 10 to 20 years. If your utility is mid-transition, the interconnection date can be worth thousands.
Ask your utility directly, in writing, which tariff a new residential system would take and for how long it is grandfathered. Do not accept the installer's summary of it.
Why quoted paybacks are optimistic
Four assumptions do the heavy lifting in a sales proposal, and all four lean the same way:
- Rate escalation. Proposals often assume electricity prices rise 4% or 5% a year forever. Long-run averages are closer to 2% to 3%. Compounded over 25 years the difference is enormous.
- Derate. Assuming 0.85 or better instead of a realistic 0.80 inflates production by around 6% every year.
- Inverter replacement. A string inverter typically needs replacing at 10 to 15 years, costing $1,500 to $3,000. It is routinely omitted.
- Degradation. Panels lose roughly 0.5% of output per year. Ignoring it overstates late-life production by more than 10%.
This calculator applies a 3% escalation, a 0.80 derate, 0.5% annual degradation, and it books an inverter replacement at year 13 on string-inverter systems. Those figures are conservative on purpose. If a proposal shows a payback dramatically shorter than the one here, ask which of these four assumptions differs and why.
Your roof comes first
Solar panels last 25 to 30 years. Putting them on a roof with eight years left is a scheduling error that costs $2,000 to $6,000 to correct — the price of removing and reinstalling the array — plus the disruption. Some installers will not warrant roof penetrations on an aged roof at all, and some roofers will not warrant a roof they did not install panels through.
The rule of thumb is simple: if your roof has under ten years of expected life remaining, replace it first. Doing both together also lets the roofer flash the mounting points properly as part of the new roof rather than penetrating a finished one. Our roof replacement cost calculator will price that side of it, and it is worth checking your insurance position too, since some carriers ask to be notified about a rooftop array and a few surcharge for it.
Buy, loan, lease or PPA
| Option | Upfront | Lifetime savings | Watch for |
|---|---|---|---|
| Cash purchase | Full cost | Best | Opportunity cost of the capital |
| Solar loan | $0–small | Good | Dealer fees buried in the system price |
| Lease | $0 | Weak | Escalator clauses; assignment on sale |
| PPA | $0 | Weak | You buy the power, own nothing |
Two specifics worth knowing. Solar loans frequently carry a dealer fee of 15% to 30% baked into the quoted system price to buy down the advertised interest rate — always ask for the cash price and compare. And leases and PPAs must be assigned to the buyer or bought out when you sell; agents widely report these contracts complicating or derailing home sales, because the buyer must qualify to assume the agreement.
Frequently asked questions
How much do solar panels cost in 2026?
Full-service installers commonly quote $2.40 to $3.60 per watt before incentives, so a 7 kW system runs roughly $17,000 to $25,000 gross. Premium panels, microinverters, a complex or steep roof, and any electrical panel upgrade push the upper end higher. Battery storage is separate at roughly $11,000 to $16,000 for a typical 13.5 kWh unit installed.
What size solar system do I need?
Divide annual kWh by your location's daily peak sun hours × 365, then divide again by a derate factor of about 0.80. A home using 11,000 kWh a year at 4.5 peak sun hours needs roughly 8.4 kW to offset all of it.
What is the payback period on solar panels?
From about 7 years in high-rate, high-sun states with strong incentives to over 20 years in low-rate, low-sun states with none. Your electricity rate, sun hours and net metering rules decide it. A quoted payback under 6 years usually rests on optimistic rate-escalation assumptions.
Does net metering still make solar worthwhile?
It depends entirely on your utility, and it is the most important thing to check before signing. Full retail net metering is the most favourable case. Many states have moved to net billing, crediting exports at a lower avoided-cost rate, sometimes a third of retail — which can double a payback period.
Should I replace my roof before installing solar?
If your roof has under about ten years of life left, yes. Removing and reinstalling an array to replace the roof underneath costs $2,000 to $6,000, and some installers will not warrant penetrations on an aged roof.
Is a solar battery worth it?
Financially, usually only where net metering is weak, time-of-use spreads are wide, or a demand charge applies. For outage backup the value is real but is a resilience purchase, not an investment. Note that a grid-tied system without a battery shuts down during an outage for lineworker safety.
Should I buy, lease or sign a PPA?
Buying outright produces by far the best lifetime economics. A loan is reasonable at a genuinely low rate, but check for a dealer fee bundled into the system price. Leases and PPAs require no money down but deliver much weaker savings, send incentives to the owner rather than you, and must be assigned or bought out when you sell.
How long do solar panels last?
Panels are typically warranted 25 years at 80 to 87 percent of original output and degrade about 0.5 percent a year. Inverters are the weak point: string inverters commonly need replacing at 10 to 15 years, a $1,500 to $3,000 expense many payback calculations omit. Microinverters usually carry 25-year warranties.