roof of house with solar panels

For many homeowners, rooftop solar panels are an attractive proposition. Generating your own electricity can eliminate high utility bills, and in an increasing number of communities, you can even sell back the excess power you produce to your electricity provider.

Installed solar panels cost $3-$5 per watt for an average residential system, according to the Center for Sustainable Energy, a San Diego-based research and advocacy group. You can buy solar panels with different power output ratings, but a 200-watt rating is typical (check home improvement stores for examples). Multiply the panel’s wattage rating by the cost per watt ($3–$5) to get the total price per installed solar panel - in this case $600-$1,000.

Furthermore, if you install 25 solar panels each rated at 200 watts, which would make up a typical 5-kilowatt system, the total cost would run between $15,000 and $25,000 before tax breaks.

Solar panel prices vary

According to the Lawrence Livermore National Laboratory, the cost of solar panels has dropped dramatically over the last 10 years. At the same time, solar panel prices are expected to further decline by 10% per year going forward, according to a study by Oxford University researchers.1

This means that prices not only vary, but that they are falling and can differ among homes depending on several factors. To better pinpoint the cost for your home, it's important to do some extra research.

Powering up solar panels

The first step is to learn how much electricity your home uses, which can help you decide how much power you want from your solar panel system. Review your monthly electrical bills from the previous year or contact your utility company to learn your average monthly usage in kilowatts for the year. As a benchmark, the typical U.S. home uses around 900 kilowatts each month, according to the U.S. Energy Information Administration.

Peak sun hours for solar panels

Next, learn how many peak sun hours your home receives. While the sun may shine for 12 hours in a day, you may only get four or five hours of peak sun. Find your average peak sun hours by consulting a solar panel expert or using a solar power meter.

You can also type your address into Google Project Sunroof, which maps a roof's solar savings potential, to determine your home's hours of usable sunlight per year and the roof area available for solar panels. Ideally, your home should have a south-facing rooftop with minimal shading from trees or neighboring buildings.

Calculate the cost of solar panels

Once you've completed your research, you can determine how many solar panels you’ll need. For example, if your home receives five hours of peak sun per day, multiply that number by the rated output of the solar panel (200 watts, in this example). This will give you its daily output.

In our example, that's 1 kilowatt (5x200), which adds up to 30 kilowatts per typical month. If your home uses an average of 900 kilowatts of electricity each month, you'll need 30 solar panels to match that usage (900÷30).

By adding the price of those 30 panels, plus components and installation fees, you'll get the total cost of your system.

Insuring a large home improvement project is an important part of your home's protection. Homeowners insurance policies from Nationwide Insurance can often extend coverage to rooftop solar panels.

[1] "How predictable is technological progress?", Research Policy,, (April 2016).