high solar panel prices in the u.s.

Why is solar more expensive in the US than in other countries?

Reading Time: 4 minutes

The cost of solar has plummeted in the US over the last five years. With solar prices dropping below $3 per Watt for residential solar shoppers, the industry has hit a very important and impressive milestone. However, the cost of solar in the US remains higher than the cost in other countries, most notably Australia. But just how much less expensive is solar in Australia, and is it possible for the US to slash solar costs even further?


The cost of solar in the US

On EnergySage, we’ve seen the cost of solar drop from $3.86 per Watt to $2.76 per Watt–as of July 2021–since the end of 2014 alone. That means in about five years, a small to medium-sized 6-kilowatt (kW) system has dropped in price by about $6,600 (not accounting for the investment tax credit). The decrease in costs is even more pronounced from earlier in the 2000s, when solar prices were up over $7 per Watt for residential systems.

What’s more, this pricing information is for the gross installed cost of solar. In fact, federal, state, and utility incentives mean that the net installed cost of solar is much lower, even before accounting for the savings from reducing or eliminating your electric bill.

For instance, a 6 kW system with a $3 per Watt gross cost would only cost $13,320 after applying the federal investment tax credit, for an effective net cost of only $2.22 per Watt. (Most companies calculate the gross cost of solar per Watt instead of the net cost of solar per Watt in order to provide a policy-neutral look at how the cost of solar has changed over time. In recent years, Tesla has created significant media attention and consumer buzz by announcing $2 per Watt pricing. That is a net cost and includes the federal investment tax credit.)

The cost of solar in Australia

When people point to lower costs for solar in other countries, they’re often referring to Australia. According to the now-defunct Energy Supply Association of Australia, in 2016, the median solar price for a 5 kW system in Australia hovered at $1.33 per Watt. At the time, Australia already boasted a higher adoption rate of rooftop solar than any other country in the world, with over 15 percent of households having solar panel systems.

Since 2016, prices have continued to drop and solar installations have continued to increase. Residential systems in Australia are now priced around AUD $1 per Watt (or about USD $0.70 per Watt), meaning installing the same size system in Australia costs one-third of the price of the same system in the US on a gross cost per Watt basis.

What can the US learn from Australia?

Two of the largest ways that Australia’s solar industry has reduced overall solar pricing is through easing both the permitting and inspection processes for new solar homeowners. These aspects of a solar installation require time and money. In fact, these “soft costs” of solar–or non-component costs–can add up to $1 per Watt to every installation, or $6,000 for an average 6 kW system.

Australia has reduced these soft costs by simplifying the permitting requirements for solar installations and by hiring dedicated solar inspectors. The US has solar permitting requirements that vary by state and even local jurisdiction, but which can involve a non-trivial amount of paperwork to be filled out by installers. Australia finds ways to ease these requirements and restrictions, including by offering nearly-immediate virtual permitting portals. The City of Las Vegas has followed Australia’s lead on this to cut permitting times from up to 90 days down to just minutes.

Additionally, whereas all solar installation inspections are performed by building inspectors in the US, in parts of Australia, the government has hired dedicated solar energy system inspectors whose role it is to inspect all systems in a geographical area once a quarter or once a year. To learn more about how permitting and inspections work in the US, read this article.

Is it worth emulating Australia’s solar industry?

Recently, problems with installed solar systems in Australia have begun to surface. According to various articles, consumers who anticipated 20 years of production and savings from their solar panel systems have seen their equipment malfunction, break or reduce production sharply after only 5 years. The original solar energy systems installed in the US are still operating smoothly after 20 years, so why is the same not holding true in Australia?

To a large degree, it appears the lack of regulatory oversight has allowed for the cheap installation of sub-standard solar panel systems, from the solar equipment and components used in the installation to the actual installation of the solar panels. Interestingly, the same policy and market forces that have helped deliver inexpensive solar to Australian residents are also responsible for the issues observed with Australian solar installations. Though these policies have reduced the time to installation, they’ve also reduced the opportunity to catch errors in installation or issues with equipment.

While there are new techniques that the American solar industry can explore, such as finding ways to reduce the time required during the permitting process or by hiring dedicated solar installation inspectors, there’s a balance to be struck to ensure that US solar panel installations maintain a high quality and continue to produce electricity for decades to come.

Take advantage of solar pricing reductions on EnergySage

Across the US, solar panel systems pay for themselves in under eight years. But the savings don’t stop there: since solar panel systems produce electricity for 25 or even 30 years, you will continue to accrue savings for many years after the panels have paid for themselves. To see how much solar could save you, check out the free-to-use EnergySage Solar Calculator. If you’re ready to take the next step, register to receive custom quotes on the EnergySage Marketplace from pre-screened, local solar companies.


6 thoughts on “Why is solar more expensive in the US than in other countries?

  1. Muhammad Usman

    Very high cost of solar system in US. In Pakistan 5KV A+ quality 12 years panel warranty and 25 years performance warranty solar system cost only 2300$ including all taxes and installation charges.

    Reply
  2. Joey

    The simple fact is we’re being ripped off in the US and you fail to cite any reference for your claim that 20 year old systems installed in the US are operating smoothly. There was one reference cited for the Australian market. You failed to mention that Walmart recently sued Tesla for a fire from solar installations at 7 of its store locations causing millions of dollars in damage and forcing closure of one location in Ohio for eight days. So if your intention is to provide factual information on solar energy, then be truthful…!!!
    Inform the good citizens of this country that they are being gouged by greedy utility companies, installers and a lot of unnecessary red-tape that do absolutely nothing to ensure a safer standard in the US.

    Reply
  3. Herman

    Solar prices in the US are skyhigh in comparison to in Europe. Here in The Netherlands residential installations can be bought for about 1,0-1,2 USD/ WP.

    There are no tax rebates as these are not needed: the pay-back time is about 5-7 years (in our climate with about 0,9 kWh/ Wp/ year).

    Do you have high import taxes on PV panels and inverters?

    Reply
  4. Billy

    Very interesting seeing the varying prices and differences between different countries in regards to solar. Thank you for sharing this insightful article!

    Reply
  5. Stephen Rich

    I have been pricing purchasing components from wholesalers versus installed price from turnkey solar installers. Point is, these installers charge TWICE the cost of the components, and that is being very generous with pricing. The gouging of the public because of the 30% tax savings is reprehensible. Why does the install cost so much for a single days labor. It appears that as long as people are willing to pay ( they exchange your electric bill for a slightly lower pv unit), we will continue to get ripped off. I am having 11.47 kW system installed on my roof for less than $22,000. They are getting a decent profit and I will keep Enerysage informed of my install and production, and of course, problems. I chose high quality components so the install will be the interesting factor.

    Reply
  6. Frank

    Our US pricing differential is rooted in one thing only….sales cost. When $6k in “soft costs” are cited, it’s rare that anyone tells you $4k of that is customer acquisition expense. Installers pay thousands to their sales people and 3rd party lead generators.

    EnergySage is looking to reduce that sales cost, but in most instances ends up being used as simply a lead generator which ads more cost on top of internal sales at the installer level.

    Tesla is making a legitimate effort to limit sales cost by ending door to door sales and taking operations online. They may have screwed up the rollout by quoting prices net of the tax credit, but it’s still just a flat $2.50/W for a 4kW install in my part of Pennsylvania. That’s far better than most ES bids from random installers.

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *