Is Solar Really Cheaper Than Electricity?
The cost of solar power has declined dramatically in the past decade. According to the Solar Energy Industries Association, the average cost of a residential solar system in the U.S. has fallen over 70% since 2010. This rapid drop in prices has made solar power competitive with traditional electricity in many parts of the country.
Current Costs of Solar Power
According to EnergySage, the average cost-per-watt for residential solar panel installations has declined dramatically in the past 10 years. In 2024, the national average is around $2.86/watt before tax credits and incentives. This is down from over $8/watt in 2009.
The cost per watt can vary quite a bit by region. For example, Massachusetts currently averages around $3.27/watt while Texas is around $2.42/watt. But overall, most states are now in the $2.50 – $3.50/watt range thanks to increasing economies of scale and technological improvements reducing solar panel production and installation costs across the board.
Current Costs of Electricity
The average price per kWh of electricity varies significantly across major cities and states in the US. According to data from the Energy Information Administration, the average residential price per kWh in 2020 ranged from a low of 8.27 cents in Louisiana to a high of 33.42 cents in Hawaii.
Some of the lowest average electricity rates are found in states like Louisiana, Washington, Arkansas, Idaho, and Utah, where prices range from 8-10 cents per kWh. The most expensive electricity rates are found in states like Hawaii, Alaska, Connecticut, Massachusetts, and California, with prices from 20-35 cents per kWh.
Major cities with the highest average residential electricity rates include Honolulu (29.54¢/kWh), San Francisco (26.94¢/kWh), New York (22.77¢/kWh), and San Diego (22.69¢/kWh). The lowest rates among major cities can be found in Houston (11.67¢/kWh), Seattle (10.38¢/kWh), and El Paso (10.19¢/kWh).
Solar System Costs vs Electricity Costs
Most solar panels have a lifespan of 25 years or more, so to properly compare costs, you need to factor in total lifetime costs. The exact costs of solar will vary based on your location, rates of electricity, amount of energy used, and size of the system, but averages can be analyzed.
Upfront costs for solar include solar panels which range between $3-$4 per watt (cite https://www.energysage.com/local-data/solar-panel-cost/), inverters which cost $0.20-$0.40 per watt, as well as balance of system costs like wiring, mounts, meters, inspections, etc. A 5kW solar system can cost between $9,000-$14,000 installed depending on above factors. (see https://www.energysage.com/solar-panels-near-me/)
However, electricity rates continue to rise nationally by about 4 percent per year. (cite https://www.eia.gov/electricity/monthly/update/) The average monthly electric bill is about $115 for U.S. homes. (cite https://www.eia.gov/tools/faqs/faq.php?id=97&t=3) Over 25 years, that same home would pay over $34,000 in electricity costs. Comparatively, a $14,000 solar system that lasts 25+ years starts saving homeowners money in the long run.
Factors Affecting Solar Savings
There are several key factors that impact the potential cost savings from installing solar panels, including:
Sunlight – Areas that receive abundant, consistent sunlight throughout the year will produce more solar energy and maximize savings. Places with fewer sunny days or more extreme weather see lower output. According to one source, geographic location has a major effect on solar production.
Weather – Solar panels operate less efficiently at high temperatures. Overly hot weather can lower energy production by 10-25%. Rain, snow, and cloud cover also reduce output. Sources like this one note weather is a significant factor.
Roof direction/space – Solar panels ideally face south. West-facing panels see good afternoon energy, while east-facing receive stronger morning sun. North-facing panels will produce far less. Homes with ample south-facing roof space can support larger solar systems and maximize savings versus limited roof space.
Electricity rates – Areas with high energy prices see greater savings from solar. Places with lower utility rates may find longer return on investment periods for solar panel systems.
Net metering policies – Net metering allows excess solar energy to be sold back to the grid. Good net metering policies provide greater financial return. Places without net metering provide lower savings.
Long Term Price Trends
According to the EIA, the cost of electricity from solar is projected to continue declining rapidly over the next 5-10 years. Solar already generates 43% more electricity in 2024 compared to 2023 thanks to a 70 TWh increase. This shows the exponential growth we can expect from solar adoption in the near future.
An empirical analysis of nearly 3,000 forecasts showed that analysts have consistently underestimated just how fast solar costs are declining. Since 1976, solar module prices have fallen over 99.8% and the pace of reductions shows no signs of slowing. The forecasts expect solar to continue getting much cheaper relative to other energy sources.
MIT researchers also confirm that solar and wind prices will keep dropping as adoption increases and technologies mature. However, fully transitioning to 100% renewable energy today would raise grid management costs. So over the next 5-10 years, we should see the overall price of solar electricity becoming extremely competitive with fossil fuels.
By 2030, solar is projected to overtake all other sources and become the “king” of global electricity generation due to its renewable nature and ever-decreasing costs. The long-term projections all point to solar getting much cheaper than grid electricity within the next decade.
Non-Monetary Benefits of Solar
In addition to potential cost savings, there are other valuable benefits that come with installing solar panels. Three key non-monetary benefits include:
Energy Independence
With solar, homeowners can produce their own renewable electricity and rely less on the grid. This provides greater energy independence and security. According to the U.S. Department of Energy, solar installations help make the power system more resilient and less prone to disruptions [1].
Sustainability
Solar energy is a clean and renewable power source. Unlike fossil fuels, it does not emit greenhouse gases or other pollutants. Widespread adoption of solar supports environmental sustainability goals and the fight against climate change [1].
Increased Home Value
Multiple studies show homes with solar panels sell for a premium compared to similar non-solar homes. This “green premium” boosts resale value. According to Pineapple Energy, solar can increase a home’s value by about $15,000 on average [2].
Challenges and Drawbacks
While solar power offers many benefits, there are some challenges and drawbacks to be aware of. The most significant is the large upfront cost of installing a solar system. Purchasing and installing solar panels, inverters and other equipment can cost tens of thousands of dollars depending on the size of the system. This high initial investment means solar has a long payback period of several years before the energy savings outweigh the upfront costs.
Rooftop solar also requires proper roof conditioning and repairs which can add to costs. Solar panels usually come with 10-25 year warranties, but roofs may need replacement or repairs during that timeframe. Roof issues like leaks, age, shading or improper orientation can all impact solar production as well.
Solar panel efficiency slowly declines over time too, dropping a fraction of a percent each year. After 25+ years, older solar panels may only operate at 70-80% of their original rated capacity. Newer equipment can help offset these degradation losses, but it still impacts long term performance.
While solar power can clearly save money over the long run, the high initial investment, potential roof issues, and slow efficiency decline over decades should be considered challenges when evaluating solar costs versus traditional electricity.
New Innovations
Solar panel technology has come a long way and continues to rapidly advance. Some notable innovations that promise to enhance solar power include:
More efficient solar panels that can convert a greater percentage of sunlight into electricity are being developed. Companies like SunPower and LG have created panels that are over 20% efficient, versus 15-17% for standard panels.1 More efficient panels generate more electricity from the same amount of roof space.
Integrated solar roofs, like Tesla’s Solar Roof tiles, embed solar cells directly into roofing tiles. This creates an aesthetically pleasing, integrated system. 2
Solar windows that can generate electricity from transparent solar cells are also in development. Companies like SolarWindow are working on windows that could turn skyscrapers into vertical power generators.3
These new solar innovations promise to make solar power even more efficient, affordable and ubiquitous in the future.
Conclusion
When analyzing the costs of solar power versus electricity from the grid, the data shows that in most cases, installing a solar power system does result in long-term savings for homeowners. Though the upfront costs of purchasing and installing solar panels can be high, overall solar energy proves to be a more affordable option than traditional electricity in the long run.
Looking at current pricing, solar power systems can produce electricity at around $0.05 – $0.18 per kWh for residential systems, while the average price per kWh from the grid is around $0.13 across the U.S. Factoring in federal and local incentives can bring the price of solar even lower. And while solar power system costs are fixed after installation, grid electricity prices continue to rise year after year.
Over a 20-30 year lifespan, rooftop solar panels can save homeowners tens of thousands in electricity bills. Though payback periods vary based on system size, electricity rates, and incentives, solar power is a smart long-term investment for most property owners. Beyond financial savings, solar power also provides energy independence, predictability, and environmental benefits.
Of course, solar power has its challenges too. Upfront costs can deter adoption, and solar energy production is variable based on location and weather. Homeowners may need to supplement solar with grid power at night. But with solar technology advancing and costs declining each year, solar is becoming more affordable and efficient all the time.
In conclusion, for the average homeowner looking to reduce electric bills over the long-term, solar power is typically a cheaper option than relying solely on electricity from the grid.
