Residential Solar Costs: June 2023 Solar Market Insight Report

The Solar Market Insight (SMI) is a quarterly report published by the Solar Energy Industries Association (SEIA) and Wood Mackenzie. The SMI provides detailed information about the US solar industry, which includes installed costs by market segment: residential, commercial, and utility scale.

via SilFab Solar

Here we will discuss key facts and figures from the June 2023 Solar Market Insight, focusing on the residential sector:

• The US installed 1,641 megawatts (MW) of home solar capacity between January and March 2023.
• The average cost of home solar systems was $3.28 per watt in Q1 2023.

Last year was an excellent year for residential solar power in the US. More than 700,000 homeowners installed photovoltaic (PV) systems, with a combined capacity of 5,860 MW.

In other words, the US installed around 1,465 MW of home solar power per quarter. 2023 could be an even better year for the solar industry if installations continue at the current pace.

The average price of home solar systems has increased by 7% between June 2022 and June 2023. One year ago, the SEIA reported an installed cost of $3.07 per watt. However, prices have decreased slightly with respect to Q4 2022, when the SEIA reported a cost of $3.30 per watt.

How Much Does a Home Solar System Cost in July 2023?

The following table provides the estimated cost of solar PV systems from 4 to 10 kilowatts (kW), which is a common size range for homes. Regardless of the installed capacity, you get a federal tax credit equivalent to 30% of project costs.

Note: The calculations are based on the average cost of $3.28 per watt ($3,280 per kilowatt) reported by the SEIA.

If you decide to add a home battery such as the Tesla Powerwall, your project budget increases by around $10,000 – $20,000, depending on the battery brand and capacity. The federal tax also covers the battery if its energy storage capacity is at least 3 kilowatt-hours (kWh).

The following table shows the average solar costs from the four SMI reports published in 2022, along with the latest figure from Q1 2023 (published in June 2023):

2022 was characterized by high inflation in many business sectors, and the solar industry was no exception. However, solar costs have now stabilized, and there was actually a 0.6% decrease between Q4 2022 and Q1 2023.

As of July 2023, the SEIA has not provided solar cost data for April-June 2023 (Q2 2023). This information will be published in the next edition of the Solar Market Insight, which is scheduled for September 2023.

What is the Payback Period of a Home Solar System in the US?

There are two main factors that determine the payback period of a solar PV system: the amount of sunlight received and local electricity prices.

• For example, a 6-kW solar system may generate over 10,000 kWh/year in a site with abundant sunshine, or less than 6,000 kWh/year in a site with lower sunshine rates.
• At an electricity price of 20 cents/kWh, the first system achieves over $2,000 in annual savings, while the second system only achieves $1,200.

Based on the table in the previous section, a 6-kW home solar system has a typical cost of $13,776 after subtracting the federal tax credit. The payback period is less than seven years if you save $2,000 annually, but it extends to more than 11 years if you save $1,200.

Some states have additional incentives beyond the 30% federal tax credit, which means you can go solar at a lower cost. For instance, New York offers a 25% income tax credit, which can be combined with the federal incentive. New York also offers the NY-Sun Incentive Program, where residential solar systems can qualify for a rebate of $200 – $300 per kilowatt.

• Using the example of a 6-kW system with a price of $19,680, you get a federal tax credit of $5,904 and a state tax credit of $4,920.
• You can also get a $1,200 rebate from the NY-Sun program ($200 per kW).
• Subtracting all incentives, the net cost of the 6-kW solar system is reduced to $7,656.

New York has above-average electric tariffs. According to the US Energy Information Administration (EIA), residential energy consumers in NY state are paying around 21 cents/kWh. A 6-kW solar system can generate over 7,800 kWh/year with local sunshine conditions, which is equivalent to over $1,600 in annual savings. Considering the net price of $7,656, the payback period is less than five years.

As you can see in the US EIA website, there are several states with electric tariffs of over 20 cents/kWh, and some New England states exceed 30 cents/kWh. Generally, solar panels achieve the shortest payback periods in these locations.

Installed Cost of Solar Panel Systems by Brand

The Solar Market Insight Report provides general cost figures for the US solar industry, broken down by market segment. However, EnergySage has also analyzed solar costs by brand. The following table compares the installed cost of solar panels from five leading manufacturers:

Note: The table provides the installed price of home solar systems, before subtracting the federal tax credit and other incentives locally available.

SunPower has above-average prices, but their solar panels are among the best you can find, with an energy conversion efficiency of up to 22.8%. Their standard solar modules have a 25-year product warranty, while their premium Maxeon modules have a 40-year warranty – the longest in the industry.

The other four brands are also excellent, and they have a comparable price range.

• Panasonic, Q CELLS and REC have a 25-year product warranty.
• Canadian Solar offers a 15-year or 25-year warranty depending on the product line.

You can get high-efficiency solar panels from all five manufacturers, and the following table compares the maximum efficiency ratings available in each case:

As of July 2023, SunPower and Canadian Solar are tied in first place with the most efficient solar panels in the market.

REC and Panasonic are close behind, with a difference of only 0.5% and 0.6%, respectively.

Q CELLS has a lower efficiency than the other four brands, but their solar panels also have a lower cost range. However, 20.9% is still a very high efficiency by industry standards.

There are many solar manufacturers who offer efficiency ratings of over 20%. In addition to the five brands compared above, the list also includes: Trina Solar, AXITEC, Silfab, Jinko Solar, Aptos, LA Solar Group, Solaria and CertainTeed.

EnergySage also provides a general cost estimate for residential solar installations in the US. As of June 2023, they reported the following cost figures for a 7-kW photovoltaic system:

• High-end system = $23,870 ($3.41 per watt)
• Average system = $20,650 ($2.95 per watt)
• Low-end system = $17,430 ($2.49 per watt)

The SEIA reports an average cost of $3.28 per watt, but there is an important difference in how each source calculates their figures. SEIA focuses on high-efficiency solar panels, while EnergySage considers a wider range of products. The cost estimate for high-end systems provided by EnergySage ($3.41/watt) is similar to the value in the SEIA report ($3.28/watt).

The US Solar Industry in 2023: Growth Trends and Opportunities

Considering all market segments, the US has surpassed 149 gigawatts (GW) of solar photovoltaic capacity, which is enough to cover the energy needs of 26 million homes. However, this growth is not evenly distributed, and three states have emerged as the solar power leaders:

Solar PV has become the fastest growing generation technology in the US, representing 54% of the power generation capacity installed in the first quarter of 2023. In other words, solar power is now growing faster than all other energy sources combined – fossil fuels and renewables.

• Considering solar systems of all sizes, the US installed around 6,100 MW in Q1 2023.
• The residential sector accounts for 1,641 MW, which represents 27% of the total growth.

The Inflation Reduction Act has been a major incentive for solar installations in 2023. The Act increased the solar federal tax credit from 26% to 30%, and the benefit now applies for all other renewable technologies and energy storage systems.

The SEIA and Wood Mackenze have forecast that the US could reach 377 GW by the end of 2028, up from 149 GW today.

Solar panel manufacturers are preparing for this growth, and they are actively expanding their local production capacity.

• According to the SEIA, the manufacturing facilities that are currently under construction could deliver 16 GW of solar panel capacity per year.
• Considering the facilities that are currently in the planning stage, the US could expand its solar manufacturing capacity by 52 GW/year by 2026.

Last year, the Uyghur Forced Labor Prevention Act (UFLPA) slowed down solar panel shipments from overseas. Solar developers must provide documentation showing that the production process of the PV modules purchased does not involve forced labor in any stage. Initially this documentation was very difficult to obtain, but solar companies have now figured out how to comply.