If you like to follow solar energy news, you’re probably familiarized with the quarterly report published by the Solar Energy Industries Association (SEIA). The publication is officially called the Solar Market Insight Report, and the SEIA collaborates with consulting firm Wood Mackenzie to bring the latest data about the US solar industry. The latest edition was published on Tuesday June 7, 2022.
The SMI report provides useful information such as the average cost of solar panels by market segment: residential, commercial, and utility scale.
If you’re considering solar power for your home or business, you can check the latest edition of the report to get an idea of typical costs.
Keep in mind that some price variation is normal depending on the equipment brands used, as well as your location and the solar installation company hired for the job. However, any offers that are significantly higher or lower than the average prices should be met with a healthy dose of skepticism.
According to the latest figures provided by the SEIA in June 2022, US homeowners can expect to pay around $3.07 per watt ($3,070 per kilowatt) when going solar. This means a 5-kW system will cost around $15,350, and a 10-kW system will cost around $30,700.
- Consider that the SEIA analyzes traditional solar panel systems connected to the grid without energy storage. If you decide to add a home battery, the system price will normally increase by $10,000 or more.
- The price figures in the SMI report also exclude the effect of solar incentive programs. This means your out-of-pocket cost can be much lower if your state or utility company offers financial incentives for going solar.
Here we will review the most relevant facts in the Q2 2022 SMI Report, focusing on current solar panel costs, and how they are expected to behave in the near future.
Keep in mind that gathering and analyzing data is a complex and time-consuming task. For this reason, the quarterly SMI report actually covers the previous quarter. For example, the current Q2 2022 edition uses information from Q1 2022, and the previous edition in turn used data from Q4 2021.
Key Factors Affecting Solar Panel Prices in the US
Currently, the US solar industry is in a unique situation, with both threats and opportunities that could materialize in the near future.
According to the SEIA and Wood Mackenzie, the short-term outlook depends on external factors like supply chain issues and key decisions from the US government.
Solar panel prices have increased slightly since 2021, but electricity prices are rising at a faster pace. This means going solar is still a great investment, despite higher prices, since the electricity they save is also becoming more expensive.
The following table compares the average solar prices in the latest SMI report (June 2022), compared with those from the previous quarter and 12-months ago.
As you can see, the solar industry has also suffered the impact of inflation:
|Solar Market Segment||Q1 2022 Price
(Current SMI Report)
|Q4 2021 Price
|Q1 2021 Price
(One Year Ago)
|Residential||$3.07 per watt||$3.10 per watt||$2.90 per watt|
|Commercial||$1.64 per watt||$1.55 per watt||$1.49 per watt|
|Utility, Fixed Tilt||$0.85 per watt||$0.94 per watt||$0.87 per watt|
|Utility, Solar Tracking||$1.01 per watt||$1.06 per watt||$0.95 per watt|
As you can see, the installed cost of solar panels has been on the rise in general, but some market segments have actually achieved a price decrease.
For example, home solar installations became around 6% more expensive during a 12-month period, but their prices decreased between the last two editions of the report (from $3.10 to $3.07 per watt).
High inflation and global supply chain issues have been affecting the entire economy, and this includes the solar power industry. However, solar panels, in particular, are also affected by an ongoing investigation from the Department of Commerce (DOC).
A California-based solar manufacturer submitted a petition to the US DOC, explaining that Chinese solar manufacturers were avoiding import tariffs by setting up manufacturing plants in Cambodia, Malaysia, Thailand, and Vietnam.
- The import tariffs in question are the anti-dumping and countervailing duties (AD/CVD) for solar cells and modules.
- Currently, the US imports 80% solar modules from the four countries mentioned above.
The AD/CVD tariffs exist to protect local solar manufacturers from underpriced imports from overseas. However, the ongoing investigation has raised fears about new tariffs that could be as high as 250%. Many solar power developers have simply paused their imports and projects while the issue is solved.
Breaking Down the Cost of Residential Solar Panel Systems
If you look for solar panel costs online, they will seem much less expensive than what the SEIA data might suggest. However, many of the prices you can find online are for solar panels only, and you need many other components to build a functional solar energy system.
You also need to consider the cost of delivering solar components to your home, the skilled labor costs associated with their installation, and profit margins of course.
The SEIA Solar Market Insight Report provides a breakdown of the costs included in the value of $3.07 per watt:
- Overhead and margin
- Customer acquisition / origination
- Logistics and miscellaneous
- Design and engineering
- Electrical balance of system
- Photovoltaic modules
- Civil engineering costs
- Permitting, interconnection and inspection
- Structural BOS
- Photovoltaic inverter
Solar panels and inverters represent less than 30% of total system costs in the residential market. The largest costs are those associated with overhead, margin, and customer acquisition – exceeding 40% of the total system cost. All the other costs are relatively small, completing the remaining 30%.
These costs are considered for all solar market segments, but their distribution changes depending on the scale of the project. For example, photovoltaic modules are the largest cost item by far in utility-scale projects, representing over 40% of total project costs.
For comparison, PV modules account for only around 15% of total cost in many residential installations.
As mentioned above, the net cost of your solar power system can be much lower if there are multiple incentives available. For example, there is a nationwide 26% Investment Tax Credit (ITC) for solar panel systems, and home batteries can also qualify if all their charge comes from a solar array.
Depending on the state you live in (breakdown of residential PV costs by state), there may be local tax credits or exemptions, and you may also qualify for grants or rebates.
Potential Good News: New Federal Tax Credits for Solar Power
The Investment Tax Credit (ITC) is set to expire in 2024, after decreasing from 26% to 22% in 2023. However, the Biden-Harris Administration is considering an extension of this tax benefit, considering the results achieved since its introduction in 2006.
According to the SEIA, the ITC has helped the US solar industry achieve 33% annual growth on average during the last decade.
If the solar tax credit extension is approved, it could help compensate for the impact of inflation, supply chain disruptions, and potential new tariffs for solar imports.
The ITC extension was originally part of the Build Back Better Act but is now being managed as a separate bill. The following are some of the main benefits for the solar industry if the bill is passed:
- Increasing the federal tax credit back to the previous level of 30%, or even 40% for solar projects meeting certain conditions.
- Introducing a stand-alone tax credit for energy storage systems. Currently, batteries only qualify if they are charged with solar panels (not with electricity from the grid).
- New tax credits for local solar manufacturers.
- Giving solar owners a direct payment option when claiming the tax credit, instead of having to wait for the next tax declaration and claiming a deduction.
These benefits would give a major boost to the US solar industry, compensating for recent price hikes and supply chain disruptions. The ideal scenario for the US solar industry would be getting these tax benefits, and not having to deal with new AD/CVD tariffs when importing modules.
Q1 2022: Home Solar Installations Set a New Record in the US
Despite the hardships affecting the solar industry in general, the first quarter of 2022 was excellent for the residential market segment.
According to the latest SMI report, the US deployed 1,247 MW of home solar capacity between January and March 2022, surpassing the previous record of 1,156 MW (Q4 2021).
- The top three markets for home solar power are currently California, Texas and Florida.
- Together, these three states account for over 50% of the home solar capacity added in Q1 2022.
Small-scale solar power is less affected by supply chain issues and the ongoing investigation about tariff circumvention. Currently, the US solar industry has a local manufacturing capacity of 11 GW. This module production capacity can be considered small compared with the size of the utility market (17 GW in 2021), but the residential market is much smaller (4.2 GW in 2021).
Expensive electricity is the main factor that drives demand for home solar systems. Between Q1 2021 and Q2 2022, the average price of residential installations increased from $2.90 to $3.07 per watt (5.9%).
For perspective, the average kilowatt-hour price in the US increased from 13.30 to 14.47 cents (8.8%) between March 2021 and March 2022. While it’s true that solar panels have become more expensive, the price of the electricity they save is increasing faster.
Need a Roofer? Get 4 Free Quotes From Local Pros:
Enter Your Zip Code: