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How Much Does a Grid-Tied System Cost? (Ballpark Estimates)

Solar energy has numerous financial and environmental benefits—we get it. But how much does it cost to install a solar system? Or to be more specific, how much does a grid-tied system cost?

While we will give you ballpark estimates of how much a grid-tied system is, note that the actual cost of a grid-tied system you may incur depends upon many factors. We will discuss the factors in detail in a while.

First, let’s discuss the cost.

How much does a grid-tied system cost?

The cost of grid-tied systems can be as low as $10,000 and as high as $50,000. A typical American household spends about $12,000 to $15,000 on installing an on-grid system. (This figure includes the Federal Income Tax Credit, which puts 30% back into your pocket in the form of a tax credit.)

As of the first quarter of 2022, a grid-tied system’s average cost per watt is $3.00 per watt. That is, a 5kW grid-tied system, on average, costs $15,000. But in some states, the cost per watt could be higher, up to $3.35 – which means a 5kW system cost roughly $16,500. Similarly, depending upon the competition between solar installers and climate, the cost of installing a 5kW could come down to $13,000 in other states.

System sizeAverage system costFederal ITC (30%)Cost after ITCCost per watt*
3kW$10,200$3,060$7,140$2.38
4kW$13,000$3,900$9,100$2.27
6kW$17,500$5,250$12,250$2.04
8kW$22,600$6,780$15,820$1.97
10kW$28,250$8,475$19,775$1.97
12kW$32,700$9,810$22,890$1.90
14kW$36,500$10,950$25,550$1.825
16kW$42,000$12,600$29,400$1.8

*Cost per watt after the ITC is adjusted in the cost.

What does the cost of a grid-tied system include?

It is not just the cost of solar panels. Solar panels may cost you only a portion of the overall cost. But to have a functioning system, you would need solar panels, racking, inverters, a net meter, wiring, and a few other associated electrical articles.

Then there are the inspection, installation, and labor costs. The overall cost of a solar system also includes solar permitting costs and interconnection fees, which may vary from state to state.

Factors affecting the cost of grid-tied systems

The exact cost you incur depends upon, among other factors, your goals. For instance, which system do you need for your home? If you consume 900 kWh per month, you could install or 7kW grid-tied solar system. Or you could also choose a 4kW solar system if you do not want to replace all your electricity consumption with solar energy.

Location

Location is a key factor affecting the cost of your grid-tied systems.

How much sunlight your area receives decides the number of solar your system would need.

For instance, for a system that could generate 1000 kWh per month, you would need 17 300-watt solar panels if the sun shines in your state for 7 hours. But you would require 19 300-watt solar panels if it experiences 6 hours of sunlight in peak hours.

Similarly, the state you live in also has much to do with the competition between solar installers. States with intense competition tend to have lower costs per watt than those with low competition.

Did you know?

In 2021, 46% of all new electric capacity added to the grid came from solar, the largest such share in history.

Source: seia.org

Size of the system

Another factor determining the cost of your solar system is your system’s size. How much energy do you need your system to produce? A 6kW system usually works well for an average American household. But if you need a bigger system, the costs would go high.

But, as the table shows above, when you install a larger system, your cost per watt decreases significantly—as is evident from the table. This is like buying watts in bulk—when you buy something in bulk, the cost of individual units declines.  

Federal and local incentives

Incentives help you save upfront on your solar system installation. If you are eligible for the Federal Income Tax Credit, you could save 30% on the very first day. This shortens the solar payback period and improves your return on investment.

Similar to the ITC, your state, local government, or utility may offer local incentives. Check the Database of State Incentives for Renewables and Efficiency (DSIRE) for incentives you could claim.

Solar permitting and licensing costs

These are not much, but they still make a good chunk of the soft cost of your grid-tied system. You will need a permit from your local building authority and the utility, for which you will pay a certain fee. Some states have tried to bring these costs down. For example, Colorado has imposed a $500 cap on permit costs; for California, the cap stands at $450.

But in other states, the costs may be higher. Most often, these costs are already included in your solar quote. But if you are doing the installation yourself, check with your local authority for the requirement and different fees you need to pay.

Labor costs

Labor costs make up around 10% of the overall cost of your grid-tied solar system. On average, the labor cost per watt ranges anywhere between $0.5 to $0.65. Large solar installers, especially those working on the national level, may cost more than local installers—they have to pay for their marketing and overhead. Similarly, states with more installers than demand have lower solar labor costs.

Some homeowners may choose to do the initial installation themselves, provided that their roof is structurally fit for solar installation. That would reduce the installation costs, but you would still pay for the electrical work (connections, commissioning, etc.).   

Type and brand of equipment

Lastly, the brand and type of solar panels. Which type of solar panels do you want your grid-tied system to have? Solar panels vary based on wattage (some are 260-watt, some 300-watt, etc.) and type (for example, mono-crystalline solar panels are a little expensive). A system featuring 300-watt solar panels generally costs less, as they are more efficient.

Similarly, some brands are expensive, and thus, installing them would cost you more. But the brand is usually not the biggest factor, as it adds only a fraction of the difference to the overall cost.

Let’s recap. How much does a grid-tied system cost? The actual cost of your system depends upon many factors, some of which we discussed above. But, on average, a typical grid-tied system costs from $12,000 to $15,000. The bigger the size of your system, the higher the cost.  

You may like to read: How much does an off-grid solar system cost?

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