Is Solar Energy Expensive? A 25-Year Cost Breakdown

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Solar is expensive up front but cheap over time. A 10 kW home system costs about $25,800 installed, yet over 25 years it makes electricity for about 9¢ per kWh. That is about half the 2026 US average utility rate of 18.2¢ per kWh.

So is solar energy expensive? The sticker price is. The power it makes is not. Below we walk through the math step by step, show the payback now that the federal tax credit has ended, and explain when solar is a poor buy.

How much does solar cost up front compared with 25 years of electric bills?

The US average installed price is about $2.60 per watt in 2026. A 10 kW system averages $2.58 per watt, or about $25,800, and an average 12 kW system is near $31,135. For a full price table by size, see our solar panel cost guide.

Now compare that with buying the same electricity from your utility. A 10 kW system in an average US location makes about 1,350 kWh per kW each year:

1. Yearly output: 10 kW × 1,350 kWh = 13,500 kWh.
2. Value at the grid rate: 13,500 kWh × $0.182 = about $2,457 in year one.
3. 25 years at flat rates: $2,457 × 25 = about $61,400.
4. 25 years if rates rise 3% a year: about $89,600.

One honest caveat: these savings assume every solar kWh is worth the full retail rate. That is true for power you use as it is made, and under full net metering. If your utility pays less for power you send back to the grid, your real savings will be lower.

What does solar power cost per kWh over its lifetime?

The fairest way to judge whether solar energy is expensive is cost per kWh. Utilities and analysts call this the levelized cost of energy (LCOE). The simple version is total system cost ÷ lifetime kWh.

1. Year-one output: 10 kW × 1,350 kWh = 13,500 kWh.
2. Panels lose about 0.5% of output a year, so average output over 25 years is about 94% of year one. That adds up to about 13,500 × 25 × 0.94 ≈ 317,000 kWh (instead of 337,500 kWh with no loss).
3. Lifetime cost: $25,800 + about $2,500 for an inverter swap and upkeep = $28,300.
4. Cost per kWh: $28,300 ÷ 317,000 kWh = $0.089, or about 8.9¢.

Leave out the upkeep and it drops to about 8.1¢. Many panels also keep working past 25 years, which pushes the real figure lower still. Sun matters a lot, though:

Even in a cloudy state, solar comes in well under the 18.2¢ average grid price. Want to size a system for your own bill? Try our solar power calculator.

How long does solar take to pay off without the federal tax credit?

The 30% federal Residential Clean Energy Credit ended for systems placed in service after December 31, 2025, under the 2025 budget law. Homeowners who buy solar in 2026 pay the full price unless a state or utility program helps. Our solar rebates and tax credits guide covers what is left.

Simple payback is cost ÷ yearly savings. At the US average: $25,800 ÷ $2,457 = 10.5 years. If rates rise 3% a year, it drops to about 9.3 years. With the old 30% credit, payback would have been about 7.4 years ($18,060 ÷ $2,457). So losing the credit added about three years.

Is it cheaper to pay cash, take a solar loan, or lease?

How you pay changes the true cost a lot. Cash is cheapest over 25 years. A loan spreads the cost but adds interest. A lease or power purchase agreement (PPA) needs no money down, but you never own the system.

Loan example: $25,800 at 7.99% for 15 years works out to about $246 a month. You would repay about $44,400 in total. Add $2,500 in upkeep and the lifetime cost is about $46,900, or 14.8¢ per kWh ($46,900 ÷ 317,000 kWh). That is still below the grid average, but the margin is thin. Year-one bill savings are only about $205 a month ($2,457 ÷ 12), so the payment beats the savings at first.

One twist for 2026: companies that own leased or PPA systems may still claim a business tax credit for a limited time. Some pass part of that saving on to you, but they don’t have to. Compare any lease offer against a loan quote. Our solar loans guide explains rates, dealer fees and lease terms in detail.

Are solar panels worth it in 2026?

For most homeowners who pay near-average rates, yes. A 10 kW system costs about $25,800, pays for itself in about 10.5 years at 18.2¢ per kWh, and then keeps making power for about 9¢ per kWh over its life. That is about half the grid price. Solar is usually worth it if:

• You own the home and plan to stay 10+ years. That covers the roughly 10.5-year payback, with 15 or more years of cheap power after it.
• You pay 18¢ per kWh or more. At 25¢, payback drops to about 7.6 years.
• Your roof gets full sun. A south-, east- or west-facing roof with little shade gets near the 1,350 kWh per kW average, or better.
• You can pay cash or get a low-rate loan. Cash keeps lifetime cost near 9¢ per kWh. A 7.99% loan pushes it to about 14.8¢.

Solar is usually not worth it, or at least worth a second look, in these cases:

• Heavy shade. Trees or nearby buildings can cut output by a third or more. Less output means a higher cost per kWh and a longer payback.
• Cheap electricity. At 12¢ per kWh, payback stretches to about 16 years. Parts of the Northwest and Midwest fall in this range.
• Moving soon. If you sell within a few years, you may not get your money back. A loan or lease can also complicate the sale.
• An old roof. If the roof needs replacing in the next few years, do that first. Removing and reinstalling panels later adds cost.
• Low export credits. Where the utility pays little for exported power, savings depend on using solar as it is made or adding a battery, which adds cost.

Frequently asked questions

Is solar cheaper than electricity from the grid?

Usually, yes, over the system’s life. With average sun, a cash-bought system makes power for about 9¢ per kWh versus the 18.2¢ US average. Financing, shade and low export credits narrow that gap.

Is solar still worth it without the 30% tax credit?

For many homes, yes. Payback rose by about three years, to around 10–11 years at average rates. In states with high rates it is still 6–8 years.

How long do solar panels last?

Most panels carry 25-year performance warranties and often run longer. Inverters usually need replacing once, around years 10–15, unless you have microinverters with longer warranties.

Why do solar quotes vary so much?

Price per watt depends on your state, roof type, equipment brand and the installer’s overhead. Loans with dealer fees also inflate quoted prices. Get at least three quotes and compare them in dollars per watt.

Sources

• EnergySage: Solar panel cost data
• US Energy Information Administration: Short-Term Energy Outlook
• NREL PVWatts Calculator
• IRS: Residential Clean Energy Credit

Last updated: October 2026. Figures are estimates based on national averages; your quotes and savings will differ. This article is for information only and is not financial or tax advice.