Why are solar panels so expensive in the U.S.? Soft costs add up, but prices have fallen $15K

Solar prices have fallen dramatically over the past few decades, averaging $2.53 per watt in 2025—a huge drop from the $7+ per watt costs of the early 2000s. Even more notable, the U.S. solar industry has maintained prices at these record-low levels despite recent economic headwinds, a testament to the sector’s resilience and innovation.

While U.S. solar remains more expensive than in countries like Australia, where systems can cost under $1 per watt, American installers are working hard to close the gap. Much of the focus is on reducing “soft costs”—non-equipment expenses like permitting, marketing, and administrative overhead. By streamlining these processes, installers can lower prices while still delivering the quality and reliability that U.S. homeowners expect.

The Trump administration’s tariffs have added new challenges, but EnergySage data shows that, in early 2025, many installers absorbed these financing cost pressures rather than passing them on to homeowners. This adaptability underscores the industry’s long-term ability to reduce costs and expand adoption.

Solar costs on EnergySage have fallen from $3.86 per watt in 2014 to $2.53 per watt in 2025—a drop of more than 34% over the past decade. For a typical 11-kilowatt (kW) system, that decline translates to roughly $14,600 in savings. The difference is even starker compared to the early 2000s, when solar panel systems cost upward of $7 per watt.

These prices reflect the gross installed cost of solar before any rebates or incentives. Depending on where you live, state and local programs can further reduce costs, although availability varies widely.

In addition to eliminating the federal solar tax credit, the Trump administration’s new tariffs on imported solar equipment may impact pricing for American homeowners. According to EnergySage's latest contractor survey, 70% of installers expected tariffs to negatively impact their businesses, with 19% predicting they would "dramatically harm" their ability to operate profitably.

However, the solar industry has shown resilience in managing cost pressures. Data from the first half of 2025 shows that installers absorbed financing cost pressures rather than raise prices ahead of anticipated tariffs and policy changes. Solar prices remained stable in the first half of 2025, suggesting installers found ways to maintain competitive pricing despite economic headwinds.

Many installers are actively working to reduce soft costs—the non-equipment expenses that can add significant expense to installations. With equipment costs representing only about 46% of total system cost, there's a substantial opportunity for cost reductions in other areas.

“When you think about all of the industries being disrupted by tariffs, residential solar should be able to handle them the easiest because they have so much more room to improve,” Jigar Shah, former Director of the Loan Programs Office in the U.S. Department of Energy and current energy entrepreneur and podcaster, said to EnergySage.

“We know that we can get the cost of residential solar down closer to $2 a watt, and we have all this [electricity price] volatility while the [solar] product has never been more valuable for customers.” 

While solar prices could drop further, holding off on installation isn’t always the best strategy. Even without the federal tax credit, which ends for systems installed after December 31, 2025, most systems pay for themselves in about 10 years through electric bill savings, then go on to deliver decades of free electricity. With electricity rates climbing and no slowdown in sight, the savings from going solar today often outweigh the potential benefits of waiting.

When people point to lower international solar costs, Australia is usually the benchmark. As of March 2025, the cost of residential solar energy in Australia averaged just AUD $0.90 (USD $0.59) per watt—less than a quarter of the U.S. average.

One big reason is permitting. In the U.S., requirements vary widely by state and local jurisdiction, often involving extensive paperwork for installers to complete. Australia finds ways to ease these requirements and restrictions by offering nearly immediate virtual permitting portals. 

“[Installers] could drop their cost tremendously if they just worked smarter, not harder,” said Shah. “That means working with the utility to make interconnection easier, and talking to your town's mayor and city council members.”

“Be very vocal—that's how this works,” Shah said. “If you have a solution, and your local officials are making it hard for their constituents to access it, that should be something that has political consequences.”

But Australia’s success comes with caveats. Reports have documented cases in the country where solar energy systems, expected to last 20 years, experienced malfunctions or sharp performance drops after only five years. Meanwhile, many U.S. systems installed in the early 2000s are still running smoothly after two decades, suggesting America’s stricter regulatory oversight helps ensure long-term reliability.

A balance must be struck between lowering costs and maintaining quality solar installations. Fortunately, recent data show that U.S. installers are finding ways to cut costs without compromising quality. 

According to EnergySage’s latest contractor survey, many installers are streamlining soft costs—expenses like sales, overhead, and operations—rather than skimping on labor or equipment. With 84% of installers reporting higher labor costs in the past year, finding efficiencies in other areas becomes critical for maintaining competitive pricing.

Solar continues to deliver strong returns despite tariffs, policy shifts, and higher labor costs. Most systems pay for themselves in a little over 10 years, and with panels lasting up to 30 years, homeowners can enjoy decades of free electricity after the initial investment is recouped. For anyone looking to reduce costs and achieve energy independence, solar remains one of the smartest investments available in the United States today.