How the cost per kilowatt-hour is calculated
The idea is simple: take everything the system costs, divide by everything it will ever produce, and you get a price per kilowatt-hour you can hold up against your utility bill. This is the levelized cost of energy, or LCOE.
At a national assumed installed cost of $2.50–$3.35 per watt, one installed kilowatt costs $2,500–$3,350. That kilowatt generates about 1,400 kWh in its first year and declines 0.5% annually, totalling roughly 32,978 kWh across 25 years. Dividing gives 7.6¢–10.2¢ per kWh.
Two things to hold in mind. First, this figure is deliberately conservative in one direction and optimistic in another: it excludes financing interest, maintenance and the inverter replacement most systems need once, all of which push the real cost up — but it also ignores that panels usually keep producing past year 25. Second, it is a fixed price. The grid price you are comparing it against is not; it has historically risen, which is the actual case for locking in a rate.
Solar cost per kWh vs. grid price, by state
Sorted cheapest first. The final column is what matters: how much less (or more) a solar kilowatt-hour costs than one bought from the utility today.
Cheapest states for solar electricity
Arizona, New Mexico, Nevada, Texas, Florida produce the cheapest solar kilowatt-hours — a combination of strong sun and low installed cost. But cheap production is not the same as good economics: several of these states also have low electricity prices, so the savings per kilowatt-hour are thin. Alaska sits at the other end at about 15.2¢ per kWh.
The states where solar makes the strongest financial case are the ones with the widest gap between the two columns — usually high-rate states, not the sunniest ones. Compare 25-year savings by state →
What this means for your bill
A typical 8 kW system producing about 11,200 kWh a year covers a meaningful share of an average home's usage. The catch is that a kilowatt-hour you generate is only worth the retail rate if you use it as you generate it. Exported power is often credited well below retail — in some states near wholesale cost — which is why two homes with identical systems and identical bills can see very different savings. Your state's export rules are covered on each state cost page.
Frequently asked questions
How much does solar energy cost per kWh?
For a home system bought in 2026, roughly 7.6¢–10.2¢ per kilowatt-hour over a 25-year life. That is the total installed cost spread across every kilowatt-hour the system is expected to produce, at a national assumed installed price of $2.50–$3.35 per watt and 1,400 kWh per installed kW per year. No federal tax credit is included, because Section 25D ended for systems installed after December 31, 2025.
Is solar cheaper per kWh than buying electricity from the grid?
In 50 of the 51 states and territories we track, the midpoint solar cost per kWh comes in below the state's average retail electricity price — meaning the system generates electricity for less than the utility charges for it. The gap is widest in high-rate states like Hawaii, California, Massachusetts. Note that this compares a fixed 25-year solar price against today's grid price, which will very likely rise.
What is the levelized cost of energy (LCOE) for residential solar?
LCOE spreads the lifetime cost of a system across its lifetime production to give a single price per kilowatt-hour, so solar can be compared directly against a utility rate. Our version is deliberately simple: installed cost divided by 25 years of production with 0.5% annual degradation. It excludes a discount rate, financing interest, maintenance and inverter replacement — all of which would raise the real figure.
Why is solar cost per kWh lower in sunny states?
Because the same panel produces more kilowatt-hours there, spreading the same installed cost across more output. A system in Arizona generates roughly 65% more per installed kilowatt than one in Washington, so its cost per kWh is correspondingly lower — even though the cost per watt is similar. This is also why sunny states are not automatically the best places to buy solar: cheap electricity in those same states can mean the savings per kilowatt-hour are small.
How does solar cost per kWh compare to utility-scale solar?
Utility-scale solar is dramatically cheaper per kilowatt-hour — commonly a third or less of residential cost — because of scale, ground mounting, tracking, and no per-roof labor, permitting or sales overhead. Residential solar competes against the retail electricity price, which includes transmission, distribution and utility margin, not against wholesale generation cost. That is the comparison that matters for a homeowner.