Solar Power Cost
Six Easy Steps To Estimate Cost of a Solar Power System
Solar power energy systems are not inexpensive. That said it’s important to compare them within context of other types of home improvement projects. Home buyers and realtors view a solar photovoltaic or solar hot water heating system as a significant value-added improvement – similar to adding a deck or remodeling your kitchen. Plus unlike a deck or kitchen remodel, you also gain one-up on your power bills.
Solar power systems often get an additional financial boost as well: many jurisdictions and utilities across the USA offer attractive financial incentives to drive down the upfront capital costs associated with a solar power system.
Here are some foolproof ways to estimate the cost of a solar photovoltaic or solar thermal system and to figure out if a solar energy system makes sense for you.
Let’s start with a home photovoltaic (PV) system.
Step 1: Estimate your home’s electricity needs
To get started, it’s good to have a sense of how much electricity you use. You’ll have a better point for comparison if you find out how many kilowatt hours (kWh) you use per day, per month, per year. Your utility bill should include that information.
Of course, the utility bill will also display your costs and many utilities include a graph that displays how your monthly energy use/cost varies throughout the year. That helps you estimate where your highest energy use is and at what time of year.
Step 2: Anticipate the future
In 2005, average residential electricity rates across the USA ranged from about 6 to nearly 16 cents per kilowatt hour depending on where you lived. Average retail and commercial electricity rates have increased roughly 30% since 1999 and the upward trend will likely continue especially as costs for the coal and hydropower used to generate that electricity rise as well.
So think about your home electricity needs and present and future cost in relation to one another. Here’s a quick chart comparing 2005 average electricity rates in several states around the country to estimated future rates 20 years from now (a conservative estimate for the lifespan of a PV system). For sake of comparison, we assume a home uses 1,100 kilowatt hours of electricity per month.
|State||2005 Average Electricity Rate
|2005 Yearly Cost||2025 Average Electricity Rate
|2025 Yearly Cost|
|Arizona||8.9 cents||$1,170||28.4 cents||$3,751|
|California||12.5 cents||$1,652||40.1 cents||$5,296|
|Colorado||9.0 cents||$1,996||29.1 cents||$3,835|
|Massachusetts||13.4 cents||$1,769||43.0 cents||$5,673|
|Maryland||8.5 cents||$1,122||27.3 cents||$3,598|
|New Jersey||11.7 cents||$1,544||37.5 cents||$4,953|
|New York||15.7 cents||$2,072||50.4 cents||$6,646|
|Texas||10.9 cents||$1,439||35.0 cents||$4,614|
Step 3: How much sun do you get?
The Florida Solar Energy Center has conducted a study to examine how a 2-kW photovoltaic system would
perform if installed on a highly energy efficient home across the continental USA.
The study accounted for all factors that impact a PV system’s performance such as the temperature effect on the photovoltaic cells, the amount of sun peak hours in various regions, and the efficiency of inverter to convert solar derived energy from DC to AC. The image above depicts the results.
As the image illustrates, solar photovoltaic systems work just about anywhere in the US. Even in the Northeast or in “rainy Seattle”, a pv system can pencil out if designed and installed properly. In New York or New Jersey, a one kilowatt system should produce about 1,270 kilowatt hours of electricity per year, in Seattle, a one kilowatt system should produce about 1,200 kilowatt hours per year. In the Southwest, of course, those ratios will be much greater.
Featured solar installers in your area
can help determine the best size for your solar photovoltaic system.
Step 4: Size your system
In general, solar photovoltaic systems sized between 1 to 5 kilowatts are usually sufficient to meet the electricity needs of most homes. One advantage of grid-tied systems is that you can use solar PV to supplement or offset some of your electricity needs; therefore you can size your system to match your budget and always add to the system later if needed.
Also as a side note, here’s a rule of thumb to remember to help you estimate the physical space your PV system might need: one square foot yields 10 watts. So in bright sunlight, a square foot of a conventional photovoltaic panel will produce 10 watts of power. A 1,000 watt system, for example, may need 100 – 200 square feet of area, depending on the type of PV module used.
Step 5: Know your rebates
Many states and local jurisdictions offer rebates, tax credits and other types of incentives to homeowners for installing residential photovoltaic and
solar domestic water systems. To view a comprehensive database of the incentives available for renewable energy visit http://www.dsireusa.org.
At the Federal Level, you can take advantage of a 30% tax credit for the purchase of a residential solar system.
Step 6: Run the numbers
Although the cost for a solar PV system will depend on the size of the system you intend to install, your electricity rate, the amount of kilowatt hours you expect to generate, and the state/local rebates/tax credits that may be available, the formulas for calculating the returns are pretty much the same.
For those who appreciate having the formulas, use the ones listed below to do a quick ballpark estimate of how much a solar photovoltaic system might cost you.
|Retail Price for Solar Photovoltaic System
(include components and labor for installation)
|-||$2,000 Federal Tax Credit|
|-||State or Local Tax Credit or Rebate|
|-||Utility Rebate or Other Incentive|
|Annual Electricity Bill Savings|
|Kilowatts of electricity generated from PV per year|
|x||Kilowatt hours used per year|
|=||Annual Kilowatt energy from the PV system|
|Annual Kilowatt energy from the PV system|
|x||Current Residential Electricity Rate|
|=||Annual $$ Saved|
|Net Metering or Resource Conservation Credits (where applicable)|
|Yearly Excess PV Energy Produced|
|x||$$ credit applied per watt|
|=||Annual Value from Net Metering|
Of course, a more accurate assessment can be made by a pro. Work with a SolarEnergy.net Featured Solar Installer to size and price the right system for you. As is true with any major purchase, don’t hesitate to ask for
several bids from different contractors. SolarEnergy.net has an extensive Solar Directory of professional installers ready to assist you with your home or commercial solar project.
Many solar power providers will provide you with a comprehensive estimate. Helpful information to know includes:
- Total cost to make the system operational (labor cost for design and installation and equipment costs)
- Equipment (Make and Model)
- Warranty info
- Permit costs, if needed
- Tax, where applicable
- Federal tax credits
- State or local jurisdiction tax credits or rebates
- Utility rebates
- Expected Renewable Energy Certificates or Net metering credits
- Expected operation and maintenance costs
- Projected savings
Solar Thermal (also called Solar Hot Water)
Solar thermal systems capture the sun’s energy to heat water and are one of the most cost-effective renewable energy systems. They are used to heat hot water tanks and/or a heating system. A solar pool heating system is another type of solar thermal system designed specifically to heat a pool or hot tub.
Generally it’s worth investigating the economic viability of installing a solar hot water system if you have an electric water heater with utility rates of at least 5 cents per kilowatt hour and have tax credits or rebates available. (It may even be worth changing out a gas-powered water heater if your
costs are at least $8/million BTU).
The formulas for costing out a solar water heater system are similar to estimating the cost for installing solar PV system. Many solar energy professionals can help you determine what system might work best for you.
Heating Your Swimming Pool with Solar Power
Although few jurisdictions provide financial incentives for using solar energy to heat a swimming pool or hot tub, in general, using solar power to heat your pool is a “no-brainer” from a return on investment standpoint.
The electricity used to heat a pool during the swimming season often amounts to the same amount of energy that homes-without-pools consume over a year. Combining a solar thermal system to generate heat for the pool with a solar thermal pool cover to retain the heat generated can further maximize efficiencies and extend your swimming season.
Most installers recommend that a solar collector used to heat a pool is sized at roughly half the square footage of your pool surface area. Solar thermal panels typically last 10 – 20 years and come with a 10-year warranty.
How long it takes to break even on the cost of your solar power pool system depends on where you live. In California or other parts of the Southwest, you’ll break even in 1 to 3 years but places as “far north” as Canada, a solar pool heating system pencils out over a slightly longer period of time.
The average homeowner saves over $1000 a year on electricity by installing solar panels on their roof. That’s including the cost of solar panels. The most common way to go solar today is by leasing, which essentially means instead of paying the utility you pay less to produce your own energy.
Want to find out more? We can connect you with top rated solar providers in your area who will provide you with a free consultation, usually over the phone or online.
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