Off Grid Solar System Cost (What Can You Expect to Pay?)
Taking your home completely off-grid with solar is a much more involved and expensive of a process than many people first think. The setup requires various different components, some of which are much more complex than the more common grid-tied solar installation. However, going completely off-grid with solar may be the only viable solution for a home that’s located in the middle of nowhere, or when the owner wants to rely solely on their own energy solutions. If this sounds like you, you may be curious about how much off grid solar system cost? Assuming electric consumption is that of the U.S. national average, an off-grid solar system would cost between 30,392 – 48,048. The major price fluctuation is largely due to battery bank type, with LFP batteries costing much more than flooded lead-acid. Lastly, before we continue going into detail on each off-grid solar system component and its cost, we need to make sure you understand something. Solar system cost is largely dictated by 3 things. Your country, peak sun hours, and electricity consumption. The average price we gave above assumes you live in the United States. Costs in Australia for example would be much different.
What Components Are Typically Used in an Off grid Solar Power System?
In this section we will outline all the different components that make up an off-grid solar system and how each will influence the overall cost of your system. Keep in mind each component that makes up an off-grid solar system varies in cost based on its size and brand. For example, if your home uses a lot of electricity it is going to need a larger-sized battery bank to offset your consumption on overcast days. The larger the battery bank, the higher the costs. We will factor in location in the next section, here we want to talk about each of the main components that make up an off-grid solar system and what you can expect their costs to be.
#2 Charge Controller
Charge controllers regulate the rate at which electric current is added to or drawn from the electric batteries.
The type/power rating of these devices generally determines the price.
We recommend installing MPPT charge controllers, Victron is a fantastic brand.
#3 Hybrid Power Inverter
Inverters are pretty much the life force behind your off-grid solar system. Without them, your setup won’t work.
They essentially transform the DC electricity from your batteries into useable AC electricity which you can use to power your appliances around the house.
#4 Battery Bank
Perhaps the most expensive component of your entire off-grid solar system setup.
Battery banks are one of the defining components of an off-grid solar system.
They allow your home to be powered during periods of overcast conditions or at night time.
Battery technology is still quite expensive, particularly lithium-ion technology.
For the most part we have covered the main components in an off-grid solar system.
However, there are of course a few more smaller components that will add to your cost. We have chosen to leave them out as they really all depend on the individual setup.
Off Grid Solar Systems: Estimated Costs Table
The overall cost of your system really all comes down to what size you have installed.
The larger the size the more expensive.
The size you require all comes down to your energy consumption and your offset requirements.
For this reason we have included averages instead of exact amounts as the cost of an off-grid solar system varies way too much person to person.
Solar Tax Credits
One perk available to those of you who live in the U.S. is the solar tax credit. Our averages do not take into account your ability to claim solar incentives for your solar installation.
Congress passed an extension of the ITC, which provides a 26% tax credit for systems installed in 2020-2022, and 22% for systems installed in 2023. (Systems installed before December 31, 2019 were eligible for a 30% tax credit.) The tax credit expires starting in 2024 unless Congress renews it Energy.Gov
Taking these credits into consideration, our average amounts get reduced to:
Off Grid Solar Systems: Complete Costs Table
|Daily Summer: 5.80 Daily Winter: 2.90
|Price: 8,349. 14,220
|Daily Summer: 13.00 Daily Winter: 6.50
|Price: 11,559. 16,921
|Daily Summer: 17.30 Daily Winter: 8.60
|Price: 13,916. 23,571
|Daily Summer: 21.60 Daily Winter: 10.80
|Price: 15,634. 25,289
|Daily Summer: 25.90 Daily Winter: 13.00
|Price: 18,303. 27,958
|Daily Summer: 28.80 Daily Winter: 14.40
|Price: 22,654. 32,699
|Daily Summer: 34.60 Daily Winter: 17.30
|Price: 24,451. 34,496
|Daily Summer: 43.20 Daily Winter: 21.60
|Price: 33,462. 54,111
|Daily Summer: 46.10 Daily Winter: 23.00
|Price: 32,065. 48,565
|Daily Summer: 51.80 Daily Winter: 25.90
|Price: 32,815. 53,464
|Daily Summer: 57.60 Daily Winter: 28.80
|Price: 35,653. 52,154
|Daily Summer: 64.80 Daily Winter: 32.40
|Price: 47,263. 76,984
|Daily Summer: 77.80 Daily Winter: 38.90
|Price: 51,180. 80,900
(Table courtesy of Unbound Solar)
You may use the above table to figure out your estimated costs based on your homes solar requirements.
Final Off Grid Power Thoughts
Understanding the costs involved with your off-grid solar system is the first step in figuring out whether this is a viable option for your household.
An off-grid solar system may allow you to live in more isolated areas, ones closer to nature without grid-tied electricity supply.
This in itself would generally reduce the overall purchase cost of your household. Perhaps this is some incentive to justify the large cost of an off-grid solar system.
Is Off Grid solar expensive? Off-grid solar systems are expensive. A solar panel setup that supplies all the energy needs of a home tends to be very expensive. Compared to a grid-connected solar system, an off-grid solar system requires more panels, an inverter with a higher voltage capacity, and a large amount of solar battery storage.
Does solar increase home value? The National Renewable Energy Laboratory (NREL) found that every dollar saved on energy through solar increases home value by 20. That’s a return on investment of 20 to 1 According to Zillow, homes with solar panels sell for approximately 4 percent higher on average than homes without solar energy.
How much does a 100kW solar system cost? The average commercial solar panel cost for 100kW solar system in the US is about 325,000 with average ranging from 50,000 for a 25kW system to 600,000 for a 250kW solar system.
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How Much Do Solar Panels Cost in 2019?
In 2019, a typical residential solar system may set you back between 11,200 to 14,400 to install after tax credits and rebates.
Solar energy is a long-term investment. To budget correctly, you must look at costs and savings over 20 years and determine the payback period and payback amount. The right calculation includes:
- The cost of photovoltaic panels and other components
- What your solar installer charges
- Your current and electricity bills
- Any applicable federal, local, or state tax credits
- Projected savings on your energy bills
Put it all together and you can calculate the actual solar panel cost for your home. If you want to skip all the math, we advise getting a free quote from a solar power professional. If you’d like to figure out the costs yourself, then keep reading and learn how the math works.
Breaking Down the Cost of Solar Panels
The standard way to evaluate a solar panel system cost is cost-per-watt or dollars-per-watt. This measurement is calculated by taking the total cost to install the system (parts and labor) and dividing by how much power it produces in kilowatts (electrical output). For reference, the average U.S. home would use a 4kW-7kW solar system.
Solar panel price will also vary based on the state you live in, the installation company, and any rebates and incentives you collect. In 2019, someone in California can expect their cost-per-watt to range anywhere from 4.39 for a small system to 3.56 for a vast system.
At the time of this writing, solar panel installation costs range between 7-9 per watt. So a 5kW system would cost around 25,000-35,000 before rebates. While that cost is a stiff pill for many households to swallow, it’s common for utility companies to offer incentives or subsidies to offset solar system costs.
For example, a system that costs 18,000 has a payback period of about 20 years. The cost of a solar panel today is around 3 per watt, and the extra cost of installation brings expenses up to 5- 6 per watt. Installation costs for PV systems include both labor and the electronics needed to tie the solar array into your existing electrical system.
Homeowners interested in solar roofs should note solar shingle systems are more expensive than the traditional roof installation. Energysage estimates solar roofs can range from 4.15 cost per watt to as much as 8.14 for the more advanced offering from Tesla’s Solar City.
How to Calculate Solar Energy Costs
Find Out How Much You Can Save with Solar
Solar Power Cost Calculator
Find Out How Much You Can Save with Solar
Estimated Savings with Solar
The rule of thumb is that the average U.S. household consumes electricity at the rate of one kilowatt per hour (kWh). There are about 730 hours in each month, and the national average price of a kWh of electricity is 0.10. So an average monthly bill would be around 73 for 730 kWh of electricity.
The average electricity bill can vary considerably if you have non-standard items, such as a hot tub, or some electrical appliances running continuously. Extended computer use, plasma screen TVs and video games consoles can also make an impact. Your usage will also increase significantly in months when you run an air conditioning unit or heater. Finally, the cost of electricity varies widely across the USA, from as low as 0.07/kWh in West Virginia to as much as 0.24/kWh in Hawaii. To get a precise estimate, you’ll want to adjust our estimated calculations to fit your electricity usage patterns.
A conservative value to use as a solar panel’s generating capacity is 10 watts/sq. ft. This value represents a panel conversion efficiency of about 12 percent, which is typical. This means that for every kW you generate, you need about 100 sq. ft. of home solar panels. If the sun shone 24 hours a day, you could put up 100 sq. ft. of panels and have enough energy to power the average home.
The average sunshine across the country varies. In Seattle, Chicago, and Pittsburgh you’ll likely get up to three hours of direct sunlight. In states like Colorado and California, you’ll probably absorb five or six hours of sunlight. Homes in sunny Arizona can get nearly 7 hours of sunlight per day.
The amount of average sunshine means that the size of the panel array required can vary, anywhere from 400 sq. ft. to 800 sq. ft. (i.e., 4 kW to 8 kW), depending on where you live. You’ll need more panels if you live in a location that gets less sunshine per day, and fewer panels if you live in a location that gets more sunshine.
How Utility Companies Affect Solar Power Costs
If your utility company allows you to have net metering — that is, they supply you with a special meter that will spin backward when you generate more electricity than you use — your annual bill can average out at zero. Because of shorter days in the winter, you’ll likely be a net purchaser of electricity in that season and a net producer in the summer months. A grid-tied system like this is different than off-grid systems used in remote locations with no electrical service; those require batteries, which can significantly increase overall system costs.
Standard Solar System Components
As we mentioned earlier, equipment is another factor to consider when calculating how much it costs to install solar panels. Each standard residential solar array uses four components:
Solar panels – captures the sun’s energy and converts it to electricity Controller – protects batteries by regulating the flow of electricity Batteries – store electricity for later use Inverter – converts energy stored in a battery to voltage needed to run standard electrical equipment
The entire system, plus installation, is what drives solar panel costs. Plus, equipment like batteries sometimes need to be replaced over time.
The good news is that the costs for solar panels are expected to continue to drop as thin film panels from companies like First Solar, Nanosolar, and AVA Solar become available to the residential market, which could drop to 1-2 per watt — and at volumes that are several times today’s total output.
Assuming that installation and auxiliary equipment costs can be reduced to around 1 per watt, then a 5 kW system in upcoming years may cost as little as 10,000, with a payback period of about 10 years. This makes the future of PV solar installations much more attractive.
How much solar panels cost vary across a multitude of factors. Want to get an idea for how much you can save? Try our solar savings calculator or give us a call to find out!
How Much Do Solar Panels Cost: Saving With Solar
One of the most important questions people ask solar companies when looking to acquire solar panel systems is how much do they cost?
Solar panel cost and installation vary based on their make and model. Labor costs also vary depending on the style of your roof, conduit attic runs, backup power, and the location of your residence or business.
That’s why Freedom Solar offers a free initial consultation and quote estimate based on your particular solar energy needs. On average, Freedom Solar customers spend only 138 per month when they finance an 8 kilowatt (kW) residential SunPower system — this is before local rebates and tax incentives come into effect based on your city and state. And some customers pay as little as 83 per month!
Cost of Solar Power System
Total solar power system cost includes parts (solar panels, inverters, mounting equipment, conduit, and other components), installation labor, and project management costs relating to HOA approvals, permitting, and inspections. Solar panel cost in particular cities within Texas, Colorado, Florida, Virginia, and North Carolina varies slightly, but the estimate above is a general idea of what to expect.
Keep in mind that purchase price is not the same as ownership cost. When you consider traditional electricity sourcing, not through solar photovoltaic (PV) systems, you’re paying to rent electricity from your utility company. Becoming your own source for energy through renewable solar power gives you more control over your bills and investments.
Solar power is a low-risk, high-return investment, especially if you have the cash to purchase it outright. If not, you can finance your system with monthly payments that make cash flow neutral from day one.
Freedom Solar can help you attain your solar panel system with interest rates as low as 0%, 0 down payment options, and a 25-year warranty that will ensure you don’t lose any money in the long run.
Saving with Solar
There are numerous ways to save money when going solar. Whether you’re looking to reduce costs on installation or your utility bill, we’ll detail all of the ways you can save with solar power.
Lowering the Price of Your Home Solar Power System
- Local rebates: Reduce solar installation costs with renewable energy incentives from your local or state government.
- Federal rebates: Take advantage of the federal solar tax credit, which can save you 30% on solar panel installation costs.
- Manufacturer rebates: Find out which manufacturers make going solar as easy as possible while offering financial incentives toward your solar installation.
- Promotions: Pay attention to promotions in your city or state that could help you save on purchase and installation costs. Buying at the right time is Smart buying.
Saving Money on Utilities
- Utility bills: Say goodbye to high electricity costs. Going solar can dramatically reduce or even completely eliminate your monthly utility bill.
- Net metering: Get paid for any excess or unused energy your solar system generates. You can potentially save thousands of dollars in electricity costs over the lifetime of your solar energy system through net metering.
Take a look at our solar potential calculator to get an idea of how much energy your panels could generate as well as how much money you could save based on your utility bill.
How to Save Money on Solar Panel Cost with Local Rebates
Plenty of utility companies and local governments offer their own rebates and other incentives — including net metering — to encourage more homeowners to go solar.
Depending on where you live in Texas, Colorado or Florida, or elsewhere in the United States, you can take advantage of the following rebates and incentives:
Saving Money With Federal Rebates
One of the best incentives to lower the costs of your solar energy system is the federal solar tax credit. You can reduce the amount you pay in taxes for your solar panel system by 30% between now and 2033.
That means that if your system costs 30,000, you get a 9,000 credit on your federal taxes. And adding any local incentives listed above will help you save even more money!
Saving Money With Manufacturer Rebates
Manufacturers want to make it easy for homeowners like you to make the switch to renewable energy. SunPower periodically offers rebates up to 1,000 to offset your solar panel installation costs.
Contact Freedom Solar and one of our specialists will help you find manufacturer rebates suitable for your residence.
Saving Money With Promotions
Freedom Solar also aims to help customers save money through a variety of promotions throughout the year. Promotions vary and have deadlines, but we’ll work with you to find the best options available.
SAVING MONEY ON UTILITIES
Saving Money on Utility Bills
One of the most popular reasons to go solar is that you can drastically reduce — or even completely eliminate — your monthly utility bill. The amount you’ll save depends on how much energy your system produces as well as how much energy you consume. But the most significant benefit is the decrease in your energy bill since you’re harnessing the power of the sun, a free, inexhaustible energy source.
You’ll also avoid hefty electricity rates that are often unpredictable and increase over time. And since the amount you’ll save with solar power is usually equal to the amount you’ll avoid paying an electricity supplier, your finances won’t be affected by surging energy in the area.
When you install a solar panel system, you can lock in your energy costs at a constant rate, making your finances much more predictable.
Saving Money with Net Metering
A solar panel system is a workhorse and can often generate more electricity than you need for your daily use. This is where net metering is beneficial; it serves as a billing agreement between you and your utility provider as a solution for any excess, unused energy. You can program your solar panel system to send any unused electricity to your city’s grid, and in return you’ll receive credits on your electricity bill.
Net metering is especially useful since it’s rare that someone is at home using electricity all day and night. When you’re out of the house, your solar panels will continue to generate energy and store it as backup power in a generator or battery. Or even when you’re sleeping at night and not using electricity, you can tap into those net metering credits to offset your electricity bill.
This means that you’re not only in control of your own energy, but you’re able to give electricity back to your city, making sustainable efforts and also saving money in return. Triple win!
All the Ways You Can Save with Solar
Acquiring a solar panel system is a major home improvement project, but it’s well worth the time and financial investment. Most homeowners go solar with no money down up front thanks to local, state, and federal incentives that significantly help reduce costs.
Whether you’re utilizing local, state, or federal rebates, net metering, or perhaps seasonal promotions, you have plenty of ways to offset the costs of your solar panel equipment and installation to help you gain a lifetime of free, renewable energy. To learn more about Freedom Solar or request a free consultation and quote, call 1 (800) 504-2337 or fill out our online inquiry form.
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Energy from the sun is free. However, capturing and utilizing this free energy does have associated costs, such as installing and maintaining the equipment needed to harness the energy.
Residential System Pricing
Solar Thermal System Pricing
Solar water heating systems generally produce the biggest economic return on investment. A typical residential solar water heating system sized for a family of four costs about 6,000 to 8,000.
Solar Electric System Pricing
The initial investment required to purchase a residential solar electric system can be significant. A turnkey system equipped to produce enough power for the average home can be as much as 30,000. 36,000, which is why most homeowners choose a solar electric system that is designed to offset only a portion of the home’s electrical energy consumption.
An average home in Alabama consumes 1,200 kWh of electricity each month. A solar electric system rated at one kilowatt will produce approximately 100 kWh of electricity per month in Alabama, which means the average house would require an approximately 12-kilowatt (kW) system with battery back-up in order to meet 100% of the household electricity needs.
Installing a solar electric system without batteries averages between 2,500 to 3,000 per kW. Therefore, the average homeowner would have to make an initial equipment investment of 30,000 to 36,000 for a 12-kW system. In Alabama, with electric costs averaging 0.125/kWh, the annual electric utility cost for the average homeowner would be 1,800.
Without incentives, it would take over 20 years to get a return on the investment of a whole-house solar electric system.
Tax Credits and Incentives
For a typical household, the prospect of paying up to 100,000 for solar panels is prohibitive; however, incentives in the form of tax credits and low interest loans can help offset the cost. A 26% federal tax credit is currently available through December 2022 for installing a solar energy system.
Let us help you determine if installing a solar energy system is right for you. For more information about solar thermal and electric system opportunities at your home or business, contact our Products and Services Team Mon-Fri, 8:00 a.m. 5:00 p.m., at 1-800-990-2726.
The Cost of Solar Panels: Is It Worth It?
Do the benefits of solar panels outweigh their costs?
Nathaniel Riley brings 28 years of experience in financial services, including merger-arbitrage trading, hedge funds, and alternative investments.
Somer G. Anderson is CPA, doctor of accounting, and an accounting and finance professor who has been working in the accounting and finance industries for more than 20 years. Her expertise covers a wide range of accounting, corporate finance, taxes, lending, and personal finance areas.
Skylar Clarine is a fact-checker and expert in personal finance with a range of experience including veterinary technology and film studies.
What Is Solar Power for the Home?
Homeowners who install solar power systems can receive numerous benefits: lower electric bills, lower carbon footprints, and potentially higher home values. But these benefits typically come with significant installation and maintenance costs and the magnitude of the gains can vary widely from one house to another.
This article will help homeowners make the financial calculations required to determine the viability of solar power in their homes.
- Those seeking to go green may want to consider equipping their home with solar panels.
- Not only is solar power good for the environment, but you can earn money selling back excess power to the grid.
- While costs have come down over the past years, installation and maintenance of solar panels can be quite expensive.
- Solar panels are best suited for homes that receive ample sun exposure throughout the year.
- Before committing to solar power, be sure to understand both the social and economic factors.
Understanding Solar Power
In principle, working out whether it makes financial sense to install solar power for your home is simple. You will need to calculate:
- The cost of a solar power system
- How much energy it will produce
- What you would otherwise pay for the same amount of energy
- How many years it will take for your upfront investment to pay for itself in saved energy costs
- Whether the system will pay for itself in five years
If it does and you have the upfront capital, it’s probably a great idea. If you’ll have to wait longer for savings or take out a loan to afford the system, you’ll need to think the decision through carefully.
In practice, however, things are not this simple. There is a large variation in each of these factors, and that can make the costs and benefits of installing solar power for two homes—even if they are neighbors—radically different.
There are some tools that can help, though. Solar Reviews offer a calculator that will quickly provide you with representative costs and savings for a solar power system in every part of the U.S. Calculators like this are a good place to start if you are new to solar energy and want to understand the basic cost model.
In the rest of this article, we’ll take you through each of the key factors you should consider when calculating the costs and potential savings of solar power for your home.
Before getting solar panels, get quotes from several reputable installers to compare.
The Cost of Solar Power for Homeowners
First, let’s look at the cost of installing a solar power system for your home. The average, upfront cost of a residential solar power system is between 3,500 and 16,000.
Why the huge range of costs? Well, a lot of the variation depends on the size of the system you’d like to install and the type of panels you want to use. Whatever system you use, keep in mind that solar power is capital intensive and the main cost of owning a system comes upfront when buying the equipment. The solar module will almost certainly represent the largest single component of the overall expense.
There are some additional costs, as well. Other equipment necessary for installation includes an inverter (to turn the direct current produced by the panel into the alternating current used by household appliances), metering equipment (if it is necessary to see how much power is produced), and various housing components along with cables and wiring gear. Some homeowners also consider battery storage. Historically, batteries have been prohibitively expensive and unnecessary if the utility pays for excess electricity that is fed into the grid (see below). The installation labor cost must also be factored in.
In addition to installation costs, there are some further costs associated with operating and maintaining a PV solar array. Aside from cleaning the panels regularly, inverters and batteries (if installed) generally need replacement after several years of use.
While the above costs are relatively straightforward—often a solar installation company can quote a price for these for a homeowner—determining subsidies available from the government and/or your local utility can prove more of a challenge. Government incentives change often, but historically, the U.S. government has allowed a tax credit of up to 30% of the system’s cost.
details on incentive programs in the U.S., including programs within each state, can be found on the Database of State Incentives for Renewables Efficiency (DSIRE) website. In other countries, such information is often available on government or solar advocacy websites. Homeowners should also check with their local utility company to see whether it offers financial incentives for solar installation and to determine what its policy is for grid interconnection and for selling excess power into the grid.
The U.S. installed 19.2 gigawatts of solar PV capacity in 2020 to reach 97.7 GWdc of total installed capacity, enough to power 17.7 million American homes.
Calculating Your Energy Production
The second factor you’ll need to consider in your calculations is the amount of energy your system will produce and when it will do that. This can be a very complicated calculation to make, even for experienced solar engineers. However, let’s run through the basics.
One of the most important considerations is the solar irradiation levels available in the home’s geographical location; in other words, how sunny it is where you live. When it comes to using solar panels, being closer to the equator is generally better, but other factors must be considered. The National Renewable Energy Laboratory (NREL) produces maps for the U.S. showing solar irradiation levels and the tools on its website provide detailed solar information for specific locations within the U.S.
Equally important is your home’s orientation: For rooftop arrays, a south-facing roof without trees or other objects obstructing sunlight maximizes the available solar energy. If this is not available, panels can be mounted on external supports and installed away from the house, incurring additional costs for the extra hardware and cables.
And then you must factor in the size of your system. Solar panel size is quoted in terms of the theoretical electrical output potential in watts. However, the typical output realized for installed PV systems—known as the capacity factor—is between 15% and 30% of the theoretical output. A 3 kilowatt-hour (kWh) household system running at a 15% capacity factor would produce 3 kWh x 15% x 24 hr/day x 365 days/year = 3,942 kWh/year or roughly one-third of the typical electricity consumption of a U.S. household.
How Much Will You Save?
Once you know how much a solar power system will cost upfront, and how much energy it will produce, you can (theoretically) predict how much you can save in energy costs per year.
This is another tricky calculation, however, because a lot depends on how you pay for electricity at the moment. Utilities often charge residential consumers a flat rate for electricity, regardless of the time of consumption. This means that instead of offsetting the expensive cost of peak electricity production, homeowners’ solar power systems merely offset the price they are charged for electricity, which is much closer to the average cost of power production.
However, many utility companies in the U.S. have introduced pricing schemes that allow homeowners to be charged at different rates throughout the day in an attempt to mirror the actual cost of electricity production at different times: This means higher rates in the afternoon and lower rates at night. A PV solar array may be very beneficial in areas where this sort of time-varying rate is used since the solar power produced would offset the most costly electricity.
Exactly how beneficial this is for a given homeowner depends on the exact timing and magnitude of the rate changes under such a plan. Similarly, utilities in some locations have pricing schemes that vary over different times of the year due to regular seasonal demand fluctuations. Those with higher rates during the summer make solar power more valuable.
Some utilities have tiered pricing plans in which the marginal price of electricity changes as consumption rises. Under this type of plan, the benefit from a solar system can depend on the electricity use of the home; in certain areas subject to rates that increase dramatically as consumption increases, large homes (with large energy needs) may benefit most from solar arrays that offset high-cost marginal consumption.
For some homes, it might even be possible to make money by selling solar power back to the grid. In the U.S., this is done through net metering plans, in which residential consumers use the power that they put into the grid (when the rate of electricity generation from the solar array is greater than the rate of household electricity consumption) to offset the power consumed at other times; the monthly electric bill reflects net energy consumption. The specific net metering regulations and policies vary across regions. Homeowners can refer to the DSIRE database and should also contact their local utilities to find more specific information.
Calculating Solar Power Costs
At this point, you will be in a position to make a final calculation, and an assessment of whether solar power makes sense for you.
The overall cost and benefit of a solar system can theoretically be evaluated using the discounted cash flow (DCF) method. Outflows at the beginning of the project would consist of installation costs (net of subsidies) and inflows would arrive later in the form of offset electricity costs (both directly and through net metering).
However, rather than using DCF, the viability of solar power is usually evaluated by calculating the levelized cost of electricity (LCOE), then comparing it to the cost of electricity charged by the local utility. The LCOE for household solar will typically be calculated as cost/kilowatt-hour (/kWh or ¢/kWh)—the same format commonly used on electricity bills. To approximate the LCOE, one can use the following equation:
LCOE (/kWh) = Net Present Value (NPV) of the Lifetime Cost of Ownership / Lifetime Energy Output (kWh)
The useful life of a PV solar module is generally assumed to be 25 to 40 years. The cost of ownership includes the maintenance costs, which must be discounted to find the NPV. The LCOE can then be compared to the cost of electricity from a utility; remember, the relevant price is that which occurs during times at or near peak PV solar production.
Is Solar Power Worth It?
Once you’ve worked through all of these calculations, you’ll likely end up with a single number—the number of years it will take for a solar system to pay for itself in savings from your energy bills. If you live in a sunny part of the country and have high utility bills at the moment, you could be looking at a system that will reach this point in five years. Other homeowners may have to wait 10 or 20 years to reach this point.
In other words, most homeowners will eventually see a benefit from a solar power system; it might just take decades for this to be realized. Whether it is worth installing such a system therefore often comes down to a number of much less technical factors than those we’ve listed above: how long you are going to stay in your home, the subsidies available in your area, and simply whether you want to do your bit for the environment.
Pros and Cons of Solar Panels for Your Home
Like most things, solar power has its benefits and drawbacks. At the same time, some economic costs may be defrayed by the social benefits to the environment and lowering your carbon footprint, which may be more important to you than a purely monetary evaluation.
- Green energy that lowers your carbon footprint
- Net metering allows you to sell back excess energy produced
- You may be eligible for certain tax breaks
- Installation and maintenance costs are still high
- Solar only works when the sun is out
- Parts of the system need to be replaced every few years
- Some tax breaks may have expired or will be expiring
Can a House Run on Solar Power Alone?
Practically, it is not often possible. This is because solar only works when the sun is shining—when it is cloudy or nighttime, they do not generate electricity. There are some battery solutions to provide power during these times, but they still tend to be quite expensive. Most homes with solar panels still rely on the grid from time to time.
Do You Really Save Money With Solar Panels?
Depending on where you live, it is possible that the system can pay itself back and more over time. This is because you won’t be spending as much money buying electricity from your utility. If net metering is in place, you could reduce your bills even further.
How Much Does a Solar Panel Cost?
have been coming down steadily over the years. The total cost will depend on how many kilowatts of power your array will generate. According to consumer reports, after solar tax credits are accounted for, the cost for a solar panel system on an average-sized house in the U.S. in 2021 ranges from 11,000 to 15,000.
How Long Will It Take To Recoup the Initial Cost?
Depending on where you live and the size of your system it can take, on average, anywhere from 10 to 20 years to break even on a solar installation.
The Bottom Line
Determining whether to install a PV solar system may seem like a daunting task, but it is important to remember that such a system is a long-term investment. In many locations, solar power is a good choice from a financial perspective.
Even if the cost of solar power is found to be marginally more expensive than electricity purchased from a utility, homeowners may wish to install solar power to avoid future potential fluctuations in energy costs, or may simply wish to look beyond their personal financial motivations and use solar for green living.