What It Takes to Go Off the Grid With Solar Panels
Off-grid solar systems offer energy independence and savings amid rising electricity costs.
Chi Odogwu is a digital consultant, professor, and writer with over a decade of experience in finance and management consulting. He has a strong background in the private equity sector, having worked as a consultant at PwC and a research analyst at Renaissance Capital. Additionally, he has bylines in well-known publications, including Entrepreneur, Forbes, NextAdvisor, and CNET. He has also leveraged his writing talent to create educational email courses for his clients and ghostwritten op-eds published in top-tier publications such as Forbes, CoinDesk, CoinTelegraph, Insider, Decrypt, and Blockworks. In addition to his writing, education, and business pursuits, Chi hosts the top-rated Bulletproof Entrepreneur Podcast. Through this podcast, he engages in insightful conversations with talented individuals from various fields, allowing him to share a wealth of knowledge and inspiration with his listeners.
Finding creative ways to save money on bills is one of the best ways to fight the current cost of living crisis plaguing Americans.
As our reliance on our devices increases, it’s easy to forget that every outlet feeding a device drains your ever-shrinking bank balance. Pretty soon, you’re scrambling to pay the increased electric bill at the end of the month. Inflation data published by the US Bureau of Labor Statistics show that the cost of electricity rose by 13% from February 2022 to February 2023.
Going off the grid is one way families can use alternative energy sources, such as solar panels, to meet their home or business electricity needs. If you transition to an off-grid electricity system you’ll need to take the bold step of severing ties with your local energy provider and switching to a self-reliant energy source.
Can solar panels save you money?
Interested in understanding the impact solar can have on your home? Enter some basic information below, and we’ll instantly provide a free estimate of your energy savings.
Although this transition requires significant upfront costs, the return on investment might be worth it in the long run. Here’s what to know if you’re thinking about buying a solar panel system and disconnecting from the power grid.
What is an off-grid solar system?
An off-grid solar system is a self-contained energy system that independently produces and stores electricity.
Can solar panels save you money?
Interested in understanding the impact solar can have on your home? Enter some basic information below, and we’ll instantly provide a free estimate of your energy savings.
Off-grid systems function by using solar panels, often mounted on the rooftop, to absorb energy radiated from the sun and convert it to direct current electricity before transferring it to a battery for storage. An inverter converts the energy stored in the battery to alternating current electricity to power your home.
There are four main components of every off-grid solar system:
- The solar panels and mounts that hold the panels in place.
- The charge controller, which regulates energy flow from the solar panels to the batteries.
- The battery, which stores the energy accumulated from the solar panels.
- The inverter, which converts the DC electricity stored in the battery to AC electricity that runs appliances.
As inflation continues to erode the dollar’s value, more people have embraced cost-effective sustainability practices. These off-grid solar system solutions offer the dual benefit of positively affecting the environment and increasing energy independence.
Can you still be connected to the grid and have solar panels?
Grid-tied systems are not independent, standalone entities. Instead, they are connected to the utility grid and transmit excess energy generated by the solar panels back to the electric grid.- often selling it back, through a process called net metering, for credits on your power bill. The primary advantage of grid-tied systems is they are significantly cheaper because the owners do not need to buy expensive batteries to add to the system.
Off-grid vs. grid-tied solar systems: Which is better?
It all depends on your preferences and needs.
There’s no easy answer when deciding which system is better off-grid vs. grid-tied, said Rohit Kalyanpur, CEO of Optivolt, a Silicon Valley-based solar technology company. Off-grid solar systems are better suited for situations where the customer lives in a remote area and does not have reliable access to the electricity grid.
Both grid-tied and off-grid solar systems are eligible for a 30% federal tax credit on the total cost of the system. In order for batteries to qualify for the credit, they’ll have to have a capacity of at least 3 kilowatt-hours.
Off-grid solar systems
Grid-tied solar systems
Types of off-grid solar systems
Each off-grid solar system installed at a location must be customized to meet the unique energy needs of the people at that location, Kalyanpur said. However, three main types of off-grid solar systems cater to the energy needs of most people:
Solar-only systems
These systems rely exclusively on solar panels for power generation. The excess energy generated from the solar panels is stored in batteries and used when the panels don’t generate enough power to run the home.- such as at night or when it’s cloudy. The cost of these systems depends on factors such as the number of solar panels, battery capacity and efficiency, and the types of inverters and charge controllers.
Solar system with generator backup
These systems combine solar panels with a backup generator. The solar system generates electricity during the day, and the backup generator kicks in during periods of low sunlight or at night. These backup generators are usually powered by diesel, gasoline or natural gas. The cost of backup generators varies, so it’s essential to research and understand the costs associated with fueling the generator on a monthly basis before making a decision.
Hybrid solar systems
These systems use solar panels and other alternative renewable energy sources like wind turbines or hydroelectric power to create a diversified and reliable power system. Like solar-only systems, hybrid systems work in conjunction with external batteries.
How much do off-grid solar systems cost?
Off-grid solar energy systems are a great alternative that helps families meet their energy needs and save money on their utility bills. But solar panels aren’t cheap, and neither is the installation work required to get a system in operation. The typical solar panel system in the US costs around 30,000 before the federal tax credit.
Off-grid systems will typically be even more costly. For example, high-capacity, high-efficiency solar batteries are typically very expensive and cost another 10,000 to 20,000. In some cases, they may be more expensive than solar panels.
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
| Solar Panels | 5,000. 30,000 |
| Charge Controller | 50. 1,000 |
| Hybrid Inverter | 3,000. 13,000 |
| Battery Bank | 10,000. 30,000 |
| Total | 18,050. 74,000 |
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
| 1.30 kW | Daily Summer: 5.80 Daily Winter: 2.90 | Price: 8,349. 14,220 |
| 2.90 kW | Daily Summer: 13.00 Daily Winter: 6.50 | Price: 11,559. 16,921 |
| 3.80 kW | Daily Summer: 17.30 Daily Winter: 8.60 | Price: 13,916. 23,571 |
| 4.80 kW | Daily Summer: 21.60 Daily Winter: 10.80 | Price: 15,634. 25,289 |
| 5.80 kW | Daily Summer: 25.90 Daily Winter: 13.00 | Price: 18,303. 27,958 |
| 6.40 kW | Daily Summer: 28.80 Daily Winter: 14.40 | Price: 22,654. 32,699 |
| 7.70 kW | Daily Summer: 34.60 Daily Winter: 17.30 | Price: 24,451. 34,496 |
| 9.60 kW | Daily Summer: 43.20 Daily Winter: 21.60 | Price: 33,462. 54,111 |
| 10.20 kW | Daily Summer: 46.10 Daily Winter: 23.00 | Price: 32,065. 48,565 |
| 11.50 kW | Daily Summer: 51.80 Daily Winter: 25.90 | Price: 32,815. 53,464 |
| 12.80 kW | Daily Summer: 57.60 Daily Winter: 28.80 | Price: 35,653. 52,154 |
| 14.40 kW | Daily Summer: 64.80 Daily Winter: 32.40 | Price: 47,263. 76,984 |
| 17.30 kW | 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.
FAQ
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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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.
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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.
Key Takeaways
- 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.
Subsidies
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.
97.7 gigawatts
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.
There are three basic types of solar electric systems:
If your home or building is on-grid already, a grid-tied system is the least expensive to install and the simplest to operate and maintain. There is no need for owner maintenance or technical ability, and as the system feeds renewable electricity into the grid through your meter. The vast majority of installs in Oregon are grid-tied. Off-grid solar is popular option for sites that are not close to transmission lines or for people who want to be independent of their utility. Increasing, homeowners and businesses are installing grid-tied solar systems in conjunction with batteries. This helps to ensure the house or building will have some power if the grid is down.
Connected to the grid: Meters, Monitoring, Net Metering
Most electric meters measure electricity moving both into and out of your home or business. Generally, we are taking electricity from the electric grid for our needs. The meter runs “forward” as it counts up the kilowatt hours we have consumed. But if you generate electricity with a grid-tied PV system and you make more electricity than you need, net metering allows this excess electricity to run the other way through the meter and back into the electric grid.
For example, on a sunny summer day a PV system might produce more electricity than needed at the time. Conversely, in the evening when everyone is home, electricity needs may exceed the output of the system.
If you put 10 kilowatt-hours (kWh) of excess electricity into the electric grid during the day, net metering allows you to take 10 kWh of electricity out of the grid later and pay nothing extra for this electricity. In effect, you are allowed to “bank” these 10 kWh and use them later to offset your need to buy this electricity.
Your inverter probably has a display showing cumulative generation, but if you change inverters, you would lose the count to that point. So the best way to monitor the output of your solar electric system is a dedicated meter at the inverter.
Off-grid solar
If your site is remote and grid electricity is not available, then an off-grid system is the only choice. An off-grid system will be a good choice for you, and save you money over extending the power line, if the following are all true:
- Your residence is over 1/4 mile from existing power lines.
- You are willing to accept that you may not have unlimited power on-demand.
- You are willing to manage your own power system.
If some of these are not true, the cost of owning and operating a stand-alone off-grid system will increase, and may be more than the cost of extending the power line.
Oregon Department of Energy has an Oregon Solar Electric Guide which contains help information on related to sizing and planning off-grid PV systems to meet your electricity needs.
Battery based grid-tied solar
Depending on grid reliability and the length of power outages in a particular service area, some people opt for the simplicity of a grid-tied system with a portable generator for emergency back-up power. Others may opt for the reliable backup of a battery-based on-grid system, which will pick up loads seamlessly during a utility power outage. The price of a battery-based on-grid system is a higher installation cost, and takes more owner time in maintaining the batteries. Modern battery-based on-grid systems are nearly as efficient as grid-tied.