Published on April 26th, 2015 | by Steve Hanley
Cost Of A Home Solar System
How much does a home solar system cost? The answer is, “It depends.” And what does it depend on? How much electricity you need, where you live, the cost of electricity from your local utility, what federal, state and local tax credits or rebates are available and several other factors. Let’s take the variables that determine the cost of a home solar system one at a time.
How much electricity do your need?
It’s fairly obvious that the more electricity you want your solar system to provide, the more expensive it will be. If you live in a 300 square foot Tiny House, you probably need less electricity than someone living in a 20,000 square foot McMansion with a hot tub and heated indoor pool.
Start by figuring out how much electricity you use now. If you don’t know, your local utility company can tell you what your usage has been over the past year or more. Their records will also show you how your electricity usage varies from month to month and season to season.
Then ask yourself whether you want to be completely “off the grid,” meaning you don’t want to use any electricity from the grid at all, or if you just want to want to get a portion of your electricity needs from solar power.
Finally, now is a good time to decide if you are going to take any steps to improve the energy efficiency of your home in the near future. If you do, you may need less electricity when the upgrades are completed, meaning you can save money by installing a smaller, less costly solar system now.
Location, location, location
Why does where you live matter? Sunlight is sunlight, isn’t it? Actually, no. Panels made from monocrystalline solar cells work best in strong, direct sunlight — the kind you find out in the deserts found in the American southwest. They are also sensitive to being at precisely the right angle to the sun, so the angle of your roof will be important. If it is not optimum, your solar panels may not perform as well as expected.
Panels made with polycrystalline solar cells preform better with the diffuse sunlight typically found in more northern states where clouds are a constant presence. They are also less sensitive to the angle of the sun and tend to be somewhat less expensive to buy.
Hybrid solar panels employ an additional substrate below the photovoltaic layer to extract more of the sun’s available energy, but they cost quite a bit more than conventional panels, which makes them unsuited for most residential applications.
The cost of electricity
Home solar owners make money two ways. First, they buy less electricity from their local utility company, which lowers their electric bills. Second, they sell the excess electricity they don’t use back to the utility, which pays them a flat rate for each kilowatt supplied to the grid. That also lowers their electric bills.
The US Energy Information Agency says the average American home uses about 900 kilowatt hours of electricity each month. Rates for electricity vary widely from state to state and region to region. Some customers pay less than 10 cents per kilowatt hour; others pay 25 cents per kilowatt hour or more.
If you live in an area with cheap energy, your monthly savings will be lower because for every kilowatt-hour you don’t buy from the electric company, you only save a dime. On the other hand, if you live where electric rates are high, every kilowatt-hour saved puts a quarter back in your pocket.
Tax credits, rebates and other incentives
Naturally, if someone helps you pay for your system, your costs will be lower. Right now, the federal government has a 30% tax credit for home solar installations. That means if your system costs $20,000 (let’s use that number for the purposes of discussion), Uncle Sam will pick up $6,000 of your bill, making your net cost only $14,000. But be warned: the federal tax credit is due to expire at the end of 2016. If Congress doesn’t renew it (and the present members of Congress tend to be fairly hostile toward anything to do with environmental issues), anyone who installs a home solar system after that date will be out of luck.
Many states have tax credits or rebate programs in addition to the federal subsidy. You can check on what is available in your home state on the US Department of Energy website. In addition, some cities and regions also have incentive programs that home solar owners can take advantage of.
Putting it all together
There are a lot of factors to consider before you can get an accurate answer to the question, “How much does a solar system cost?” One factor often overlooked is the condition of the roof the system is going on. If the shingles are already 15 years old, you may have to add in the cost of a new roof before your solar program even gets off the ground, literally and figuratively.
And a solar system involves more than just a collection of solar panels. The electricity those panels makes is in the form of direct current, otherwise known as DC. But your house uses AC or alternating current. Your system will need an inverter to make what comes down from the roof compatible with what comes out of your wall outlets.
That is especially important if you are going to feed excess electricity back into the grid. Electric companies are very fussy about the characteristics of the electricity they will accept. So add enough money into your budget for an inverter approved by your local utility.
Then you have to get someone to install the panels on your roof and run the wiring. Your home may need upgrades to the existing electrical service for you to get the most out of your home solar power system.
Right now, you can buy a complete 5,300 watt solar system from Home Depot for $12,388. But then you have to add the rack system that goes on the roof to hold the solar panels, installation and the services of a qualified electrician to get everything hooked up properly. The installed price of a typical solar system today is around $20,000. Some systems can be $30,000 or more.
And here’s an interesting thing about that solar system from Home Depot. According to the product summary, it will generate between 3,800 and 8,900 kilowatt-hours of electricity a year. That is a big difference between the high and the low figures and it’s all dependent on how much sunlight the system “sees” during the course of the year. That’s why it is so difficult to give a precise answer to the question “How much does a solar system cost?”
No money down
The real key to the rapid adoption of rooftop solar systems across the country is the number of programs that make it possible for homeowners to get a rooftop solar system for no money down. Most solar installation companies offer zero down leasing programs and many are now starting to offer purchase arrangements with no out of pocket expense, too. In both cases, the savings on customers’ monthly utility bills are enough to pay for the system and provide a profit for the solar company.
There are a lot of factors to consider when you decide to “go solar”. After your system gets installed, who fixes it if there is a problem? Who do you turn to if there is a warranty issue? Yes, those solar contractors are making money off your rooftop. But they are also providing the financing, taking care of maintenance, dealing with warranty claims and giving their customers complete peace of mind while the sun generates all that clean, renewable electricity.
In the end, everybody comes out a winner.
Photo Credits: SolarCity/Home Depot