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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 with significant solar energy savings over the life of the system.

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

New Home Construction

If you are constructing a new home, then you'll need to estimate your demand based on the type of equipment you plan to install and your home's square footage. The pross call this "your load".

To figure out your anticipated load, create a table to record the watt use for each appliance. Each appliance – be it a water heater, electric light, computer, or refrigerator – should have a nameplate that lists its power rating in watts. Or you can get the information from the manufacturer's website.

Some labels list amperage and voltage only; to obtain watts multiply the two together (amperage x voltage = watts). In another column, record the number of hours each appliance is expected to operate. Then multiple the watts and hours together to estimate watt-hours used per day. Since it's hard to anticipate all electric loads (it may get tedious scouting out every toothbrush and mobile phone cell charger), you might want to add a multiplier of 1.5 to be safe.

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.

US Solar Hours Map

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 to the right 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 (of up to $2,000) for the purchase of a residential solar system at least until December 31, 2008. Starting at the beginning of 2009 the 30% tax credit will NOT have a cap.

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.

Initial Investment
  Retail Price for Solar Photovoltaic System
(include components and labor for installation)
+ Building Permits
- $2,000 Federal Tax Credit
- State or Local Tax Credit or Rebate
- Utility Rebate or Other Incentive
= Net Investment

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 solar power contractor 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.

Of course, a more accurate assessment can be made by a pro. Work with a Find Solar 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. Find Solar 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:

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.