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 valueadded improvement – similar to adding a deck or remodeling your kitchen. Plus unlike
a deck or kitchen remodel, you also gain oneup 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 watthours 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 (Cents/kWh) 
2005 Yearly Cost 
2025 Average Electricity Rate (Cents/kWh) 
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 2kW 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 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 gridtied 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:
 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 costeffective
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 gaspowered 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 "nobrainer" 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
homeswithoutpools 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 10year 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.