There’s no doubt that a solar electric system will cut
your monthly utility bill. But will it save you money
in the long run? That’s a tricky question. The upfront
costs average about $15,000 to $25,000 (after
financial credits and rebates). For a lot of folks, the
discussion ends right there. But for people who live
in areas with lots of sun, high electricity rates and
significant financial incentives, the payback period
for a solar electric system can be less than five years.
This article will pose five key questions to help you
decide whether solar makes sense for you.
How do photovoltaic (PV) solar panels work?
A grid-tied system includes solar panels and
an inverter (or micro-inverters) that convert the
direct current (DC) produced by the panels into
alternating current (AC) that can be used in the
house. Excess power flows back into the utility
grid. If the solar system can’t keep up with
demand, power from the grid flows into the home.
An independent system (“off the grid”) provides
most or all of the electricity you need and is more
common in rural areas where utility connections
are expensive. These always include batteries for
nighttime use and cloudy weather. Many people
with off-the-grid systems also have a backup generator
Are you a good candidate for solar?
Consider a solar installation
- You live in the Sun
Belt. Especially good
areas are California,
Texas, Florida, the
Southeast, the desert
Southwest and the
Rocky Mountain states.
The worst areas are the
Great Lakes and Alaska.
Foggy or rainy climates
will require a lot more
solar modules, and the
system won’t be cost
- Your electric bill averages
more than $125 per
month and your rate per
kilowatt-hour (kWh) is
on the high side (14¢ or
more). The more money
you spend each month
on electricity, the more
money your PV system
will save you. (If you’re
paying only 8¢ or 10¢
per kWh, the payback
period for solar panels
would be unattractively
long. Investing in new
might provide a
- You live in an area
with incentive programs.
Call your electric utility
and visit dsireusa.org to
find out which federal,
state and local tax credits
and rebates are available
in your location. In addition
to the 30 percent
federal solar tax credit
(in effect through 2016),
states such as California,
Colorado and Arizona
offer financial incentives
that can cut the net
cost of solar by 30 to 70
- Your utility provides
“net metering.” For
grid-tied systems without
batteries, this allows
you to sell excess electricity
back to your
power company to further
reduce your electric
Two takes on solar
“I researched a modest
solar installation and
elected to forgo the project.
Payback was 17 years!”
Buzz Jones, Field Editor
“The cost of solar is
like prepaying your
electricity bills. You will
no longer be susceptible
to electricity price
increases, and the cost
of the system can effectively
be recouped if you
ever sell your home.”
Rick Wood, Solar Energy
Consultant, Helio Power Systems
Do you have the right kind of roof?
The optimal roof for
a solar installation is
south-facing (west is
next best) with minimal
trees or other buildings.
It should also
be relatively new.
Solar panels last for
30 years, so you want
to install them on a
roof that won’t have
to be replaced soon.
You will need about
100 sq. ft. of roof area
for every kilowatt of
system size. Ground-mounted
also a possibility (but
are more expensive
Do you live in the right spot for solar?
To see how much useful sunlight your area averages, go to nrel.gov/gis/solar.html and click on the
photovoltaic solar resource map. Find your location and compare the color to the scale. A lower
number means the financial incentives will have to be high to make your system cost-effective.
Will you install the system yourself?
Doing the installation yourself can
save you a third or more of the cost.
But you’ll need to take a training
course and devote a lot of time to
researching a potentially confusing
host of options. Most areas require a
licensed electrician to hook up the
inverters and do the wiring. And in
many states, a solar electric system
must be installed by a certified professional
in order to be eligible for
solar tax incentives. Research local
code requirements before moving
forward on this project. Great Web
sites for solar DIYers include builditsolar.com, trainingsolar.com and
Great resource to see if solar makes sense for you
Go to findsolar.com and use the site’s solar calculators. You plug in your address and it will tell
you which local, state and federal rebates and tax credits are available. You’ll learn how big a
system you need, the roof size necessary, the estimated cost of the system, your monthly and
25-year savings, your 25-year ROI and the number of years it will take to break even.
“I have a remote cabin in
northern Michigan that the
local utility quoted $20,000 to
run power to. I installed a PV
solar system to run my lights
and a pump, with a small
generator backup. The system
is quiet, and it cost me a lot
less than what it would have
taken to get grid power.”
Lanse LaVoy, Field Editor
What size PV system will you need?
Sizing a PV system is complex, and you should consult a certified solar electrical contractor for help in determining an appropriate system type and size as well as to get a cost estimate. Visit eere.energy.gov for more sizing information and find-solar.org to find a contractor near you.
Here are some factors to consider before doing the calculations:
Your goals. Do you want to reduce the amount of electricity you buy from your utility or completely replace the power you get from the grid?
Your electricity needs. Check your electric bills and figure out your average annual electricity usage.The more energy efficient your home and the more you can reduce household power consumption, the smaller and less expensive your solar system will be.
Integrated Solar DesignIntegrated
Sunslate/Atlantis Energy SystemsBuilding-integrated PV array
Types of PV Systems
Roof-mounted panels: Most common installation in
urban and suburban areas.
For every 1 kW of power generated,
you’ll need 100 sq. ft.
when roof-mounted panels
aren’t feasible. Additional
racking, trenching and
mounting equipment add to
the cost, and neighbors may
object to the appearance of
Integrated into a shade
structure such as an awning.
This gives you active solar
electricity and passive solar
shading. May not generate as
much electricity, and is more
expensive than roof-mounted
Building-integrated PV array:
The panels are incorporated
into the roofing materials, which
then look like standing seam
metal roofs, slate tiles and
three-tab shingle strips. The
most expensive but least visually
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How much will your PV system cost?
Costs vary widely depending on location and the specific
installation. An average cost for a typical 5-kW system, at
$7 per watt, would be about $35,000. Solar rebates could
reduce this cost significantly. Prices are slowly coming
down, especially in California, where state incentives have
driven the cost of PV-generated electricity to below 11¢ per
kWh. But in other places around the country, it’s still likely
to be a fairly long payback.
Run the numbers:
- How much can you afford to spend up front? (And how
much will you have to finance?)
- What financial incentives are available?
- How big a system will you need?
- What’s the best system for your situation?
- How long will you live in the house?
- What will your payback be (the time it takes for the savings
to equal the cost)?
How to calculate your payback (a thumbnail method):
Add up the materials and labor costs and subtract any
rebates. Add in any annual costs such as maintenance
(minimal), additional insurance and interest payments.
Then subtract any tax breaks. Now multiply the actual
annual electricity generated in kWh by the cost you
would normally have to pay your utility for those kWh of
electricity (and the cost will undoubtedly rise each year).
Subtract the savings. Continue to do this for subsequent
years until the number becomes negative. This is the payback
period. If you have a payback of eight years, great.
The PV system should last for 30, so you will have 22
years of saving money on your electricity bill.
“If you live on the coasts where
electrical costs are high, then
solar might make sense. It usually
doesn’t make economic sense in the
Midwest, where power is around
7 to 8 cents a kilowatt-hour.”
Dave Youngblood, Field Editor and Senior
Sales Executive for Schneider Electric