Making Sense of Solar-Electric System Costs

Solar Panel

The truth is, it’s not much easier to answer, “How much will a solar-electric system cost me?” than it is to answer, “How much will it cost me to build a house?” In either case, the answer has to start with two words -  “It depends…” That’s because several variables influence the cost of a grid-tied solar-electric (photovoltaic; PV) system. Although there’s no pat answer to the price question, the guidelines and examples here will help you estimate your costs, and get you started on your path to energy independence.

How Hungry Is Your Home?

The average American home uses roughly 830 kilowatthours (KWH) of electricity each month. But basing system costs solely on that number would most likely give you an inaccurate and unhelpful result. Your electrical use may vary wildly, depending on the season, what kind of appliances you use, and your usage habits. So how can you gauge your electrical appetite? For a quick snapshot of your electrical usage, check out your monthly electricity bill. Most bills will include KWH usage figures for the last twelve months; this will give you a good idea of how much electricity your home uses each year.

Solar HouseOnce you’ve got a handle on your electrical appetite, taking steps to improve the efficiency of your home will be your next best move. This can have a tremendous impact on the cost of the system you install. Every dollar you spend on making your home more efficient decreases the cost of your system by approximately US $3 to $5.

A huge disparity exists between home sizes, efficiencies, and personal electrical appetites, and there’s also a similar gap in the efficiency potential of different homes. If you live in an efficiently built, well-insulated home, with modern appliances, compact fluorescent lighting, and high performance windows, you may only be able to reduce your average electricity use by 5 or 10 percent. But if you’re on the other end of that spectrum, by implementing efficiency measures you may be able to reduce your use by 40 percent or more, shaving several thousand dollars off the cost of your system. For example, just replacing an older model refrigerator with a modern, more efficient one could reduce your electrical usage by 50 KWH per month. Combine this with household-wide efficiency strategies and you can make a pretty sizeable dent in your system cost.

Location, Location, Location

Where you live also affects your system costs. Less sunny locales will call for larger systems to generate the same amount of electricity that a smaller system in a sunnier spot can produce. In the solar world, sunlight is measured in units called “peak sun hours.” Phoenix, Arizona, receives an annual average of 6.5 peak sun hours per day, while Seattle, Washington, only gets 3.7 peak sun hours per day.

Besides the number of peak sun hours in your region, average annual temperatures where you live also affect your system size, and its relative cost. In colder regions, you may use lots of electricity for space heating and water heating. In warmer regions, air conditioning can dramatically amplify your electricity use.

Climate and other site-specific variables will also determine your solar-electric system’s size and its production. PV panels operate more efficiently in cooler climates and less efficiently in hot ones. Some locations regularly receive morning fog or afternoon thunderstorms. In dry, dusty climates without regular rains to clean the panels, accumulated dust and dirt will reduce the output of the system. All of these variables need to be considered when sizing a system and estimating its annual production.

A Place in the Sun

Even the sunniest regions won’t guarantee you good system performance unless you have unobstructed solar access at your site. This daily access to the sun is called your “solar window.” You’ll need a location on your rooftop or elsewhere on your property that:

  • Ideally faces south, but east- or west-facing arrays make sense in some cases;
  • Provides enough space for the number of PV panels needed, possibly including room for expansion;
  • Enables the entire array of modules unshaded exposure to the sun between the hours of 9 AM and 3 PM, year-round.

Compromising any of these three conditions can mean having to increase the size of your system, which increases its cost.

A Nibble or a Bite?

Small Solar HouseOne of the best features of solar electricity is its scalability. With a little foresight, you can start small and build your system gradually if that better suits your budget. A starter system can be designed to meet just a portion of your home’s daily electricity needs. This is one great benefit of a grid-tied system—the remainder of your electricity can be purchased from your electric utility, just as before. And, if you plan your design for future expansion, adding more modules to your array as your pocketbook allows is relatively simple.

Free Money

Perhaps the most powerful impetus behind the exploding popularity of grid-tied solar electricity is the availability of generous financial incentives. In some states, rebate programs refund as much as 60 percent of the system’s installed cost to the homeowner! Add to that state tax credits and exemptions, and low-interest state loans, and the picture gets brighter still. You can get up-to-date information on financial incentives at the Database of State Incentives for Renewable Energy Web site at