How Much Do Solar Panels for Your Home Cost – Prices

Ballpark Estimate: $9,000 to $40,000+

Ever get the feeling that if you went outdoors and looked at your electric meter, the numbers would be spinning right before your eyes? Electric rates may not be rising as fast as oil or gas rates, but wouldn’t it be nice if we could heat our homes and run our appliances for free? That’s asking a little too much, of course, but there are alternate sources of energy: wind, water, geothermal, and solar, to name just a few. So what will it cost you to change your house over to solar?

Passive vs. Active

There are two kinds of solar energy systems: passive and active. Passive solar uses techniques that are dependent on the characteristics of your home: windows, walls, floors, roof, basement, as well as landscaping and exterior design. Depending on where you live (hot vs. cold climate) all of these elements are used to either maximize or minimize the heat generated by the sun. Large, south-facing windows that allow the sun’s heat to pour in and be absorbed by a dark stone flooring system is a good example of passive solar. The use of shade trees and reflective windows on the sunny side of your home is an example of passive solar ideas to prevent overheating.

Active solar power refers to a process that converts sunlight into electricity by means of some sort of mechanical device, namely a photovoltaic (PV) system. Most PV systems these days are based on silicon, an element found all over the world in great supply. There are various ways of processing the silicon to create photovoltaic cells which are the building blocks for those familiar solar panels we see on roofs all over the country these days (see below). When sunlight hits these panels, silicon electrons within the cells break free and create an electric current.

The possibility exists for materials other than silicon to be used to create solar energy, and research is currently underway, but for now, silicon is the way to go.

How a Solar Energy System Works

Many interconnected PV cells form what is called a solar module, commonly known as a solar panel. A grouping of solar modules is called a solar or photovoltaic array. The size of the PV array depends on how much power you want your system to produce. In general, modules can produce anywhere from 10 to 300 watts of direct-current (DC) electricity. The electricity that is used in our homes is alternating current (AC), so an inverter is needed to convert the energy from DC to AC.

Off the Grid

Back in the 1970s, when solar energy made its public debut, solar systems were usually installed “off-the-grid.” That is, the Cost For Solar Panelsenergy produced by the system was completely independent of the public utility grid. Usually, these systems were installed on remote cabins that were far from a utility source or in an area where electricity was too expensive, or simply because the homeowner chose to “go solar.” Whatever the reason, the key component in the system was a bank of batteries that stored any surplus power for later use. On sunny days, the home’s energy came directly from the solar modules; on cloudy days, the power came from the batteries. If your batteries ran out and it was still cloudy, you either used a back up gas generator, or lit a fire in your woodstove.

On the Grid

These days, solar energy systems have invaded suburbia, where public utility systems are close-at-hand. Independent systems have given way to on-the-grid systems – systems that are connected to the public utility grid in the following way:

• The PV modules on your roof are connected to an inverter which converts the system’s DC electricity to AC (compatible with the utility grid and your home).
• The inverter then connects to a bi-directional public utility meter which tracks the difference between the amount of energy your PV system produces and the amount of energy your household consumes.
• The public utility grid serves as a storage system. When you produce more energy than you need, the electricity goes to the grid. On cloudy days (when PV systems operate at a lower level), or when the sun goes down, you get it back. When you need more power than your system has created, you automatically revert to the public utility system. (See below for Net Metering.)
• Some homeowners install either a bank of batteries, or a gas generator for backup during public power outages

What You Need

The most cost effective way to go solar is to build an energy efficient house from the ground up, with passive solar ideas in mind: thicker walls, thermal windows, well-placed windows and awnings, tankless water heater, and energy efficient major appliances. PV modules can be installed as part of your roof, rather than over an existing roof, which will save you money. But if you’re retrofitting an existing house, you must think about the following crucial features:

• Sunshine – You need unobstructed sunshine for most or all of the day, all year long.
• Size – You need about 80 to 100 square feet of solar panels for every kilowatt hour you want to produce annually
• Roof Location – The best roof location is south-facing. Slight variations may be acceptable, depending on where you live. Flat roofs also work well. Ground mountings, car ports, and window awnings are other options.
• Roof Surface – Shingles are easiest to work with; slate is the hardest. If your roof is very old, consider replacing it before or during your PV system installation, to take advantage of panel styles that become part of the roof itself.

Financial Incentives

Net Metering

When you’re connected to the grid, the utility company keeps track of how much power your system produces vs. how much you use. When you produce more than your household can use, that power is diverted to the public utility system. At that point, your electric meter spins backwards, as you are credited, at retail rates, for the power you are supplying to the grid. When the sun goes down and you need the power, your system reverts to the grid and your meter spins forward as usual.

• As of December 2007, net metering is available in over 42 states and the District of Columbia.
• To qualify for net metering in some areas, your PV system must be under a certain size.
• Utility companies will credit your account for the power you generate, but will rarely pay you outright. Therefore, size your system carefully, so you don’t generate more energy than you actually need.

Federal Tax Credit

You can receive a tax credit worth 30% of the total cost of your PV system, capped at $2,000.

State Tax Credits, Subsidies, and Rebates

Depending on your state, you may be entitled to sales tax exemptions on the PV system purchase, a property tax exemption, and/or state personal income tax credits. Some states offer sizable utility company rebates, as well.

Buy-Down Loan Programs

These programs offer borrowers a lower initial interest rate. The rate increases during the first few years of the loan and then levels out.

Manufacturers’ Rebates

Dependent on the product you choose.

What It Costs

For those of you who like to do the math, the average American family living in a 2,000 sq. foot home uses about 10,000 kilowatt-hours per year. A PV system generates approximately 1,800 kilowatt-hours per kilowatt installed. The national average cost per kilowatt hour (installed) is between $7 and $10 per watt.

Your bottom line will depend on the state you live in and the cost of electricity on your grid. In general, the cost per kilowatt hour goes down as you increase the size of your system. Labor costs, however, remain fairly constant regardless of the size of the system.

Final Cost

Here’s the formula for purchase cost, not taking into account your future savings:

Final Cost = (Purchase price of installed system) – (Federal and State incentives) – (Manufacturer’s rebates) + or – (Retail cost of electricity purchased from or sold to the grid).

• $9,000 – a single-kilowatt system will offset only a small fraction of your electric bill.
• $16,000 to $20,000 – 2-kilowatt system will meet nearly all the needs of an extremely energy-efficient home.
• $30,000 – 3-kilowatt system will generate part of an average household’s energy needs.
• $36,000 – 4-kilowatt system will generate most of an average household’s energy needs.
• $40,000+ – 5-kilowatt system will generate all the energy needs for an average household.

Warranties cover most systems for 25 years. If you plan to have batteries installed as well, that will add significantly to the value of the system, as well as to your cost. Well-maintained batteries last between 10 and 15 years.

How Much Will You Need to Save?

Again, it depends largely on where you live, how much you pay for electrifcity, and how much your utility company will pay you for your surplus energy. Some solar companies claim that the system will pay for itself in about 10 years, and will last 25 to 30 years. As far as resale of your home, the National Appraisers Association says that if your PV system decreases your energy costs by $500 annually, it can increase your home’s value by $5000.

Rental

If all this still sounds too pricey to you, there are plans in the works for renting PV equipment. You will sign a rental agreement with the company, pay a small down payment ($500), and they will install your PV system for you. Then, for the length of your rental agreement, you pay the solar energy company for every kilowatt hour of energy the system generates, based on local utility rates.