With solar power, not many of us know how the cost of solar panels is measured. We also don’t immediately see the relationship between the cost of solar power and the value of solar power.
Solar panel costs are not as easy to figure out as the cost of a tank of gas. When you purchase a tank, the value of the tank is enjoyed and used more or less immediately. When it comes to solar panels, the value is delivered over a number of years. So, how much do solar panels cost, and does their value outweigh the cost?
First, let’s take on the cost of solar panels. Solar photovoltaic (PV) panels – which turn the sun’s rays into electricity – are usually priced in dollars per watt ($/W). When you buy a home solar energy system, you are paying for the ability to generate electricity for the present and into the future.
One of the biggest concerns deals with the out-of-pocket costs of a solar PV system. So, how much will you paying? Remember, each solar home project is different so the cost can vary from house to house. Also, it can differ from region to region because solar rebates and solar tax credits are often made available at the state and/or local level. (Don’t forget – all U.S. homeowners with federal income tax liability can take advantage of a federal solar energy tax credit worth 30 percent of system costs.) Here are a few resources that may help with solar energy costs:
- The Open PV Project passes on pricing information from solar installers across the country. At this time in 2010, the national average cost of solar PV was $7.62 per watt. Not all solar companies participate in the project, but the data will offer a good idea at how much homeowners across America are paying for solar power.
- Some states mandate solar installers to report the prices of their solar installations. In these states, officials may withhold solar rebates if numbers aren’t submitted. For example, Pennsylvania’s Sunshine Solar Rebate Program reported a median cost of $5.92/W for residential solar energy projects. Go Solar California gives quarterly updates on residential solar costs, which in 2010 are averaging about $7.50 per watt.
- Using a default value of $7.00/W for residential solar projects is a reasonable figure. This pre-incentive figure will be lowered by the solar rebates and tax credits that are available in your area.
- It is crucial to always get more than one solar home energy quote. It is recommended to receive three estimates from qualified solar installers. The best way to know for sure how much solar panels for your home will cost is to receive a hard proposal from a solar company.
Assuming a pre-incentive cost of $7.00/W, an average 5-kW system would have a total cost of $35,000 ($7.00W X 5,000 W = $35,000). Solar rebates and the 30 percent federal solar tax credit would further reduce the cost.
What about the value of solar panels? Does it outweigh the cost?
Once again, the answer depends on each particular project and region. In states that are “good” for solar – such as Arizona, California, New Jersey, Pennsylvania, Colorado and Hawaii among others – a solar panel system can pay for itself in as little as three to five years along with delivering long-term energy savings.
When thinking about solar energy for your home, you should consider the following factors, each of them contribute to solar panels’ return on investment:
The price you pay for electricity. Homeowners who already pay a high per-kilowatt hour price for electricity will see the biggest financial return.
The solar energy incentives available in your area. In some states you may be eligible to sell solar renewable energy credits (SRECs). This is a residential solar energy system that will not only cut you’re electric bill, but also generate income beyond just utility savings.
The amount of sunshine in your area. Solar systems do produce more power in sunnier regions.
Don’t forget that solar will have a positive impact on your home value. Solar panels reduce a home’s overall cost of ownership and therefore improve its overall value.
A good quote will be able to determine the yearly savings of a solar panel system. It should also include a cash flow analysis that shows a projected pay back period and return on investment.
There are many solar power projects that are significantly lowering homeowners’ electricity bills and offering a good return on investment. This suggests that the value of solar panels considerably exceeds the costs. Admittedly, in states where local incentives for solar power are weak and/or electricity is relatively inexpensive, such as Kentucky and Nevada, it’s tough to determine if the value of solar is greater than the costs.
Solar panels are quickly becoming more affordable. In the future, it is likely that more and more states will takes steps to promote solar power and the value of a home solar energy system will be strong for homeowners in all fifty states.