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Six Easy Steps To Estimate Cost of a Solar Power System

Solar energy systems are not cheap. She said it’s important to compare them in the context of other types of home improvement projects. Home buyers and sellers see a photovoltaic or solar hot water heating system as a significant incremental improvement – ​​like adding a deck or renovating your kitchen. Plus, unlike a deck or kitchen remodel, you also get a one-off on your power bills.

Solar power systems often have an additional financial incentive: many jurisdictions and utilities across the United States offer attractive financial incentives to reduce the upfront capital costs associated with a solar power system.

Here are some foolproof ways to estimate the cost of a photovoltaic or solar thermal system and find out if a solar energy system makes sense for you. Let’s start with a home photovoltaic (PV) system.

Step 1: Assess your home’s electrical needs

To get started, it’s good to have an idea of ​​how much electricity you use. If you find out how many kilowatt hours (kWh) you use per day, month, year, you will have a better point of comparison. Your utility bill should include that information.

Of course, the utility bill will also show your costs and many utilities include a graph showing how your monthly energy usage/cost varies throughout the year. It helps you estimate where your energy usage is highest and at what time of year.

New Home Construction

If you are building a new house, then you need to evaluate your demand according to the type of equipment you plan to install and the square footage of your house. The pioneers call it “your load”.

To understand your projected load, create a table that records the wattage usage for each appliance. Every appliance – be it a water heater, electric lamp, computer or refrigerator – should have a name indicating its power rating in watts. Or you can get information from the manufacturer’s website.

Some labels only list amperage and voltage; add the two together to get watts (amperage x voltage = watts). In another column, record the number of hours each appliance is expected to operate. Then multiply the watts and hours together to estimate the watt hours used per day. Since it’s hard to predict all electrical charges (searching for every toothbrush and cell phone charger can get boring), you might want to add a multiplier of 1.5 to be safe.

Step 2: Predict the future

In 2005, average residential electricity rates across the United States ranged from 6 to about 16 cents per kilowatt hour, depending on where you lived. Retail and commercial electricity rates have increased by about 30% since 1999 and the upward trend is likely to continue especially as the costs of the coal and hydropower used to generate that electricity also increase. So think about your home’s electricity needs and current and future costs together.

Step 3: How much do you get per day?

The Florida Solar Energy Center conducted a study to examine how a 2-kW photovoltaic system would be installed on a highly energy efficient home across the continental US ( html). /FSEC-PF-380-04/).

The study covers all the factors that affect the performance of the PV system, such as the effect of temperature on the photovoltaic cells, the number of peak hours of sunlight in different areas, and the efficiency of the inverter to convert solar energy from DC to AC.

As the study shows, solar photovoltaic systems are operating almost everywhere in the United States. Even in the northeast or in “rainy Seattle”, a pv system can fail if properly designed and installed. In New York or New Jersey, a one kilowatt system should produce about 1270 kilowatt hours of electricity per year, in Seattle, a one kilowatt system should produce about 1200 kilowatt hours per year. In the Southwest, of course, those rates will be much higher.

Solar contractors in your area can help determine the best size for your solar photovoltaic system.

Step 4: Size your system

In general, solar photovoltaic systems that grow between 1 and 5 kilowatts are usually sufficient to meet the electrical needs of most homes. One advantage of grid-connected systems is that you can use solar PV to supplement or offset some of your electricity needs; so you can scale your system according to 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 require: one square foot gives 10 watts. So in bright sunlight, a square foot of a conventional photovoltaic panel will produce 10 watts of power. For example, a 1000 watt system may require 100 – 200 square feet, depending on the type of PV module used.

Step 5: Know your costs

Many states and local jurisdictions offer rebates, tax credits and other types of incentives to homeowners for installing residential solar and photovoltaic indoor water systems. To view a comprehensive database of incentives available for renewable energy, visit

At the Federal Level, you can take advantage of a 30% tax credit (up to $2,000) for the purchase of a residential solar system through at least December 31, 2008.

Step 6: Run the numbers

Although the cost of a solar PV system will depend on the size of the system you want to install, your electricity rate, the number of kilowatt hours you expect to generate, and state/local rebates/tax credits that may be available, the formulas for calculating returns are almost identical.

For those who appreciate having formulas, use the ones listed below to make a quick ballpark estimate of how much a solar photovoltaic system might cost you.

Selling Price of Solar Photovoltaic System

+ Building Permits

– $2,000 Federal Tax Credit

– State or Local Tax Credit or Rebate

– Service Rebate or Other Incentive

= Net Investment

Kilowatts of electricity produced from PV per year

x Kilowatt hours used per year

= Annual energy in Kilowatts from the PV system

Kilowatt annual energy from PV system

x Current Residential Electricity Rate

= Annual $$ Saved

More PV Energy is Produced Annually

x $$ credit applied per watt

= Annual value of Net Metering

Of course, a more accurate assessment can be made by an expert. Work with a solar contractor to size and price the right system for you. As is true with any major purchase, don’t hesitate to ask for several quotes from different contractors.

Many solar power providers will provide you with a detailed estimate. Helpful information to know is:

  • Total cost to operate the system (labor cost for design and installation and equipment costs)
  • Equipment (Make and Model)
  • Warranty Information
  • If necessary, permit fees
  • Tax, where it occurs
  • Federal tax credits
  • State or local jurisdiction tax credits or rebates
  • Utility Rebates
  • Renewable Energy Certificates or Expected Grid Metering Credits
  • Expected operating 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 expensive renewable energy systems. They are used to heat hot water tanks and/or heating systems. A solar pool heating system is another type of solar heating system designed specifically for heating a pool or hot tub.

It is usually worth investigating the financial 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 tax credits or rebates available. (If your costs are at least $8/million BTU, it may be worth switching to a gas-fired water heater as well).

The formulas for costing a solar water heating system are similar to estimating the cost of installing a solar PV system. Many solar energy experts can help you determine which system might work best for you.

Heating your pool with Solar Power

Although a few jurisdictions provide financial incentives for using solar energy to heat a pool or hot tub, in general, using solar energy to heat your pool has a “no brainer” return on investment.

The electricity used to heat the pool during the swimming season usually amounts to the same amount of energy that homes without a pool use in 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 increase efficiency and extend your swimming season.

Most installers recommend that a solar collector used for pool heating is about half the square footage of your yard. Solar thermal panels typically last 10 – 20 years and come with a 10-year 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 in places like “far north” Canada, a solar pool heating system takes a little longer.

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