We often get asked how much it would cost to install enough photovoltaic (PV) solar panels on a house or business building to generate one’s own electrical energy. There are web sites to help with this, and Solar Power Authority even has a free solar calculator and quote tool, but they can be confusing unless you’re a technologist — so I’ve developed some simple guidelines (below) that will help put cost in perspective.
In the USA, a rule of thumb is that the average house consumes electricity at the rate of 1 kW per hour (kWh). There are about 730 hours in each month, and the average price of a kWh of electricity is $0.10. So an average monthly bill would be around $73 for 730 kWh of electricity.
Of course, this can vary considerably if you have non-standard items such as a hot-tub, or some electrical appliances running continuously. Extended computer use, plasma screen TVs and video games consoles can also make an impact. Your usage will increase significantly in months when you run an air conditioning unit, as well. Finally, the cost of electricity varies widely across the USA, from as low as $0.07/kWh in West Virginia to as much as $0.24/kWh in Hawaii. You’ll have to adjust my guidelines accordingly, because they apply to an average home with average consumption and average electricity costs.
A conservative value to use as a solar panel’s generating capacity is 10 watts/sq. ft. This represents a panel conversion efficiency of about 12%, which is typical. This means that for every kW you generate, you need about 100 sq. ft. of solar panels. If the sun shone 24 hours a day, you could put up 100 sq. ft. of panels and have enough energy to power the average home.
But, as we all know, the sun is available only during daylight hours, and the amount available per day is highly dependent on the extent of cloud cover. Also, the length of each day is dependent on the season. Fortunately, there are resources on the web to help you figure out how many hours per day (on average) you can count on the sun to shine, based on where you live.
The averages across the USA vary from around 3 hours per day in places like Seattle, Chicago, and Pittsburgh, to 5 or 6 hours per day in states like Colorado and California, to a high of 7 hours per day in Arizona. What that means is that the size of the panel array required can vary, anywhere from 400 sq. ft. to 800 sq. ft. (i.e., 4 kW to 8 kW), depending on where you live. You’ll need more panels if you live in a location that gets less sunshine per day, and fewer if you live in a location that gets more.
If your utility company allows you to have net metering — that is, they supply you with a special meter that will spin backwards when you generate more electricity than you use — your annual bill can average out at zero. Because of shorter days in the winter, you’ll likely be a net purchaser of electricity in that season and a net producer in the summer months. A grid-tied system like this is different than off-grid systems used in remote locations with no electrical service; those require batteries, which can significantly increase overall system costs.
The standard way to evaluate solar panel system cost is cost-per-watt, or dollars-per-watt. It’s calculated by taking the total cost to install the system (parts and labor), and dividing by how much power it produces (electrical output). Cost of solar power will vary based on other factors including the state you live in, the installation company, and any rebates and incentives collected. In 2019 someone in California can expect their cost-per-watt to range from $4.39 for a small system, down to $3.56 for a very large system.
At the time of this writing, the installed cost of solar panels was between $7-$9 per watt: A 5 kW system would cost around $25,000-$35,000. Many utility companies offer incentives, and some subsidize as much as 50% of system costs. Even at half the cost, though, a system that generates an average $75 of electricity per month could take a long time to pay for itself.
For example: A system that costs $18,000 has a payback period of about 20 years. The cost of a solar panel today is around $3 per watt, and the extra cost of installation brings costs up to $5- $6 per watt. Note: Installation costs for PV systems include both labor and the electronics needed to tie the solar array into your existing electrical system.
Homeowners interested in solar roofs should note solar shingle systems are more expensive than the traditional roof installation. Energysage estimates solar roofs can range from $4.15 cost per watt to as much as $8.14 for the more advanced offering from Tesla.
Standard Solar System Components
This brings up an important point: it takes more than a solar panel to get a PV system up and running, though. In fact, there are generally four components in every PV system:
- Solar panels – captures sun’s energy and converts it to electricity
- Controller – protects batteries by regulating the flow of electricity
- Batteries – store electricity for later use
- Inverter – converts energy stored in a battery to voltage needed to run standard electrical equipment
The entire system is what drives the cost of solar up and equipment like batteries need to be replaced over time.
The good news is that the costs for solar panels are expected to continue to drop, as thin film panels from companies like First Solar, Nanosolar, and AVA Solar become available to the residential market. Right now, though, First Solar is only selling to commercial customers. Nanosolar and AVA Solar have yet to ramp up their production facilities. It will be interesting to see where this all goes in the next year or two, since these companies are talking about very aggressive price targets — in the order of $1-2 per watt — and volumes that are several times today’s total output.
Assuming that installation and auxiliary equipment costs can be reduced to around $1 per watt, then a 5 kW system may cost as little as $10,000, and the payback period would be 10 years, even without subsidies. This makes PV solar installations much more attractive. Of course, all this assumes that electric rates stay constant.
However, they are likely to rise as fuel and other infrastructure costs increase, so payback periods may be even shorter in the future. In the meantime, expect to see more PV solar panels installed on roofs, especially in areas with favorable solar conditions or with higher-than-average electricity rates.
Want to get an idea for how much you can save? Here’s a calculator you can use to find out!
By clicking calculate, you give a solarpowerauthority.com representative your consent to use automated technology to call you or email you using the information you provide. You are not required to provide this consent to make a purchase from us.