Homeowner Cost of Solar Energy

Solar energy is free, the cost of solar energy is the upfront cost to install the two types of solar energy systems:
Photovoltaic systems also known as residential solar power system and the solar thermal systems also known as solar powered water heaters.
The annual maintenance cost of these systems is very low and their life span is more than 20 years

Cost of Solar Energy System Breakdown

The non recurring upfront investment cost in a solar system consists of the following:

Equipment cost
At present $5 to $7 per watt production capacity; the most expensive cost item are the solar panels that are showing a consistent price reduction of 10-15% every year. View my page on the cost of solar panels.

Installation cost
You may assume $2 per watt production capacity, varies according to region and country

Permits and Approvals
Few hundred $: varies according to region and country

Maintenance cost is really minimal because the system has no moving parts. Off grid solar power systems though require the replacement of batteries every 5-10 years

Energy Tax Credit Plans and Net Metering

The cost of solar energy to the homeowner is alleviated by federal and state level energy tax credits. A typical 2,500 Watts solar system cost range is $17,000 to $24,000. Taking into account the 20 years system life expectancy and the interest cost, the payback period would be too long. Expectations are that only in 2013 or later solar panels price will drop to make the payback time in the range of 5 to 6 years. In the mean time, Governments are subsidizing the investments in Residential Solar Power. Energy Tax Credit plans offset the Cost of Solar Energy investment. Net Metering add a revenue stream to the household budget (under net metering programs, utilities are obliged to buy back surplus home generated electricity, e.g. during daylight when the residential solar power system production is at peak while the household consumption is very low). In some countries (e.g. Israel and Germany) the utility pays much more (3 to 4 times more) than what it charges for KWh (Killowatt-Hour). With these generous feed in tariffs and other benefits, pay back time at present is 6 to 8 years.

If you live in the US or the UK, click here to view my Solar Energy Grants page

Revenue Stream

During the life of the installed system there are 3 sources of income:

  1. Cut energy costs by reduction or elimination of the monthly utility bill
  2. Selling surplus electricity to the utility
  3. Avoid the ever increasing electricity prices that historically tracked the price of crude oil and coal, labor cost and capital equipment cost
  4. Appreciation of the property

Strategies to optimize the Cost of Solar Energy and Revenues

a key element in reducing the cost of solar power is to buy cheap solar panels


There are 2 ways to raise the needed cash:

A word on Off-grid Solar Systems

For remote from the grid sites, solar energy is the best investment. You avoid the one time connection fee that might run in the range of $15,000 to $50,000 per mile, more than your upfront investment in Solar. To make it even more attractive, invest also in home wind energy turbine if feasible. Investing in Hybrid Solar Wind Generation is probably the optimal choice for remote homes.

It is expected that the new Tax Credit Guidelines to solar components manufacturers will eventually bring down the cost of solar power to the homeowner

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Jacob Mintz

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