A common question we hear all the time is, “How much does solar panel cost?” Or more specifically, how much will it cost for me to install grid tie solar on my house?
Without knowing more specifics, this is a very difficult question to answer. But I’ll try to give you some guidelines that may help you get to the answer of the cost of solar on your home.
Just like in real estate, a big factor is location.
Where is your house?
For this post, any estimates I give you will be for the United States. But I would absolutely LOVE it if our international viewers would write in the comments section any input from your country, be it availability or pricing, or interesting facts that may be unique to your area.
You’re in an area that gets lots of Sun, it doesn’t have lots of extra fees associated with collecting solar energy.
You’re ready to make a long-term commitment to solar, solar power could be a good way to cut down on utility costs. But if you’re really wanting to make the switch the upfront cost of installing panels and getting your home solar ready can be expensive.
What is location makes such a difference?
- Some places are just sunnier than others and the more Sun the better
- Some states have incentives for solar paneled homes while others don’t
–> Find your location peak sun hours here
States like Nevada, Arizona and Hawaii for example might not be the best places to invest in solar despite the sunny weather.
In Nevada and Arizona public utilities have inactive regulations that have driven up the cost for homeowners taking advantage of net metering, which is when a home sells its excess solar power back to the utility companies. Hawaii’s problem is that the solar panel homes have sold so much surplus power back to the grid and utilities have become overwhelmed.
On the other hand, if you live in states like California or Rhode Island, solar could be a good investment.
If you are in a location where there is a lot of solar installed, and therefore a lot of solar installers, the odds are pretty good that the average price has been driven down due to availability of equipment and experienced installers. Competition can be a great thing for the homeowner.
Unfortunately, due to regional politics and lack of local incentives, or extremely cheap electric rates in your area, there may not be a high demand for solar in your state, and therefore not a lot of installers.
Doing it yourself or hiring an installer to do all of the work for you.
If you are comfortable with doing your own roofing and electrical work, depending on the local regulations, you may be able to do some or all of the work yourself, and hire an electrician to do the final connections if needed.
Not all solar installations are on the roof, if you have space in your yard, you could do a pole or ground mount and dig a trench back to the house. Once again, depending on your location, you may be able to save up to half the price of installation by doing the work yourself.
However, this isn’t a small project, you need to be sure you can handle hauling 40 to 50 pound glass panels up a ladder, as well as roof flashing and running conduit, and doing code compliant wiring. If you are thinking about DIY solar, talk to your local electrical inspector first, to see what requirements they may have.
Cost of solar panels based on your system size.
The cost of installing solar on your home or business depends on how much electricity you want to generate – a bigger system will cost more, because you’ll need to buy more equipment and more labor will be needed to install it.
Keep in mind that one of the great things about grid tie solar is that you don’t have to make all of the power yourself. You can just make some of the power you use, and buy the rest from the electric company, same as usual.
This will result in a lower electric bill, since you will be buying less from the grid. This is very common, most people do not try to make all of their power with solar. This lets you just buy the size array that fits on your roof or in your yard, or fits in your budget.
The solar power authority estimates the average cost of a 5 kW system ranges from around $12,500 to 15,000$ after tax credit. Below are some average 2016 quotes for other solar energy systems by size:
- 6kW solar energy system cost: $15,000
- 8kW solar energy system cost: $20,000
- 10kW solar energy system cost: $25,000
These prices reflect the cost of a solar energy system after deducting the federal solar tax credit, which reduces your solar system cost by 30 percent. Some states, local governments, and utilities also offer rebates and other tax incentives that can further reduce the solar system costs in your quotes from solar installers.
In the US, an average price for a grid tie solar system professionally installed in 2016 with brand name products, before incentives is less than $4 a watt.
It may be more or less depending on your area, or the equipment used, or if there is something about your house that requires specialized installation, like a tile roof, or difficult access.
Then your state or local utility company may have additional incentives, and that could potentially bring that number down again.
For the sake of argument, let’s say you qualify for an additional $4000 off, bringing it to $10,000.
What kind of payback time would you see on this system?
Let’s assume you pay 18 cents/kWh for your electricity. If you are making 525kWh a month (with your 5kW system), that’s $94.50 a month that you don’t have to pay to the electric company.
That’s $1134 a year. $10,000 for the equipment divided by $1134 is 8.8 years.
Now that is assuming that your electric rates stay the same, which we have certainly seen is not the case. So the real payback is likely much sooner.
Then for the remaining decades that you have the solar system working, you are making at least $1134 a year by not having to pay the electric company that money. In ten years, that’s $11,000! And remember, solar electric systems can be expected to last decades meaning 10’s of thousands of dollars of savings over the course of a lifetime.
Those numbers can be twice as good if you do the install yourself, and just pay for the equipment and not the labor to install it. If you don’t have the money available to buy outright, there are specialty solar loans available to finance the solar system. While it will make the payback time longer, it is still a better deal than leasing.
On top of the savings, and of course the environmental benefit of reducing the amount of dirty electricity you use, there’s another plus to installing solar on your house.
Studies have found that owning a solar system increases the resale price of your house.
So if you sell your house before the payback time, chances are high that the increased amount you will get for the house will pay for the solar.