Solar Cost Basics

afdb5a_e4b125bfd5674994b99bec9e4a18e825.jpg_srz_p_285_338_75_22_0.50_1.20_0The cost of solar has plummeted in recent years, which has led to a rapid rise in the number of installations and good market competition that keeps the prices falling. The cost of solar today is 80% lower than in 2008. In 2015, individual installer companies nationwide are charging as low as $3.50 per installed watt, and in Kentucky, the rates can be even lower. For utility scale, and depending on site and other considerations, the cost of installations can be as low as $2.00 per installed watt or lower.

For residential applications the installed system has three main cost categories:

  1. Cost of equipment – panels, inverter, wiring, etc.
  2. Cost of permitting, inspection, and grid-interconnection.
  3. Cost of installation labor

Making energy efficiency improvements and changing practices to reduce your home or business energy use as a first step is always a good practice. Energy efficiency upgrades typically have a quick payback period and energy conservation practices cost nothing and save money. By making these changes first, where feasible, the size of solar system required to meet your energy needs can be reduced which also saves you money.

Building size, roof orientation, energy efficiency of the building, condition or age of your roof, and energy use patterns of the occupants are all factors that affect a solar system’s costs. With the federal tax credits, low interest financing options now available, and the ability to sell SRECs (Solar Renewable Energy Credits) the cost of a system can be reduced by up to nearly half factoring in depreciation. A no money down financing option, such as EPAD (Energy Project Assessment Districts), applied to an average system makes it possible to pay for the system in full in about 8-15 years. Keep in mind that the loan payments are paid almost entirely through reduced energy bills, and one sees that the cost of the system is paid mainly through energy savings!

Several factors influence the cost of solar for your home or business, including:

  • The size of unshaded and unimpeded roof space. In the U.S., roofs facing south receive the most sunlight. However, as panels performance has increased and costs have come down, east, west, and in rarer instances north facing roof surfaces are increasingly being used

  • The current energy usage in your home or business. The more energy you use, the larger system you’ll need to fully offset your energy use.

  • Net metering that permits feeding the solar energy produced onto the electricity grid, which eliminates the need for a separate battery backup system and saves money.

Your current energy costs will affect how quickly you make back your solar investment – higher utility rates mean the cost of the system will be recaptured more quickly. For example, if you use a lot of energy during peak demand hours, your initial electricity costs will be higher.

LG&E offers excellent advice and services for Saving Energy and Money that can help you analyze your energy use, conserve or shift your demand  away from peak hours, and reward you with home energy rebates for energy efficiency upgrades. Many solar installers will also advise you on energy efficiency improvements to make before installing solar.

After the panels are paid off and fully owned, your solar system will continue to produce electricity at essentially no cost for the electricity produced – other than the minimum monthly charge by the utility, currently $10.75 per month at LG&E. Solar panels are warrantied for 20-25 years and expected to last 30-50 years or longer, with only minor declines in performance over time. The inverter(s) are warrantied for 10 years, and expected to last 15-20 years.

A final note: Large solar leasing companies, due in part to their high overhead and advertising costs, typically charge higher rates than installation companies, even up to $5.00 or $6.00 per installed watt. The consumer sees only the monthly lease fee, which can be less than what was formerly paid on the electric bill, but takes on a 20 or 30 year commitment. For someone who is unable to get financing, this can be a good option for going solar. However, with attractive financing, many find they can pay off their system within 8 to 15 years, or more or less. depending on a number of factors.  In the long term it usually saves the person or company money to purchase rather than lease. Unfortunately, there is not large solar leasing in Kentucky due to this being a regulated utility state.