Does Solar Power Make Sense for You?

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Many homeowners are switching to solar power as an energy source to power their homes, as technology costs decline and environmental awareness grows. Here’s how to determine if you should make the switch.

If you’ve been considering solar panels as a clean energy source for your household electricity needs, you’re not alone! The popularity of solar energy has grown by leaps and bounds over the past few years, as the price for solar technology is becoming more and more affordable.

However, to determine if solar power makes financial sense for you, you will need to determine your current costs for electricity, and compare them to the cost for solar power.

These costs are more difficult to determine than just looking at your electric bill, but you can do so by calculating the cost of electricity at the point of connection to the grid, and then adding initial installation costs as well as ongoing expected maintenance costs.

If this sounds complex, well, it can be, but this article shares tips that can help you determine if solar power makes sense for you:

Where you are located greatly impacts the cost of solar electricity, or LCOE. Not only is the amount of sunlight that falls on your panels’ location dependent, but so are the available financial incentives, such as rebates and tax credits.

Because there are so many different incentive programs at the municipal and state level, for simplicity, we will only consider the federal investment tax credit (ITC) of 30%, because that is available nationwide….

Let’s look at an example:

Solar system installation cost: An average-sized residential solar panel installation with 5-kW capacity would cost about $14,000 ($20,000 minus the 30% federal investment tax credit) based on the estimates of the Solar Energy Industries Association….

Operating and maintenance cost: A relatively conservative estimate for the operation and maintenance costs over the expected 20-year lifetime of your panels would be about 20 percent of the initial installation cost before rebates — in this case, about $4,000 for a 5-kW system.

So our total lifecycle cost is composed of the installation and operation and maintenance costs: $14,000 + $4,000 = $18,000.

We’re almost done! But we still need to determine how much electricity you can produce with your system to determine the levelized cost.

For example, a 5-kW system installed in San Diego (with a Solar Score of 79) would generate about 8,300 kWh of electricity per year. By comparison, the same system installed in Portland (where the Solar Score is 40) would yield about 5,500 kWh per year.

Because, as we mentioned, most solar energy installations have an expected lifetime of 20 years, we multiply the annual average generation by 20 to get 166,000 kWh over 20 years for San Diego or 110,000 kWh over 20 years for Portland.

The final step is to divide the life-cycle cost ($18,000) with the amount of electricity the system will generate over its lifetime. In the case of San Diego: $18,000 divided by 166,000 kWh equals about 11 cents/kWh, whereas in Portland, we are looking at about 16 cents/kWh.

Once you have the levelized cost of solar electricity where you live, all that is left to do is compare that number to what you are currently paying for electricity from your local utility. If the LCOE for solar where you live is the same or lower than the utility rate, then you’ve reached grid parity and switching to solar will save you money over the lifetime of the panels.

But it’s important to note that the federal investment tax credit of 30% makes a big difference….

However, the ITC is set to expire at the end of 2016, and it’s unclear whether it will be extended. If you’re considering solar energy for your home, you may want to get going with the installation before the ITC is no more.


For more information, as well as an interactive grid parity map so you can check costs for your location, visit MotherEarthNews.com.


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