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Making Solar Electricity Affordable

2/24/2009 12:36:00 PM

Tags: energy efficiency, solar panels, Dan Chiras

Many people who are contemplating installing solar electric systems on their homes struggle with the high initial costs. To pay for a system, they either have to dip into their savings or take out a loan. A 3- to 5-kW grid-connected solar system, suitable for most homes, can run $30,000 to $50,000.

Even with recent legislation that provides a 30 percent tax credit for solar and wind systems for homes and businesses, the cost of such as system will still cost $21,000 to $30,000, which is a substantial piece of change.

Isn’t there some way to reduce this cost?

There is. It's called efficiency.

Richard Perez, founder of Home Power magazine, ran the numbers. He found that every dollar invested in energy efficiency could reduce the cost of a photovoltaic (PV) system by $3 to $5.


By reducing the size of a system one must install to meet his or her needs. The economic savings from efficiency are quite substantial. For instance, a $2,000 investment in home energy efficiency — for example, weatherization, insulation and energy-efficient compact fluorescent or LED light bulbs — will reduce the demand for electricity. This, in turn, will reduce the size of the PV system required to meet one’s needs. It could easily save $6,000 to $10,000 on the cost of the system of a 3- to 5-kW PV system before tax incentives. Taking into account the 30% federal tax credit, the savings would be $4,200 to $7,000.

Spend a little more on efficiency and the cost of the system drops even more. If you invested $4,000 in efficiency, the total system cost would decline by $12,000 to $20,000. Taking into account the federal tax credits once again and the decrease in initial cost would be $8,400 to $14,000.

That’s not a bad return on an investment in efficiency.

Instead of spending $21,000 to $30,000 for a system, you’d pay $12,600 to $16,000.

So, if you're thinking about installing a PV system, think efficiency first. It’s a gift you give yourself and the planet. It will reduce energy demand, reduce pollution, and reduce the cost of a system substantially. Moreover, the savings will provide dividends for the life of the house.

Contributing editor Dan Chiras is a renewable energy and green homes expert who has spent a lifetime learning life’s lessons, which he shares in his popular blog, Dan Chiras on Loving Life. He’s the founder and director of The Evergreen Institute and president of Sustainable Systems Design. Contact him by visiting his website or finding him on .

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5/17/2009 7:35:26 AM
HI Everyone, i hope you will be all righ there,and the question to ask is that i have a palant of ice fatory due to load shedding of electricity we are unable to run over business so,we are interseting in 100 KILO WATT power genereatin in purchasing so,if u can guid us so,rply me please i will wait..take care bye

4/3/2009 9:05:04 AM
where can i buy the equipment [supplies]to build my own does not look like it is something that is difficult I have a lot of common sense. I have built homes,commerical units, from the ground up. I was a licence contractor in IL.I also have,and carry a card in the refrigeration service engineers society. and I do believe there are many out there who know more then me. IT HAS TO BE BOUGHT WHOLESALE.TO KEEP THE GREEN COST DOWN.FOR WE CAN BECOME GREEN. HAVE A REAT DAY

3/16/2009 8:16:16 PM
A couple of insights, since we installed our own solar panels just last year. The 30% federal rebate is great and applies even if you install the system yourself, but you have to have an up and working system, not just a bunch of stockpiled parts. A lot of the state-by-state rebates require an installer to receive, but the federal rebate has no such requirement. It can also be taken for grid-tied or off-grid installations. See IRS tax form 5695 for more information, it's very straight forward. As for starting small, we went this way and it's working out great for us. To save money in the long run, you need to know where you're heading and get the base system components that you'll want when it's all finished and simply start with fewer solar panels. You have to do your research though. Most inverters need to have a minimum number of panels (minimum system voltage) attached in order to function. We chose the Outback inverter because the minimum system voltage is zero as far as I could tell and one could theoretically install it in a grid-tied, battery-backup situation without any panels and have what would ammount to a very expensive Uninteruptible Power System (UPS) for their home just waiting for solar panels. This is what we did along with just 4 solar panels (540 watts) and the system works perfectly. We've learned a ton in the process and we're much more confident now and are planning on adding another 4 panels this spring. What every professional told us we couldn't do for under $20,000, we did ourselves for under $7,500 and after the $2,000 rebate that we just got back a couple of weeks ago, our total out of pocket expense was $5,500 for a very complete grid-tied and battery-backed-up system. On a very sunny day in northern Wisconsin we make up to 50% of our energy use from the sun, but we're quite efficient in our energy use already. With another 4 panels, we'll be self-sufficient on sunny days, and we

Dan Chiras
3/10/2009 8:56:25 AM
Frank asked about building a PV system gradually. That's quite feasible, but don't forget that your money is best spent on efficiency first. Make your home as efficient as possible, then begin building a system one panel at a time. It's much cheaper to save energy than to generate it via a PV module. When you start to build your system, the best way is to buy an oversized inverter, one that will meet your needs when your system has reached its full size. So, if you think you'll eventually need a 2500-watt inverter, it's best to start there with a few panels. Consult with a local solar installer to be sure that the few panels you install, however, will be sufficient to run the inverter.

Dan Chiras
3/10/2009 8:56:19 AM
Frank asked about building a PV system gradually. That's quite feasible, but don't forget that your money is best spent on efficiency first. Make your home as efficient as possible, then begin building a system one panel at a time. It's much cheaper to save energy than to generate it via a PV module. When you start to build your system, the best way is to buy an oversized inverter, one that will meet your needs when your system has reached its full size. So, if you think you'll eventually need a 2500-watt inverter, it's best to start there with a few panels. Consult with a local solar installer to be sure that the few panels you install, however, will be sufficient to run the inverter.

Dan Chiras
3/8/2009 2:42:01 PM
To MT Nester: Solar tax credits are available for grid-connected systes, I believe. I'm not sure if the solar tax credits apply to off grid systems. I know local utility incentives only apply to grid-connected systems. Does anyone else know? Tax credits are for those of us who purchase systems from installers or suppliers. I doubt very seriously that they apply to those assembled by do-it-yourselfers. Anyone else want to weigh in on this? Thanks Dan Chiras

Dan Chiras
3/8/2009 2:34:38 PM
Hi Everyone, Many of you have raised some excellent points and some good questions. Rather than try to respond to each one separately, I'll be posting a new entry "Does Efficiency Really Save When Installing a PV System?" This piece provides some real numbers, so you can view the potential savings on the initial cost of a PV system. I think you'll be amazed at home much money you can save on the initial cost of a PV by first investing in efficiency. If you'd like to sign up for workshops on solar electricity, wind, passive solar, green building, etc. please check out our web site: I spend a lot of time looking at the costs and benefits of systems and ways to analyze them. Enjoy... Dan Chiras

3/8/2009 6:49:46 AM
It all sounds wonderful free energy sad part it's real costly to get.I have worked in alternative energy for years and well I have learn that people want it all to work like in town.There are a few that will bare bones it but ones that say they are never do and there under sized systems fail,making them feel riped off and discrediting the our industry.Here in Canada you are looking for a stand alone solar at around 55.000 yes you can go for less but this will just work like in town 120 and 240 volt.Keep in mind now solar is very costly.Now we have thoughs that say wind I have lots this is easy look at you trees are the branches permently bent to the other side of the tree from the wind if it's yes then you have enough to live on for power but your house may blow away! Water is the real answer my last job was a water turbine under 5.000 with out all the inverters and battery's we had a 1900 foot long pipe from a spring that droped 900 feet to were the turbine was placed and wow runs the home and then some.Now to create that same energy in solar would have cost 90.000 just in solar panels.The sad part is he had spent thousands on wind and solar and generators for years to live a bare existence when it can to power,he timed tv, washing clothing had to have a propane fridge energy saver lights for limited times more or less camping for life.And all this was done by so called pros so look have see there work and rember wind sucks not blows.

M T Nester
3/7/2009 9:32:38 PM
I wonder if those energy tax credits will be available to do-it-yourselfers, or if you have to go through contractors and use purchased turn-key systems?

3/6/2009 11:47:16 PM

Catskill Clean Energy
3/6/2009 2:44:58 PM
To Ron Mach you are incorrect about the incentives it is a 30 % tax CREDIT (ie: spend 30,000 get almost 10,000 back) it is not a deduction second the article is based on a grid tied system not off grid I agree when you start adding batteries you will increase your system cost by 25-30% You can decrease the the size of a grid tied system by investing in efficiency first especially insulation and your homes envelope (ie: windows, doors etc.) I think maybe investing 2 grand is not going to save you 10 grand though that may be a little optimistic! and to frank gregg yes you can start small and work your way up but it is all based on wattage not voltage (with grid tied) and its based on your load for off grid systems or grid tied with battery back up. You will have to increase your inverters wattage as you build though (keep in mind that a larger inverter will not even switch on untill it senses about 150 -200 volts from your panels) Good luck RG "Catskill Clean Energy"

3/6/2009 1:27:23 PM
These numbers are inflated. Changing a few light bulbs will not save much. Heating is usually by wood stove when you are on solar so where this guy got these numbers I don't know. I have lived off grid for over 6 years now and the cost of my system is about $31,000 including a backup generator and a backup generator for that one. When living in the boonies (5 miles to power) I can't afford to be without power. Solar panels are more expensive now than when I first bought mine as well. That 30% tax break doesn't give you a 30% yield either. It is only a deduction against your income and only saves you the taxes you would normally pay on that income which for most folks is in the 15-30% range. If you don't pay taxes it doesn't save you a darn thing. We have master switches on everything in the house and nothing gets left on. We have florescent high efficiency bulbs but there is no way (unless you waste energy up the ying yang) that you can spend $2000 to save $4-10,000 on a system. Believe me I have every energy saving device we could find and it only saved me a few hundred bucks on the cost of solar panels. The rest of the system including batteries will cost the same. You may be able to save a few bucks on smaller or cheaper batteries but it will cost you in the long run. Buy the best and you will be a lot happier. From someone who walks the walk and doesn't just talk the talk. We also have a wind generator but for 9 months out of the year it sits motionless. I also live in sunny New Mexico so I have a big advantage over most folks who use solar. I find this article optimistically misleading at best.

3/6/2009 12:35:46 PM
to save $ is to build it yourself, but first understand that all the crooks are not in washington, some manufacture windmills and some solar panels. when you consider an alternator brand new, even a 250 amp alt can be bought for 2 or 300 bucks at your local parts house or on the web, i know i checked, that's 3000 watts. if you get a machine shop to make up a prop and buy an expensive tower that doesn't need to be guyed you still can't spend $2000, well i guess you could if you are completely ignorant of the industry.30 years ago when all these companies were charging crazy amounts of money for solar panels. i put 12 air hearters on my house that i built out of beer cans and the only thing i used from the solar industry was sunlite covering from kallwall corp and nextrel non-reflective black from 3m it put out 220+% then and after 30 years it still puts out 140%, the sunlite was the most expensive, i think it was $350 or so. i have no idea how much $ i saved, the but comfort great. there is an ordinance against wind mills now, but i think the pressure is coming to remove it and you can bet i will build my own, i sure as hell willnot $10,000 or $20,000 for one. donn

3/6/2009 10:42:35 AM
I would really like to do that... How do you start small and work up? I'm looking at a 70 watt panel. As I add panels, do I need to keep buying a new converter till I have the optimum number of panels to run my house with the right number of volts? If so, doesn't that get expensive? Thanks.

Bill Griffin
2/24/2009 1:11:56 PM
Or, you can build up a system a little at a time. Taking one circuit away from the power company at a time until you can tell them to come get their feedline.

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