The Cost of Solar Power: You Can Afford It

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This chart compares costs of utility bills without a solar system to costs of the solar system (loan, lower utility bill and maintenance). It assumes the PV system inverter is replaced at 15 years. The major drop at 20 years represents payoff of the loan.
This chart compares costs of utility bills without a solar system to costs of the solar system (loan, lower utility bill and maintenance). It assumes the PV system inverter is replaced at 15 years. The major drop at 20 years represents payoff of the loan.
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In the best cases, after you've paid the up-front cost of solar power the return on investment will be more than 10 percent, the cash flow positive and the increase in property value greater than the system cost.
In the best cases, after you've paid the up-front cost of solar power the return on investment will be more than 10 percent, the cash flow positive and the increase in property value greater than the system cost.
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This chart shows changes in value of a property with a solar system. It appreciates until about year 11, then is limited by the savings the system will provide in its remaining lifetime.
This chart shows changes in value of a property with a solar system. It appreciates until about year 11, then is limited by the savings the system will provide in its remaining lifetime.

For years, questions about returns on the expensive investment in a solar-electric system were dismissed with the analogy, “What’s the payback on your swimming pool?” That sentiment might speak to the converted, but for most people considering solar power, the financial case is a major deciding factor.

Fortunately, photovoltaic (PV) technology has matured such that we now can offer serious answers to the payback question, backed by solid math and accounting. Answers vary significantly by local climate, utility rates and incentives, but in the best cases, the returns will be more than 10 percent, the cash flow positive and the increase in property value great enough to offset or more than offset the cost of solar power. In other parts of the country where electric rates are low and incentives may be less, a grid-tied system may barely cover its maintenance costs.

What Factors Improve Payback?

The most important factors for making solar an attractive investment include high electric rates, net-metering policies, financial incentives and good sunlight. Unlike the other factors, sunlight is available in almost all of the continental United States.

High electric rates can take various forms. California, Hawaii, New York and other states have average rates well above 15 cents per kilowatt-hour (kWh). California’s tiered pricing system penalizes large residential users with prices as high as 33 cents per kWh. Solar energy offsets highest-tier usage first, making the customer look like a smaller net user.

  • Published on Oct 1, 2006
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