More Affordable Solar Power

The cost of solar systems has never been lower — now is the right time to consider solar power for your home.
By Dan Chiras
August/September 2012
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Switching from fossil fuels to solar energy is good for the environment. With the falling price of solar panels, it can save you money, too.

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If you’ve ever considered installing a home solar electric system and generating your electricity with free, renewable energy, now’s a great time to look at your options. In recent years, prices for solar systems have plummeted thanks to increased demand, mass production and intense competition among manufacturers. Generous government financial incentives for solar power have reduced the cost for homeowners even further, making a home solar electric system more affordable than it’s ever been.

Because the source of energy — sunlight — is free, the cost of solar power equates to the cost of your solar electric system spread over the lifetime of the system you buy — easily 30 years or more. As a rule, solar incentives for homeowners reduce the system cost by 30 to 50 percent. Incentives for businesses can lower the cost by 50 to 75 percent! However, even without incentives, the lifetime cost of solar electricity is now frequently cost-competitive with the cost of electricity from your local utility. In some places with relatively high costs for utility electricity unsubsidized solar is already cheaper than utility rates.

When purchasing a solar electric system, most people choose to contact a solar installer, who can help them decide which type of system they need. To find a solar installer, check local listings or use the Find Solar Directory to search for local options within a national directory. Another option is to plan and install your own solar electric system. For more on this approach read Choose DIY to Save Big on Solar Panels For Your Home!. In either case, before you get started you’ll want to learn a few of the basics about how solar electric systems work and what decisions you’ll need to make when choosing a system.

How Solar Power Works

As the name implies, solar electric — or photovoltaic (PV) — systems convert sunlight energy to electricity. This transformation occurs in solar modules, typically referred to as panels. Each module consists of numerous solar cells, which are usually made of silicon. They produce electricity when incoming solar radiation knocks electrons from the silicon atoms out of their orbits around their nuclei. These electrons flow to the surface of the cell where they are drawn off by tiny silver contacts.

In solar electric systems, numerous modules are wired together in series to provide the electricity for our homes. These modules are usually attached to an aluminum rack, which can be mounted onto your roof or a foundation set in the ground next to your house. The modules and the rack system constitute a solar array.

The electricity produced by a solar array is direct current (DC) electricity. A device known as an inverter converts the DC electricity into alternating current (AC) electricity, the type of power used in U.S. households. The inverter feeds electricity into the breaker box or main panel, where it is distributed throughout a home.

One recent development in home solar electric systems is the use of micro-inverters (see photo in the Image Gallery). The idea is that you would use one small inverter for each panel rather than one larger inverter for the whole system. This can improve the overall efficiency of the system, especially if your solar panels are in partial shade. Another relatively recent trend is the use of thin-film solar panels. Unobtrusive solar laminate can be applied directly to a metal roof (see photo in the Image Gallery).

On or Off the Grid?

There are three types of solar electric systems. Here are pros and cons of each.

Grid-Connected Systems. The most common PV system is known as a grid-connected (or utility-tied) system. In these systems, the utility grid becomes a means of “storing” your excess electricity and acts as a backup, supplying electricity any time your demand exceeds the output of your system.

Here’s how it works: Your solar system provides electricity to your home anytime the sun is shining. If the system produces more electricity than you’re using, the surplus flows onto the utility lines that supply your home. When you need electricity, but aren’t producing any (at night, for example) you can draw from the grid. The utility meter on your home keeps track of any electricity you feed back onto the grid, as well as what you use. How exactly this is calculated depends on net metering regulations where you live (see Resources at the end of this article). These vary by state, but currently all states have some form of net metering except for Alabama, Mississippi, South Dakota and Tennessee.

Theoretically, it’s possible to produce enough electricity that you get a credit from your utility company instead of a bill. More often, homeowners choose to install a smaller, less expensive solar array that only meets a portion of their electricity needs, and then buy the rest of their electricity from the utility. This is one reason it can be much cheaper to buy a grid-connected system: You don’t have to buy a system large enough to produce the maximum amount of electricity you need. Instead, you can choose how much of your power you want to generate.

The downside of grid-tied systems is that when the grid goes down, your system shuts off. So, if a utility line goes down during an ice storm, your solar electric system shuts down, too. Even if the sun is shining, the system won’t operate. This is a built-in safety precaution that prevents your system from back-feeding electricity onto a dead grid, which could be dangerous to line workers or anyone who comes into contact with a downed electrical line.

Off-Grid Systems. These are self-contained energy systems powered by the sun that operate independent of the electrical grid. These systems must be equipped with a large battery bank to store the electricity needed to power your home at night or during long cloudy periods. Most people use a gasoline or diesel generator — or even a wind power system — for backup power, should the batteries run low. An off-grid system gives you the opportunity to experience true energy independence — you are completely responsible for producing your own power. Plus, you’ll never see another electric bill!

Although this is the most expensive type of solar electric system, off-grid systems often are the single most economical way to get electricity in remote locations. If your home is a mile away from an electric line, you could pay from $10,000 to as much as $50,000 for the utility company to install electric poles and run an electric line to your residence. (The cost of line extension varies greatly depending on how rough the terrain is.) Bear in mind that the cost of line extension doesn’t buy you a single kilowatt-hour of electricity — it only gives you the privilege of buying electricity from the utility company. In contrast, an off-grid system for an energy-efficient home could be installed for $20,000 to $50,000 — and that supplies a lifetime of low-cost electricity.

Grid-Connected With Backup. This is a third option that can make sense if you want reliability during a power outage but don’t care about being fully off the grid. The idea is to purchase only a small battery bank so that during a grid outage you can continue to operate your most critical electric devices — such as your refrigerator and heater fan — while line workers repair the damage. During such times, these systems automatically switch to battery operation. You could also choose to purchase a generator rather than a battery bank. These types of systems can make sense if you experience frequent power outages or want to be prepared for an emergency, but they require more maintenance and are more expensive than grid-connected systems.

Options for Mounting Solar Arrays

In cities and suburbs, most solar modules are mounted on roofs, high above trees and neighbors’ homes and away from vandals, thieves and curious children. In rural areas, solar electric systems are often mounted on rooftops of homes or outbuildings, or on racks secured to the ground. A ground-mounted system is one option to consider if your rooftop is shaded or otherwise not well-positioned for solar panels. Racks may also be mounted on poles to raise them higher off the ground.

For optimum performance, solar arrays should be mounted so that air can circulate over and under them, which naturally cools them. The cooler the array, the more electricity it produces. Roof-mounted arrays may be mounted parallel to the roof line but raised up 6 inches to provide air circulation, or they may be mounted on racks, which allow better air circulation to cool the array.

Arrays mounted on racks may also be adjustable, designed so the operator can manually change the tilt angle of the array several times throughout the year to accommodate the change in the sun’s angle, which improves a PV system’s output. Pole-mounted arrays may also be installed with automatic trackers — devices that follow the sun from sunrise to sunset every day of the year. If a system is installed in an open field with full access to sunlight throughout the year, automatic tracking can boost the output of a PV system by about 20 percent. This is typically found in commercial installations, and less often in residential systems.

Most solar arrays are “fixed,” or non-adjustable, and these arrays should be oriented as close as possible to true south to ensure the greatest annual production. They should also be mounted at an angle that corresponds with the latitude of your site. If you live at 40 degrees north latitude, for instance, the tilt angle for your array should be about 40 degrees. A solar installer can help you determine the correct angle.

Cost of Solar Power and Solar Incentives

Most homes require PV systems in the range of 3,000 to 10,000 watts, and grid-connected systems today cost about $5.50 per watt installed. A 5,000-watt system will therefore cost about $27,500. Generous financial incentives, however, dramatically reduce the initial cost of solar electricity. Homeowners qualify for a 30 percent federal tax credit, which is available until 2016. For a 5,000-watt system, you’d receive an $8,250 tax credit, and the system cost would drop to $19,250.

Additional incentives are also available from forward-thinking states, either directly from the state or through utilities. In parts of Missouri and Colorado, for instance, the investor-owned utilities provide a $2-per-watt rebate. For a 5,000-watt system, a customer would receive a check for $10,000 as soon as the system was operational. Thus, in these locations, the same 5,000-watt system would cost only $9,250.

Businesses also qualify for federal tax credits and utility or state rebates. In addition, businesses can apply an accelerated depreciation to PV systems. That is, companies can depreciate the cost of the system in five years. This amounts to a tax benefit of 15 to 30 percent, depending on the business’s tax bracket. A 15 percent benefit would lower the cost by $4,125. With these incentives, the cost for a 5,000-watt PV system would be $5,125. Businesses in rural areas can also apply for a 25 percent U.S. Department of Agriculture grant (REAP grant). When the system is operational, the USDA deposits 25 percent of the initial system cost into the business’s bank account. For a 5,000-watt system, the grant would be $6,875. A business eligible for all the incentives could actually come out $1,750 ahead! Plus, their electricity is free for the 30- to 40-year lifetime of the system.

As if that’s not enough, some utilities pay customers for their renewable energy credits. This is a complicated system that helps utilities meet state-mandated goals for renewable energy production. Utilities often pay $50 to $100 per 1,000 kilowatt-hours (kwh) produced by the system. A 5,000-watt system in the Midwest would produce about 6,500 kwh per year for 30 years if installed in a sunny location. At $50 per 1,000 kilowatt-hours, the utility would pay you $325 per year for renewable energy credits. They typically pay a lump sum for 10 years, which in this case comes to $3,250.

Incentives dramatically lower the lifetime cost of electricity from a PV system. If you claim only the federal tax credit of 30 percent, the electricity generated by your PV system will cost about 10 cents per kwh, a rate that’s cost-competitive with utility power in many cities. At a 50 percent discount, found in states with the best solar incentives, the cost of electricity over the system’s life will be about 7 cents! That’s a bargain when you consider that the average price of electricity in the United States in 2011 was 11.8 cents per kwh.

If you can’t afford to buy a solar electric system, you may be able to lease one. Some companies install PV systems on customers’ homes and businesses free of charge. They sell the electricity to customers at a fixed rate over the time of the lease. (Read more in Leasing Solar Panels.)

What it all adds up to is that solar is more affordable than it’s ever been. When you choose to install solar power, you’re not only making a good choice for the environment — in many situations, you’re also going to save money on your electric bill.


Database of State Incentives for Renewables and Efficiency
Find out about state and local solar incentives and net metering policies.

American Solar Energy Society
This nonprofit organization publishes Solar Today magazine and has regional chapters covering most of the United States. It also organizes the National Solar Tour, held every October.

Build It Solar
Gary Reysa is a frequent contributor to MOTHER EARTH NEWS. Visit his website for advice and plans for DIY solar projects.

Find Solar
This website can help you get a ballpark price for a solar electric system and find solar professionals in your area.

Dan Chiras is a Contributing Editor at MOTHER EARTH NEWS and author of 30 books, including Solar Electricity Basics. He teaches classes on solar power at The Evergreen Institute in Gerald, Mo. 

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Post a comment below.


7/27/2014 7:53:36 AM
We unfortunately, have had a horrible experience with our solar panel company. They are using the solar panel projects to rip people off, including seniors and widows. The projects are a joke, being split in up to three different directions and surrounded by large shading trees. Snow covers the panels in winter up here, yet they charge us hundreds of dollars anyway? People are losing thousands every year off this scam created by this "green project" and introduced by the government.. Buyer beware, check the BBB sites and our particular supplier has been in four lawsuits with the Ontario Energy Board, yet continue to rip folks off? They keep changing their company name but not their shady practices. Use MUCH due diligence so you are not financially raped by this so called "green project". It is destroying lives. Elaine

7/8/2014 5:47:53 PM
Thanks for this article! I must admit that the price of installing pv system is still gradually falling, and that's great. I hope that people will turn to being more environment-friendly. To all reading it: we have to start being more responsible for our environment and use renewable sources of energy. It's really not that hard to design and do all the installations, especially now, that we have better tools to do it, like the apps ( this one for example ) that practically do everything for you, design, calculate the azimuth, provide you with simulations and financial analysis and save you time! Start to make good changes! And good luck! Elizabeth

4/25/2014 5:12:10 AM
I believe that wherever you are in this continent as long as the sun hits your spot you already have a solar energy power. There are lot's of available in the market today.

3/21/2014 1:18:38 AM
The sun gives a lot of energy in a varying light spectrum. We can capture only small amounts of that spectrum and convert them to electricity by using photovoltaic panels. Today's crystalline solar panels are about 6% to 19% efficient. A fossil fuel burning generator has an efficiency of about 29%. All solar panels lose efficiency each year with their constant exposure to the elements. You need to buy a very expensive set of panels to get the most efficiency and longevity. You also require a set of batteries and have to wire them to your house and to the solar panels. {Most estimates say that the batteries will last for 5 - 7 years} Suntech is a huge solar panel company and their "new" 60-cell monocrystalline solar module only has a 16% efficiency rate. Phoenix AZ averages 6.5 hours of direct sunlight per day, so for a quarter of the time you are getting the full monty and the other 8.5 hours a day you get less sunlight to almost none and of course at night, zero percent. If you live anywhere else, you will get less sunlight and the further north you go, you get a lot less intensity. The average US home used 11,000 kWh per year {in 2012} and the average price per kWh was 11.7c. So the average home in the USA spends roughly $1,300 per year for electricity. When most reasonable estimates put a solar panel system {capable of running the entire home off the grid} at $30,000 - $50,000 and that doesn't include maintenance, battery replacement or adjusting the angles of the panels every few weeks to maximize their ability to capture the sun's rays. It will take 30-80 years to break even on these systems if you factor in all of the maintenance required.

3/8/2014 11:12:32 AM
It is nice one.Thanks sharing it.

12/13/2013 2:19:21 PM
Eddie is absolutely right. Hopefully homeowners are becoming more aware of other ways of financing their solar systems rather than the expensive leases that some companies are pushing. Solar is cost effective right now for millions of homeowners across the country. Nick Tedesco

12/13/2013 2:18:17 PM
Eddie is absolutely right. Hopefully homeowners are becoming more aware of other ways of financing their solar systems rather than the expensive leases that some companies are pushing. Solar is cost effective right now for millions of homeowners across the country. Nick Tedesco

11/25/2013 1:58:45 AM
The only way to get these federal tax credits and rebates for solar is if you PURCHASE the panels, and not lease them.

The majority of companies out there are leasing companies, so do a little research before you settle on one.


8/29/2013 8:53:38 PM
t brandt raises an interesting point. Is it better to invest some amount of money (such as $27,500) in the stock market or in a home solar installation? The answer depends very much on assumptions, including assumptions about the future. Future value of the Dow-Jones Average (DJA) is highly uncertain, and subject to energy costs among other things. While the rising cost of fossil fuels could be bad for the DJA, it will definitely increase the savings from generating solar electricity. So it is far from certain that the DJA will have better return than the solar investment. A more fundamental problem with the analysis is that we are comparing an investment in the DJA which we liquidate after some number of years with one that produces monthly tax-free "dividends" in the form of reduced energy costs. We could spend or reinvest the solar "dividends" as we choose, but when we liquidate the DJA investment we would have to pay taxes. Of course, we could also take monthly payouts from the DJA investment, but we would still pay taxes and would earn less by not allowing the gains to compound. Current production solar panels can be expected to produce at least 80% (not 50%) of their original output after 20 years, and batteries are optional in grid-connected systems. A more reasonable estimate of system lifetime would be 40 years, although inverters might need to be replaced before that. When these considerations are taken into account, it's not clear there is any advantage of DJA over solar in terms of risk and financial return. But we don't make investments based purely on risk and rate of return, but also on our priorities and values.

t brandt
9/18/2012 10:05:49 PM
The DJA has returned about 5% per annum over the past 125 yrs. Your initial investment of $27,500 for your solar system, had it been invested in the Dow, would have earned you about $73,000 over the 20 yr effective lifetime of the solar panels. (they're less than 50% effective after 20 yrs). An average family uses 1000kW-hr per month with grid costs $0.20 per kW-hr (a higher than average estimate), so they would spend $48,000 for grid power over 20 yrs. With the solar panels, you'd be at least $25,000 behind. Then you'd have to invest the initial capital again after 20 yrs. And don't forget the cost of replacing batteries every 5 yrs....It's only worth it if you live way off grid and the cost of running lines is in excess of $25,000.

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