The cost of a solar power system installed on your roof top has reduced significantly over the years, and even more so in recent years, as more and more homeowners turn to solar, the demand increased and prompted many companies to manufacture and distribute solar components at a high quality, but at a much reduced rate due to the increased competition.
Here is a chart that demonstrates that price reduction:
It is quite clear from the chart how big the price cut was, and that's for a complete system without reducing the cost for the customer after applying the incentives and tax breaks homeowners gets from their respective states.
While these vary from state to state, in many of them, it is now so lucrative, that solar powered homes make a lot of sense.
To further demonstrate the costs or rather, the reduction of cost for the systems, here is a chart that shows how the cost of the component has been used in a residential solar power installation reduced.
Chart of solar components reduced rates:
To know your savings, you will need..
Solar power systems are different from one location to the next. To figure out exactly how much electricity you can save, installation companies need to know the following:
- Where do you live? - Each state has different solar policies thus changing the savings from one location to the next.
- Is there shade on your roof? - Obviously to go solar, you will need the help of the sun, and the more, the better.
- What type of roof do you have? - Some are easier than others to install on.
- What direction is your roof facing? – A key factor for the system to maximize its potential.
- What is your current electric bill? – The more you pay, the more you will save with solar.
Here is a great video detailing the cost of solar PV system breakdown:
The California Case Study
An average cost for 5KW of system will cost you around $20K to install. (Panels, labor, connections etc.). This is just our starting point. Now we need to subtract the incentives and solar federal tax breaks as follows: Subtract the rebate you'll receive for each KW, which is totaled at $3750.
Now we need to subtract the federal solar tax credit at an amazing 30% to reduce the bill by another $4875 dollars. That brings your total savings to $8625 dollars!
So, all of a sudden, a $20K investment turns to $11,375. That is almost half of the original cost, and that's big.
Again, each state has a different policy and each municipal, has different incentives like rebate program. For example, the LADWP (Los Angeles Department of Water and Power) rebate program is much different than the SMUD (Sacramento Municipal Utility District) rebate program.
One of the main reasons people tend to not get very excited about the prospect of installing a solar energy system to their home is their perception of the costs involved.
[blue[The truth is, over the long term, a solar energy system will pay for itself, and will actually generate you money in the form of lower utility bills, tax incentives, and selling back a proportion of the energy you produce but do not use to utilities companies.[/blue]
How much you stand to make depends upon where in the US you live, how much sunshine you typically see, and how electricity costs you. Naturally, the more money you pay for your energy supply, the more money you will save when you switch to solar.
The costs involved depends upon what kind of system you install. You can even have solar panels installed for free by allowing a solar energy company to lease your roof space off you so they can install their panels there.
They sell the electricity the panels generate back to you at a cost that's typically much lower than mains electricity, but you will not receive the tax breaks and long-term benefits available to you if you go down this route.
How much electricity do you use?
If you do buy your own panels, then you will need to buy enough to make your switch to solar worthwhile, and you make it worthwhile by calculating how much electricity you use.
You really need 1 kW worth of solar panels for every $50 you pay in electricity every month, so if you pay $200 for your electricity per month, you are going to need a 4 kW solar panel system.
Each solar panel is worth around 250 to 300 W, so for a 2 kW system you will need eight panels, and for a 4 kW system, you will need sixteen. You will need to make sure you have sufficient roof space to install the system that you require.
Check out your options
As you may imagine, there are plenty of different manufacturers of solar panels, all having different standards of the efficiency of the panels they produce, with different costs as well.
A 4 kW solar panel system will cost you between $10,000 and $11,500 to install. If you want to up the juice a little bit, a 5 kW system will cost between $12,500 and $14,000 to install. Don't forget, it's not just the panels you are buying – there's the wiring into your home electricity system as well, plus the cost of the installation itself.
You can find out more about the cost of a solar panel system here. You can also choose to finance the residential energy system, and go solar with zero down payment via solar leasing or Power Purchase Agreement (PPA), which is another great way to start save without having to pay for the system in full upfront.
Typically, as soon as you have your system up and running, you will receive tax breaks in line with about 30 percent of the cost of your installation. Most solar panel systems pay for themselves within 8 to 10 years of installation via lower utility bills and tax breaks.
Don't forget, it's not just the financial cost you have to take into consideration – there's the continual cost in terms of damage to the environment if you continue to rely heavily on fossil fuels.