Six easy steps to estimate the cost of a solar energy system

Solar energy systems are not cheap. That being said, it’s important to compare them within the context of other types of home improvement projects. Homebuyers and real estate agents view a solar photovoltaic system or solar water heating system as a significant value-added improvement, similar to adding a deck or remodeling your kitchen. Plus, unlike a deck or kitchen remodel, you also get a head start on your energy bills.

Solar energy systems often get an additional financial boost as well: Many jurisdictions and utilities in the US offer attractive financial incentives to reduce the up-front capital costs associated with a solar energy system.

Here are some foolproof ways to estimate the cost of a solar photovoltaic or solar thermal system and to find out if a solar power system makes sense for you. Let’s start with a home photovoltaic (PV) system.

Step 1: Estimate your home’s electricity needs

For starters, it’s good to have an idea of ​​how much electricity you use. You’ll have a better point of comparison if you find out how many kilowatt hours (kWh) you use per day, per month, per year. Your utility bill should include that information.

Of course, your utility bill will also show your costs, and many utilities include a graph showing how your monthly energy use/cost varies throughout the year. That helps you estimate where your highest energy usage is and what time of year.

construction of new houses

If you’re building a new home, you’ll need to estimate your request based on the type of equipment you plan to install and the square footage of your home. The pros call this “your load.”

To calculate your anticipated load, create a table to record the wattage usage for each appliance. Every appliance, whether it’s a water heater, electric light, computer, or refrigerator, must have a nameplate indicating its wattage rating. Or you can get the information from the manufacturer’s website.

Some labels list only the amperage and voltage; to get watts, multiply the two together (amps x voltage = watts). In another column, record the number of hours each appliance is expected to run. Then multiply the watts and the hours to estimate the watt-hours used per day. Since it’s hard to anticipate all electrical loads (it can get tedious to scan every toothbrush and cell phone charger), you might want to add a multiplier of 1.5 to be safe.

Step 2: Anticipate the future

In 2005, average residential electricity rates in the US ranged from about 6 to almost 16 cents per kilowatt hour, depending on where you lived. Average retail and commercial electricity rates have increased by approximately 30% since 1999 and the upward trend is likely to continue, especially as the costs of coal and hydropower used to generate that electricity also rise. So think about your home’s electricity needs and current and future cost relative to others.

Step 3: How much sun do you get?

The Florida Solar Energy Center has conducted a study to examine the performance of a 2 kW photovoltaic system when installed in a highly energy efficient home in the continental US (http://www.fsec. ucf.edu/en/publications/html) /FSEC-PF-380-04/).

The study took into account all the factors that affect the performance of a PV system, such as the effect of temperature on the PV cells, the number of peak hours of sunshine in various regions, and the efficiency of the inverter in converting solar energy derived from DC to AC.

As the study implies, solar PV systems work virtually anywhere in the US Even in the Northeast or “rainy Seattle,” a PV system can work if designed and installed correctly. In New York or New Jersey, a one-kilowatt system should produce about 1,270 kilowatt hours of electricity per year; In Seattle, a one-kilowatt system should produce about 1,200 kilowatt hours per year. In the Southwest, of course, those proportions will be much higher.

Solar contractors in your area can help you determine the best size for your solar PV system.

Step 4: Size your system

In general, solar PV systems between 1 and 5 kilowatts in size are usually sufficient to meet the electricity needs of most homes. One advantage of grid-tied systems is that you can use solar PV to supplement or offset some of your electricity needs; therefore, you can size your system to match your budget and always add it later if necessary.

Also as a side note, here’s a rule of thumb to remember to help you estimate the physical space your PV system might require: One square foot produces 10 watts. So, in sunlight, one square foot of a conventional photovoltaic panel will produce 10 watts of power. A 1,000-watt system, for example, may require 100 to 200 square feet of area, depending on the type of PV module used.

Step 5: Know your refunds

Many states and local jurisdictions offer rebates, tax credits, and other types of incentives to homeowners for installing residential solar and photovoltaic water systems for home use. To view a complete database of incentives available for renewable energy, visit http://www.dsireusa.org.

Federally, you can take advantage of a 30% tax credit (up to $2,000) toward the purchase of a residential solar system through at least December 31, 2008.

Step 6: Run the numbers

Although the cost of a solar photovoltaic system will depend on the size of the system you intend to install, your electricity rate, the number of kilowatt hours you expect to generate, and any state/local tax rebates/credits that may be available, the formulas for calculating the yields are practically the same.

For those who appreciate having formulas, use the ones listed below to make a quick estimate of how much a solar PV system might cost you.

Retail price of the photovoltaic solar system

+ Building permits

– $2,000 federal tax credit

– State or local tax credit or refund

– Utility reimbursement or other incentive

= Net Investment

Kilowatts of electricity generated from photovoltaics per year

x Kilowatt hours used per year

= Annual energy in kilowatts of the photovoltaic system

Annual energy in kilowatts of the photovoltaic system

x Current Residential Electric Rate

= $$ annually saved

Annual excess of photovoltaic energy produced

x $$ credit applied per watt

= Annual Net Metering Value

Of course, a professional can make a more accurate assessment. Work with a solar contractor to determine the right system size and price for you. As with any major purchase, feel free to request multiple bids from different contractors.

Many solar providers will provide you with a full quote. Useful information to know includes:

• Total cost to put the system into operation (labor cost for design and installation and equipment costs)
• Equipment (Brand and Model)
• Warranty Information
• Permit costs, if required
• Tax, if applicable
• federal tax credits
• State or local jurisdiction tax credits or refunds
• Utility Rebates
• Expected Renewable Energy Certificates or Net Metering Credits
• Expected operating and maintenance costs
• projected savings

Solar Thermal Energy (also called Solar Hot Water)

Solar thermal systems capture the sun’s energy to heat water and are one of the most cost-effective renewable energy systems. They are used to heat hot water tanks and/or a heating system. A solar pool heating system is another type of solar thermal system specifically designed to heat a pool or hot tub.

In general, it’s worth investigating the economics of installing a solar hot water system if you have an electric water heater with utility rates of at least 5 cents per kilowatt hour and tax credits or rebates are available. (It may even be worth switching to a gas water heater if your costs are at least $8/million BTU.)

The formulas for calculating the cost of a solar water heater system are similar to estimating the cost of installing a solar photovoltaic system. Many solar professionals can help you determine which system might work best for you.

Heat your pool with solar energy

Although few jurisdictions provide financial incentives to use solar energy to heat a pool or hot tub, in general, using solar energy to heat your pool is a “no-brainer” from a return on investment standpoint.

The electricity used to heat a swimming pool during the bathing season is often equivalent to the same amount of energy that houses without a swimming pool consume during a year. Combining a solar thermal system to generate pool heat with a solar thermal pool cover to retain generated heat can further maximize efficiency and extend your swimming season.

Most installers recommend that a solar collector used to heat a pool be about half the square feet of your pool’s surface area in size. Solar thermal panels typically last 10-20 years and come with a 10-year warranty.

The time it takes to break even on the cost of your solar pool system depends on where you live. In California or other parts of the Southwest, it will break even in 1-3 years, but in places as “far north” as Canada, a solar pool heating system lasts a bit longer.