Solar technologies can provide a cost-effective means of controlling your electricity bill, especially if utility rates continue to rise. Installing solar technologies can reduce or eliminate your exposure to rising electricity rates. Government incentives combined with decreases in solar equipment prices can make the investment in solar a good financial decision for homeowners, businesses and public agencies. Since the 1998, installations of PV cells and modules around the world have been growing at an average annual rate of more than 35% (EPIA 2007). According to the Solar Energy Industry Association, 2007 was a record year with over 314 MW of new solar capacity installed in the U.S., adding $2 billion into the U.S. economy and creating 6,000 new jobs.
What is the payback period on a renewable energy investment?
The costs of solar PV systems have decreased significantly over the past 10 years. Over the same period, many states have developed financial incentives to help consumers of PV technologies better able to afford the up-front costs, sometimes providing incentives to cover up to 50% of the costs. As a result, the payback period can vary widely depending on the costs of the PV system, the performance of the PV system and the availability of grants and tax incentives. It also depends on the stability of utility energy prices. The Emergency Economic Stablization Act of 2008 established an 8-year extension of the commercial and residential solar investment tax credit, and completely eliminates the monetary cap for residential solar electric installations, and allows utilities and alternative minimum tax (AMT) filers to take the credit. Using a 5% annual utility inflation rate, a residential solar PV system that qualifies for a state grant and the federal tax credit, could pay for itself in approximately 10-15 years. A commercial solar PV system could have a much faster payback period because the 30% federal tax credit is not capped, and MACRS accelerated depreciation can be applied to the capital investment. This can result in a payback for some commercial solar PV systems in fewer than 7 years!
For solar thermal, domestic hot water systems cost approximately $2,000 – $6,000 depending on the size and type of system. They could take 6-10 years to pay back, depending on geographic location, system design, collector orientation, and collector size. The shortest pay backs occur when using solar thermal technology to heat a swimming pool which can pay for itself in as little as 2-3 years. Residential solar water heating systems are subject to the $2,000 cap for the solar investment tax credit.
Several studies have shown that the average re-sale value is increased for properties with renewable energy systems. There can be as much as a $20 increase in property value for every $1 of annual energy cost reduction realized frm renewable energy systems. (See “Planning for PV: The Value and Cost of Solar Electricty,” by US DOE EERE.)
In all cases, a renewable energy system provides the owner the advantage of locking in the cost of some portion of their energy usage, and essentially free energy from the system once the cost of the initial investment has been recovered.
FAQs for Solar Photovoltaics
How much should I expect to pay?
US DOE EERE’s ”A Homebuilder’s Guide to Going Solar (December 2008)” brochure includes the following table on the Cost of Installed 3-kW Solar Systems after Rebates and Incentives:
General cost break down (before any rebates or tax credits factored in):
• Complete systems installed: $8-$10/watt
• 1 kW System: $11-12,000
• 2 kW System: $16-20,000
• 3 kW System: $24-30,000 (Avg. system size for family of 3-4 in a 2,500 sq. ft. house)
• 4 kW System: $31-35,000
• Solar modules: $4-7/watt, approximately 50% of total cost
• Installation: $1-3/watt, 10-20% of total cost
• Inverter & Balance of System: $2-5/watt, 30-40% of total cost
Also, see the DOE EERE brochure, “Making ¢ents Out of Solar: Putting More Power into Your Building Plans.”
FindSolar.com is an excellent website that can help you estimate how much installing PV and solar hot water technologies could cost you and what financial incentives may be available to you. FindSolar.com’s mission is to serve as a convenient, user-friendly means for home and their website offers Online “quick calculators” to help you determine the costs and benefits of solar energy systems for your particular location and building needs, a means to review and access solar energy contractor and professional services, and links and resources to current information about solar energy data, programs and other helpful information.
PV cost trends are being monitored by Lawrence Berkeley National Lab. Their most recent report from February 2008, “Tracking the Sun: The Installed Cost of Photovoltaics in the U.S. from 1998-2007,” offers an analysis of installed cost data from nearly 37,000 residential and non-residential PV systems, totaling 363 MW of capacity and representing 76% of all grid-connected PV capacity in the U.S. through 2007. The Executuive Summary from this report offers the key finding of the analysis, usch as
- Average installed costs have declined since 1998 for systems <100 kW, with systems <5 kW exhibiting the largest absolute reduction, from $11.8/W in 1998 to $8.3/W in 2007. Cost reductions for systems >100 kW are less apparent, although the paucity of data for earlier years in the study period may limit the significance of this finding.
- The overall decline in installed costs over time is primarily attributable to a reduction in non-module costs, calculated as the total installed cost of each system minus a global annual average module price index. From 1998-2007, average non-module costs fell from $5.7/W to $3.6/W, representing 73% of the average decline in total installed costs over this period. This suggests that state and local PV deployment programs – which likely have a greater impact on non-module costs than on module prices – have been at least somewhat successful in spurring cost reductions.
How efficient are the PV panels?
The performance of a photovoltaic array is dependent upon sunlight. Climate conditions (e.g., clouds, fog) have an effect on the amount of solar energy received by a PV array and, in turn, its performance. Most current technology crystalline photovoltaic modules are about 12 to 13 percent efficient in converting sunlight into electricity. Some modules provide as much as 20 to 21 percent efficiency. Further research is being conducted to raise this efficiency to 23+ percent.
Thin film solar PV products generally are less efficient. They range from 6% to 10%. However, their retail cost per watt is comparable to crystalline modules.
How Fast is the PV Industry Growing?
According to Clean Energy Trends 2010 report by CleanEdge, solar photovoltaics (including modules, system components, and installation) will grow from a $30.7 billion industry in 2009 to $98.9 billion by 2019. New installations reached just less than 6 GW worldwide in 2009, a nearly sixfold increase from five years earlier, when the solar PV market reached the gigawatt milestone for the first time. But because of rapidly declining solar PV prices, industry revenue between 2008 and 2009 was down about 20 percent – from a revised $38.5 billion in 2008 – as solar prices dropped from an average $7 peak watt installed in 2008 to $5.12 peak watt installed last year. However, CleanEdge also envisions that within a decade, for example, the installed price for solar PV will drop nearly 60 percent, from an average of $5.12 per peak watt in 2009 (do in from $7.00 in 2008) to $2.11 per peak watt in 2019. Further, their analysis shows that the solar photovoltaics currently accounts for more than 267,562 direct and indirect jobs worldwide. By 2019, CleanEdge projects the number of jobs at 2,178,919 for solar, based on their projections for global industry growth through 2019.