Factors Influencing the Cost of Residential Solar

residential solar power
When considering a residential solar power system, one of the first of many questions that gets asked is, “What is the cost of a residential solar system?” and a similar question, “What is the price of residential solar power?

It would be incredibly simple to address those questions if there was one single definitive answer about the cost of residential solar power that we could give people, but the price of solar power can vary quite a bit, depending on a number of factors that go into installing a home solar array. Every home differs in their electric needs, has a different amount of available space to mount solar panels on, and each homeowner’s budget for purchasing home solar will vary, so unfortunately there isn’t a “one size fits all” answer.


We’ve previously written about why “How much are solar panels?” is the wrong question, which approaches the cost of solar from the angle of the amount of money solar homeowners can expect to save, but in this piece, we’ll talk a little bit about some of the factors that can affect the cost of residential solar power.

To get a better idea of how much a home solar system will cost, it helps to know some of the variables that go into the cost of a solar array, and while some of them can be reduced, others will be up to the choices that the solar installer will make.

Household electrical demand

One of the most important factors, and one that the homeowner has the most control over, is the amount of electricity that gets used every month. In a house that has predominantly electric appliances (water heater, stove, central air conditioning and heat, washing machine and clothes dryer, electronics such gaming systems, computers, and home entertainment systems), then the amount of electricity used every month is going to be quite a bit higher than for those whose homes have gas appliances, a solar or gas hot water system, or an intelligent home energy management system (which can help to radically reduce ‘vampire’ energy use and to automate appliance and lighting use for optimal energy efficiency).

Prospective solar homeowners can get an idea of how much their own electrical demand is by looking at their utility bills over the course of a year, and can then calculate how much their average monthly electricity usage in kilowatt hours (kWh) is. This number can give homeowners a good idea about how much solar capacity will be needed, if their desire is to offset all of their home’s electricity use. A home solar system doesn’t have to always be able to generate the full amount, or an excess, of electricity used in the home every month (assuming it’s not an off-grid solar system, which will have to be sized to fit the electric demands of the home, as well as integrate a battery bank for energy storage). Many homeowners looking to go solar may seek to only reduce the amount of electricity they buy from the grid, which can reduce their electricity costs, and a smaller system might work better in their situation and with their budget.

Purchasing a solar system large enough to offset all of the electricity that an energy-intensive home uses every month is necessarily going to cost more than installing a smaller solar array that is intended to just offset some of the electrical bill. One cost-effective method of reducing the size of the solar system needed is to reduce the amount of overall electric demand in the home, before trying to price a residential solar system, as purchasing a smaller solar power setup can offset a larger percentage of the home’s energy needs, simply because the demand has been reduced. Replacing older appliances with more modern energy-efficient models can be one approach, but potential solar homeowners can also use other strategies for reducing their electrical demands, including installing or modifying their landscaping so that it helps to shade and cool the house, installing more insulation and upgrading the windows and doors, as well as tracking down vampire energy loads (electrical demand from electronics and appliances that can use quite a bit of electricity when nobody is using them – even while on standby).

Rooftop evaluation

Another factor that affects the cost of solar is the amount of space available on the roof that can be used for a solar array, and the orientation of the roof itself. A rooftop that has less available space for solar panels can limit the size of the rooftop solar array, and a smaller array will cost less than a larger one. A roof that isn’t oriented to the south or the west, or one that has too steep or too shallow of a pitch won’t be as efficient as a rooftop solar array that exposes the panels to the sun for long periods throughout the day and the course of a year, and any system inefficiencies will effectively raise the relative cost of a residential solar system because of reduced output (as compared to a system of the same size, but with optimal orientation and pitch).

Choice of solar panels

The type and model of solar panels used for the system is another factor in the cost of solar, although one that may be more up to the solar installer than the homeowner. Three different types of solar panels are available on the market: those made with monocrystalline solar cells or polycrystalline cells, and thin film solar. For home solar systems, the two types of panels used most often are those made from monocrystalline or polycrystalline cells. As a rule of thumb, mono- type cells tend to be more efficient than poly- cells, but they also command a slightly higher price. Solar panels made from polycrystalline cells are said to have an advantage in hot climates, as some of the monocrystalline units may lose some efficiency as the panels heat up on hot days, although these specs can vary by model and manufacturer. Due to higher efficiency, a monocrystalline panel can be sized smaller than a polycrystalline panel with the same generating capacity, which means that the overall array can be smaller. However, for a home-sized solar array, being able to save 10% of the space with higher efficiency solar panels may not be nearly as important as getting the best overall price. Advances in solar technology, and the current trend of dropping costs for solar panels, is gradually equalizing these differences in solar cost and solar efficiencies.

Because solar panels are manufactured by many different companies, each with slightly variations in configuration, materials, and technology, the costs of the panels can vary quite a bit when it comes to quality and efficiency. Choosing the lowest price you can find on solar panels may seem like the way to go at first, but bargain-priced solar panels may end up saving less money (or costing more, depending on how you see it) over the years, because if those panels aren’t as efficient, or are a lower quality, the cost per watt generated over time won’t be as good of a deal as originally thought. On the other hand, higher priced solar panels may not always offer the best value, either. In order to consider the overall cost of a solar system, it’s important to calculate a cost per watt for the whole array, and to figure in the power tolerance ratings for the specified solar panels, which will give you an idea of the range of variation you might see in their performance.

Solar panel mounting hardware

Another factor that goes in to the price of a residential solar system is the kind of racking (mounting hardware), and the amount of racking required for a system. The racking is used to fasten the panels to the roof itself, and to connect each panel with the ones adjacent to it. Each solar installer has their own favorite mounting system they use for each different type of situation (the local weather conditions, the pitch of roof, the size of the solar array, and so forth), so the choice and cost of the mounting hardware will probably be up to the solar installer, unless you install your own system.

Power inverter

The brand and model of the power inverter unit, which converts the direct current (DC) electricity produced by the solar panels into the alternating current (AC) used inside the home, and which connects the solar system to the utility grid, also affects the total cost of a solar power installation. Just like solar panels, there are a variety of different manufacturers and models of solar inverters available, and all of them feature slightly different efficiencies and ratings, and are made for different installation situations. The solar installer will probably be choosing the appropriate model for your solar array, which they will determine by their working knowledge and personal experience with installing inverters for different situations.

Labor costs

The cost of the labor to transport and install the solar array is another factor that can affect the cost of residential solar power, and is something that the installer generally includes into the cost of the solar project. Labor costs for solar installation can vary widely by geographic location, by individual installers, and by the size of the array. The labor costs aren’t something that can be individually reduced, unless the homeowner installs their own system, so getting several quotes for the cost of similar solar power systems, as well as the specifications, from different installers is one way to be sure you’re getting the best overall value for the cost of a solar system.

Solar incentives

Financial incentives for residential solar power will also affect the cost of solar, and while the Federal renewable energy tax credit for solar power, which can offset up to 30% of the cost of a home solar system, applies to all US homeowners installing solar energy on their site, there are quite a few other state solar incentives and local and municipal incentives that can serve to bring the cost of solar down even further. Some of these incentives are tax credits and sales tax exemptions, others can take the form of low interest rate financing options, and still others may be energy-efficiency audits or credits for various types of home improvement projects that reduce energy use.

These variables are all part of the residential solar power equation that determines the cost of solar power, and while some of them, such as size of the solar array or where it gets installed, can vary by the customer, other costs might not be nearly as simple to compare. Because of this, it’s important to ask a lot of questions of the solar installer, which can help you to make the most informed choice and get the most solar value for your money.

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[Image: Mike Spasoff]

Cost of Solar

May 20, 2014

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