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Cost of Solar Power Electric Systems

HomeCost of Solar Power Electric Systems

How much does a solar power system cost?

This is a bit like asking, “How much does a car cost?” because every home is different. However, for most Florida homes, meeting all of the electric power needs except power for central air conditioning, water heating and a swimming pool pump, usually requires a solar power system with between 2 kW and 10 kW of peak-rated power output, with 2 kW usually being adequate for daytime power demands.

Of course, regardless of which size solar electric power system you choose, your home will still be connected to the utility grid.

Some specific examples

It’s important to note that the examples below are just that: examples. Your cost will almost certainly vary from the examples. Factors that can cause variations in the installed cost per peak-rated watt include:

  • distance from the solar PV array to the existing main breaker panel
  • orientation of the available roof area (south-facing is best)
  • more than one solar PV array (for example, on different roof sections)
  • difference between roof slope and ideal mounting angle mounting racks for ground mounting of the solar PV modules two-story or greater roof height
  • critical loads sub-panel for emergency backup power
  • battery bank for emergency backup power storage

Note that the last two items above are not required for a utility grid-tied system. However, a critical loads sub-panel is necessary if you wish to use your solar power system during utility power outages, and a battery bank is necessary if you wish to store solar power for use during utility power outages that occur during cloudy weather or the overnight hours.

Of course, variations in individual installation requirements and site feasibility are two great reasons to contact us.

Electric rates

Recent (early 2009) Progress Energy electric bills in the 2,000–3000 kWh range have average electricity costs of about 14 cents per kilowatt-hour. Franchise fees and taxes add another two cents per kWh, and these fees and taxes increase proportionally with the electric cost.

The savings estimates above assume 8 percent average annual inflation in electric rates. Recent annual increases have been much higher. Many electric utility companies plan to ask for a one-time rate increase request of as much as 35 percent during the next two years. Naturally, such a big rate increase during the first few years of a solar power system’s life would have a very positive impact upon the solar power system’s economic performance.

Financed systems can have positive cash flow the first year.

When financed with a 15-year or longer home improvement mortgage loan, the solar PV systems above produce positive cash flow after the 30 percent solar tax credit is realized. This is true even with the State of Florida rebate disbursing during the second year, and for a range of annual loan interest rates (e.g. five to nine percent). Cash flow remains positive for approximately the first 10 to 11 years of the system’s life, and is slightly negative during the two or three years before and after the loan is paid off.

However, on a present value basis, the cash flow from a solar power system financed in the scenario above is always positive. This is because cash flows that occur during the early years of an investment are more valuable than cash flows to be received at some point several years into the future. Put another way, a dollar received today is more valuable than a dollar to be received a year or more in the future.

With a 6 percent, 15-year mortgage loan, the annual mortgage loan payment is about 10 percent of the system investment, assuming 100% of the system cost financed.

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