Financial

People have various reasons for considering or deciding to incorporate solar power into their homes, including less reliance on the electrical grid, less money going to the power company, or a new toy to play with. This post discusses the financial aspect of solar panels.

Initial Cost

Depending on the size of a solar system and whether federal, state, or private financing is available, and whether one does the installation himself or herself, the cost of a solar system is high, typically $20,000 to $35,000 or more. Because of this high cost, the break-even point may be several years to a decade or longer.

Monthly Cost

Some people want a larger system to completely cover their electrical needs, while other people want a smaller system that will reduce their monthly bill received from their power company but not completely cover their electrical needs. My wife and I chose a larger system that should completely cover our electrical needs during most of the year, but probably not during January.

In addition to the cost of the energy, around $0.09 per Kwh, our electrical bill consists of a fixed fee which, for us, is $7.00. In addition, the bill includes other fees and appropriate sales tax. The energy costs during winter months are staggered or in tiers, with one increase in cost at 400 Kwh. In summer months the costs are in tiers, with increases in cost at 400 and 1100 Kwh. Because a solar system reduces the amount of electricity drawn from the grid, this reduction means that a person may pay a lower amount for electricity than if no solar cells were used, due to the electricity taken from the grid being in a lower tier. Another factor, which favors solar power, is that the costs of electricity pulled from the grid may rise due to inflation, but the operating cost of installed solar systems (which is zero) won't increase (I'm ignoring the long-range cost, discussed below, of the solar system).

Most people don't have enough available cash to pay for their solar system, and they have to finance in some way that cost. Even if people do have money available to completely pay for solar systems, they probably have that money invested and will lose the a portion of the interest/dividends received while they are reaching the break-even point of their solar system. This financing/loss implies a monthly cost that is separate from the monthly bill of the power company.

Long Range Cost

During the life of a solar system (presently about 25 years) new shingles may need to be installed on the roof, and the solar panels may have to be removed while the new shingles are installed, at a cost of several thousand dollars. In addition, the time will come when the solar panels don't work anymore, and the homeowner will face the cost of a completely new solar system. My wife and I hope that during the life of our solar system, technology will improve such that a replacement system will have fewer panels and will cost less than it would cost today.