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1/25/09

The Costs of Solar power | Solar Power Cost For a Home

A very confusing item right now is how to research and review the costs of solar power in your home and what are the solar power pros and cons.

I will break the costs of solar power into two areas. I will cover the actual costs including the federal and government solar power rebates and then I will cover the trends for the costs of solar power in a second post.

The Cost of Solar Power Summary
There are essentially three areas you need to consider when going through your evaluation.
  • Upfront Costs - Currently the cost of the solar power panels and equipment can be pretty pricey. I will cover those details below.
  • Government Credits - Depending on your state, these are life savers and the government realizes that without these credits, it would be impossible for the average family to afford.
  • How long you will be in your house - If you plan on moving or could move in the next couple of years, the solar power costs will not be a wise investment. More on that below.

The Cost of Solar Power Calculation

I used the Sunpower Solar Power Cost Calculator to do my analysis. I walked through it and found it very objective and fair. Avoid calculators that don't take into account the cost of money or loans.

Key Variables - I made these up and they assumed I live in California because the credit is best there. I also assumed a 2000 sq ft home with all average living conditions.


You can see that the initial cost of the equipment is 38,000 dollars. Don't pass oThe Cost of Solar Power for Homes Summaryut quite yet! The government credits and rebates bring that down to $21,337.00! You can see that if you live in a state that does not yet cover these costs as aggressively as California does, you have some catching up to do on your ROI.

Assuming you don't have $21,000 dollars laying around, you have to then assume you will want to take out a loan. One difficulty in this is that loans aren't easy to come by. Keep in mind, this is money you will save over time, so the loan isn't the same as buying a car or boat.

The cost of Solar Power - Financing

The Cost of Solar Power Financing
So how does this look? Well you can see from the table (click to zoom in) that your loan is 142.00 dollars, so its a matter of how quickly you save on your bills each month. Bottom line: The more your bill is over 142 dollars in this example, the faster you will return your money!

There's two parts to this savings as you can see. There is a very quick initial return on your energy bills of 1,600 dollars in the first year alone So the first 5 years will be very good as that is how long some people can estimate they will live in their home. Secondly, if you are in that house for over 18-25 years, you will essentially fallen off the grid with a positive cash flow of roughly $10,000.00.

The Cost of Solar Power Summary
While these take in prime conditions, living in sunny California with an aggressive rebate, they do have some long term advantages. Sunpower estimated that this would be a 10.3% ROI. While that initial cost would scare off some, that type of ROI would lure in any business, so it should be the same mindset for the average homeowner.

I will cover the trend in the industry in another blog, but as solar power equipment is expected to fall and utility prices are expected to rise, this gap should be even better over time.

And if you are doing this for environmental reasons, then you should know that this investment was the equivalent of reducing 8,300 miles of driving in the first year!

Questions? Do you agree? Leave a comment!