Solar Photovoltaic Cost Analysis

There are several different factors that go into figuring the cost of a solar PV system. There are also up front costs, rebates and rate of payback to be considered.

Up Front Costs

Up front costs are what a homeowner pays to purchase and install the system. Typically, solar PV systems cost around $10 per watt installed. That translates to about $10,000 per kilowatt (kW) of system size. An average system will be about 3kW in size and subsequently have roughly $30,000 in up front costs. However, some state rebates are paid based on expected performance and passed on to the solar installer, who then passes it on as a discount to the homeowner, thus lowering up front costs.

Rebates and Tax Incentives

Many U.S. states have aggressive solar PV rebate programs which can reduce up front costs by as much as 30 to 40 percent. Some of these are paid through the contractor up front (see above), while others are paid directly to the homeowner after installation. The federal government also has a solar rebate program, with a current cap at $2,000.

Tax incentives are another important factor in solar PV cost analysis. In many states solar systems are exempt from sales tax on the purchase of equipment, which lowers up front costs. Even more vital to long-terms cost analyses are property tax exemptions. Such tax laws typically exempt the homeowner from any property taxes that would be incurred from the addition of a solar system to the residence. It is generally accepted that the increased assessed value of a home is 20 times the first year energy savings. This can lead to big savings and the system can sometimes effectually pay for itself just in the first year of operation. This assumes the owner will sell the house and does not put any money directly into the homeowner's pocket. Although it does keep a significant amount of money from exiting said pocket.

Energy Savings

Solar PV systems are considered by many to be long-term investment in both personal economy and the environment. Often a system's rate of payback is a measure of how long it takes for money saved in free energy to equal the up front costs of the system. This payback period is typically around 20 to 25 years at this point. It will likely decrease as incentives, rebates and demand increase at the same time that systems are dropping in price.

Solar Photovoltaic Costs