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Rates & Fees - Average Cost and Factors that Affect it


To determine how much it would cost you to get Solar panels installed to cover part or all of your electricity bill, you need to determine the following:

Sun Hours Per Day for United States:

For a more accurate estimate, here is a much more detailed map of solar energy potential:

Cost Per Watt

Using real world data from California (2016 data from California Solar Statistics), the average cost per watt installed was from $4.38-$5.33 per watt installed in California.

DC to AC power conversion

Because of physics, there are losses in converting the energy from the sun into DC power, and turning the DC power into AC power (AC power is what your home appliances use). This ratio of AC to DC is called the 'derate factor', and is typically about .8. This means you convert about 80% of the DC power into AC power.

Factors that Affect the Cost

Prices vary based on building and system configuration, the type and brand of equipment used and what company does the installation. The type and quality of panel as well as the size of the array affects the final price of an installation. Manufacturers price their products based on their efficiency and longevity. Panels that retain their efficiency longer are usually more expensive.

You location can also have a big impact on the final price of a solar energy project. Federal and local governments in many countries offer financial incentives to make buying and installing systems more affordable. Prices also depend on local weather conditions. Due to limited sun hours per day, the cost per kilowatt installed is higher than in sunnier parts of the country like Southern California.

Grid-Tie and selling excess electricity produced

Grid-tie solar installations are connected to the utility company's power lines. If the home or business needs more electricity than it can produce it draws energy from the grid and if it is producing excess electricity, it injects it into the electrical grid. Electricity added to the grid is credited to the homeowner or business' electricity bill. When power is drawn from the grid, this electricity credit is reduced. This process is called "net-metering" and is accomplished with a bi-directional or smart meter.

As a homeowner you may also install a battery backup that is used during power outages or at times when there is little sunlight or even during the night. During the day when the sun is out the batteries are charging when solar power is available, even if the utility grid is down, so that you can use the power stored in the batteries at a later time of your choosing.

Sample pricing table at $5 per watt installed baseline (your cost will vary)

System Size (Watts)Monthly Generation Pre-Tax Incentive Cost Range Post-Tax Incentive Cost Range (30% tax credit)
1,000 - 3,600120 - 432 kwh$5,000 - $18,000$3,500 - $12,600
3,700 - 6,000444 - 720 kwh$18,500 - $30,000$12,950 - $21,000
7,200 - 12,000864 - 1440 kwh$36,000 - $60,000$25,200 - $42,000
14,100 - 19,1001,692 - 2,292 kwh$70,500 - $95,500$49,350 - $66,850


Note: this table assumes 5 hours of sunlight per day, 30 days per month, and also accounts for 80% conversion from DC power to AC power

Note: This is a baseline cost, your actual cost may vary! Your local city and/or state may have additional incentives further reducing your cost of going Solar. This estimate does not include battery backup systems.

Payback Period Breakdown

Using the sample table above, if you currently pay $100/month in electricity, using a sample utility rate of $0.16/watt, that means your home uses about 625 watts/month. Using the above table the after tax price of such a system will cost between $12,950 and $21,000, or using our calculations about $18,500. So at $18,500 up front, it would take 185 months at $100/month to make back the up front cost of the solar panels, or about 15 years. What's not part of the calculations though, is that the electricity company's rates may and usually do, go up every year. So that 15 years may in end up being a lot less. And if your electricity rates are a lot higher than $0.16 per watt you will make the cost back a lot sooner.

Financial Incentive Programs

Federal tax credits offer the following tax incentives for solar panel installation (link):

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