Jun 14, 2016

It’s Official – Solar Beats the Grid!

We get asked by clients all the time – how much does solar cost? And of course the answer varies from project to project. But one underlying fact is clear: Rooftop Solar in California is now Cheaper Than the Grid.

This has been an amazing shift to watch over the last year. Prices for solar have been dropping steadily, and with the surprise 5-year extension of the federal Investment Tax Credit (ITC) in December 2015, we can now confidently say that producing electricity from the sunshine on your roof is cheaper than buying electricity from a fossil fuel utility.

How can this be? Lets dive into the numbers.

1. The average price for solar installations is about $4 per watt.

Prices can definitely be less than that, $3.50 or even $3.00 per watt is not uncommon, but it depends on an enormous variety of factors including the size and complexity of the installation, the type of equipment being installed, local permitting and other soft costs, as well as any prevailing wage requirements a project might have. So to be safe, lets say $4 per watt is a fairly conservative average.

2. Each Kilowatt (KW) of Solar produces about 1500 kilowatt hours (kWh) of energy each year.

Think of the panels as employees on your roof, with each panel working about 4-5 hours a day on average to produce electricity.

Like light bulbs, solar panels are measured in watts, with typical panels ranging in size from 250 to 300 watts or more.

That means if you had four 250 watt panels, you’d have 1000 watts, or one kilowatt of solar on your roof. That is the system size. Every hour that system sits in the sun, it produces one kilowatt hour of DC electric current. That is the system production.

In California, solar panels get enough sun to produce 1400 - 1600 hours per year, so each KW of panels on your roof produces about 1500 kilowatt hours (kWh) of electricity, depending on your location.

3. Solar Panels Last 25 Years

Solar Panels now regularly come with 25 year warranties. That means you can count on your system producing electricity for 25 years or more. The panels degrade slightly over time, typically about one-half a percent per year. This means they produce 90% as much power at year 20 as they do brand new. So your 1KW system will produce about 35,000 kilowatt hours over 25 years.

4. So, how much does Solar Electricity Cost?

If your system was $4 per watt, that’s $4,000 per kilowatt. And that kilowatt produces 35,000 kilowatt hours over it’s lifespan. This means you bought 35,000 kWh for $4000, or 11 cents per kilowatt hour.

Typical utility pricing in California is anywhere from $0.15 – $0.22 cents per kilowatt hour. So even without tax credits or rebates, most rooftop solar systems are already cheaper than today’s electricity prices.

And that price covers your electricity for the next 25 years. Typically utility pricing goes up anywhere from 3-5% per year. Which means in 25 years, utility prices could be twice as much as they are today, just with inflation.

5. But it gets even better!

Remember the ITC that just got extended? That gives you a 30% tax credit on the price of your solar. This drops your price down to $0.08 cents per kWh – about HALF of today’s utility pricing.

Here’s three more things that could reduce your cost:

  • Live somewhere sunny? At 1550 kWh per KW, your solar could be closer to $0.10 cents per kWh
  • Got a good deal? If you installed solar for $3.25 a watt, you’re at $0.09 cents per kWh.
  • Utility Rebate? If you get utility rebate, that could drop the cost even more.

And solar prices are continuing to drop, even as utility prices rise.

So the real question to ask when considering whether to go solar, is not how much it costs – but how would you like to pay?

There are a number of financing methods available to pay for solar, just like we pay for houses, cars, cell-phones, computers and everything else these days.

But the bottom-line is, rooftop solar is now cheaper, cleaner, more reliable electricity than fossil-fuel utilities. And that’s not going to change anytime soon.

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