People decide to buy PV systems for a variety of reasons. Some want to reduce air pollution and help preserve the earth’s finite fossil-fuel resources. Others would rather spend their money on an energy-producing improvement to their property than to send their money to a utility. Some people like the security of reducing the amount of electricity they buy from their utility, because it makes them less vulnerable to future increases in the price of electricity. Finally, some people just appreciate the independence that a PV system provides from local utility bills.
If you plan to build away from established utility service, you should consider the cost of installing a utility line needed to provide the utility’s energy. Often, the cost of extending conventional power to your residence is more expensive than the solar option.
Whatever your reason, solar energy is widely thought to be the energy source of choice for the future, and you may be able to take advantage of a state-sponsored program to help make it your energy choice for today and tomorrow.
A well-designed PV system needs unobstructed and clear access to the sun’s rays for most or all of the day, throughout the year. You can make an initial assessment yourself, and if the location looks promising, your PV provider has the tools to trace the sun’s path at your location and determine whether your home or business can make use of a PV solar system.
The orientation of your PV system (the compass direction that your system faces) will affect performance. In the United States, the sun is always in the southern half of the sky and is lower in the winter and higher in the summer. Usually, the best location for a PV system is a south-facing roof, but roofs that face east or west may also be acceptable. Flat roofs also work well for solar systems because the PV modules can be mounted flat on the roof facing the sky or mounted on frames tilted toward the south at the optimal angle.
If a rooftop can’t be used, your solar modules can also be placed on the ground, either on a fixed mount or a “tracking” mount that follows the sun to orient the PV modules for maximum performance. Other options (used most often in multifamily or commercial applications) include mounting structures that create covered parking or provide shade as window awnings.
To make the best use of your PV system, the PV modules must have a clear “view” of the sun for most or all of the day—unobstructed by trees, roof gables, chimneys, buildings, and other features of your home and the surrounding landscape. Note that although the area where a system is mounted may be unshaded during one part of the day, it may be shaded during another. If this is the case, then this shading may substantially reduce the amount of electricity that your system will produce.
To be eligible for some rebates, your system must be unshaded between certain hours during certain times of the year. Some states have laws that establish your right to protect your solar access through the creation of a “solar easement.”
The amount of space needed by a PV system is based on the physical size of the system you purchase. Most residential systems require as little as 50 square feet (for a small “starter” system) up to as much as 1,000 square feet. Commercial systems are typically even larger. If your location limits the physical size of your system, you may want to install a system that uses more-efficient PV modules. Greater efficiency means that the module uses less surface area to convert sunlight into a given amount of electric power. PV modules are available today in a range of types, and some offer more efficiency per square foot than do others. The cost per kilowatt of higher-efficiency modules is about the same as low-efficiency modules, so this may not add to your system’s price. System sizing is discussed later in this series and should also be discussed with your PV provider.
Some roof types are simpler and cheaper to work with, but a PV system can be installed on any type. Typically, composition shingles are easiest to work with, and slate is the most difficult. In any case, an experienced solar installer will know how to work on all roof types and can use roofing techniques that eliminate any possibility of leaks. Today’s PV modules often can be integrated into the roof itself, and some modules are actually designed as three-tab shingles or raised-seam metal roof sections. One benefit of these systems is their ability to offset the cost of roof materials.
If your roof is older and needs to be replaced in the very near future, you may want to replace it at the time the PV system is installed to avoid the cost of removing and reinstalling your PV system. Also, ask your PV provider how the PV system affects your roof warranty.
As a starting point, you might consider how much of your present electricity needs you would like to meet with your PV system. For example, suppose that you would like to meet 50% of your electricity needs with your PV system. You could work with your PV provider determine the size of the PV system needed to achieve that goal based on past energy usage.
You can contact your utility and request the total electricity usage, measured in kilowatthours, for your household or business over the last 12 months (or consult your electric bills if you save them). Ask your PV provider how much your new PV system will produce on an annual basis (also measured in kilowatt-hours) and compare that number to your annual electricity demand to get an idea of how much you will save. In the next section, we’ll provide more information on estimating how much you will save. Because some Arizona utilities offer net billing rather than net metering, any excess electricity beyond your household load has a lower value. Consult your solar system provider to size the system to your electric usage. Because Arizona’s tax rebate is capped at 25% of cost or $1,000, a solar system that matches this cap will maximize the benefit of the solar rebate. One optional feature you might consider is a battery system to provide back-up power in case of a utility power outage. Batteries add value to your system, but at an increased price. As you size your system, you should consider the "economies of scale" that can decrease the cost per kilowatt-hour as you increase the size of the system. For example, many inverters are sized for systems up to 5 kilowatts, and if your PV array is smaller (say 3 kilowatts), you may still end up buying the same inverter. Labor costs for a small system may be nearly as much as those for a large system. Therefore, it’s worth remembering that your PV provider is likely to offer you a better price to install a 2-kilowatt system all at once, than to install a 1-kilowatt this year and another similar system next year—because multiple orders and multiple site visits are more expensive.
Roof Area Needed in Square Feet (shown in Bold Type)
* Although the efficiency (percent of sunlight converted to electricity) varies with the different types of PV modules available today, higher-efficiency modules typically cost more. So, a less-efficient system is not necessarily less cost-effective.
The value of your PV system’s electricity will depend on how much you pay your utility for electricity and how much your utility will pay you for any excess that you generate. Some Arizona utilities offer net billing. Arizona utilities also offer time-of-use (TOU), and TOU with demand rates. The TOU rate will give you the maximum PV energy savings if the peak window is during PV production hours (10:00 a.m. to 3:00 p.m.) and your usage is also during these hours. For on-peak summer usage, rates range from 11–18 cents per kWh. However, according to the peak times shown, only Arizona Public Service TOU rates will provide on-peak energy savings.
All utilities offer a choice of rates for most customers. You may want to contact your utility, check your bills, or check the following internet sites for available rate tariffs.
Remember, if you are not using the energy, you only get the buy-back rate of 1–3 cents per kWh.The value of any electricity from your PV system you do not use is only valued at the buy-back rates noted below. It is therefore recommended that you size your system to avoid generating electricity significantly beyond your actual needs. Keep in mind that actual energy production from your PV system will vary by up to 20% from these figures, depending on your geographic location, the orientation and angle of your system, the quality of the components of your system, and the quality of the installation. Be sure to discuss these issues with your PV provider. Consider asking for a written estimate of the average annual energy production from the PV system. However, even if an estimate is accurate for an average year, actual electricity production will fluctuate from year to year due to natural variations in weather and climate.
There is no single answer, but keep in mind that a solar rebate and other incentives may reduce the cost. Your system’s price will depend on a number of factors, including whether the home is under construction or whether the PV is integrated into the roof or mounted on top of an existing roof. The price also varies depending on the PV system rating, manufacturer, retailer, and installer.
The size of your system may be the most significant factor in any equation measuring your costs against your benefits. Small, single PV-panel systems with built-in inverters that produce about 75 watts may cost around $900 installed, or $12 per watt. These small systems will offset only a small fraction of your electricity bill. A 2-kilowatt system that will offset the needs of a very energy-efficient home may cost $16,000 to $20,000 installed, or $8 to $10 per watt. At the high end, a 5-kilowatt system that will completely offset the energy needs of many conventional homes may cost $30,000 to $40,000 installed, or $6 to $8 per watt. These prices, of course, are just rough estimates. Your costs will depend on your system’s configuration, your equipment options, and other factors. Your local PV providers can provide you with estimates or bids.
There is nothing magical about financing the cost of purchasing and installing your PV system. Although there are some special programs available for financing solar and other renewable-energy investments, most of the options will be familiar to you.
The best way to finance PV systems for homes is through a mortgage loan. Mortgage financing options include your primary mortgage, a second mortgage such as a U.S. Department of Housing and Urban Development (HUD) Title 1 loan, or a home-equity loan that is secured by your property. There are two advantages to mortgage financing. First, mortgage financing usually provides better interest rates and longer terms than other loans such as conventional bank loans. Second, the interest paid on a mortgage loan is generally deductible on your federal taxes (subject to certain conditions). If you buy the PV system at the same time that you build, buy, or refinance the house on which the PV system will be installed, adding the cost of the PV system to your mortgage loan is likely to be relatively simple and may avoid additional loan application forms or fees.
If mortgage financing is not available, look for other sources of financing, such as conventional bank loans. Remember to look for the best possible combination of low rate and long term. This will allow you to amortize your PV system as inexpensively as possible. Because your PV system is a long-term investment, the terms and conditions of your PV financing are likely to be the most important factor in determining the effective price of your PV-generated power.
PV systems purchased for business applications are probably best financed through a company’s existing sources of funds for capital purchases—usually Small Business Administration loans or conventional bank loans.