Residential solar energy is cheaper and more efficient than ever thanks to innovations in technology, financing and installation.
From devastating oil spills to tense political battles, fossil fuel-based energy seems to be a never-ending source of bad news. But as we’ve been focused on headlines about offshore drilling in the Arctic and soaring gas prices, solar energy providers have been quietly, continuously innovating their offerings, moving us ever closer to powering our lives with the renewable energy of the sun. The price of solar panels has gone down 30 percent since the beginning of 2010 and the solar industry grew 69 percent in the past year, according to the Solar Energy Industries Association. Along with rapidly advancing the technology of solar panels, industrious companies are also providing new ways to finance and install photovoltaic solar energy. For those of us who dream of a clean-powered future, there is hope: The solar energy revolution looks brighter than ever.
Regardless of where we live, we can all plug in the same Energy Star appliance and expect similar results. This is not the case with rooftop solar energy. Photovoltaic (PV) installations are highly customized, and the orientation of your roof, the cost of your local electricity, and the incentives offered in your region all play a key role in determining the type and price of a PV system for your home. Along with the cost of the panels themselves, those considering the overall cost of a residential solar energy system must factor in the balance of system (BOS) components—inverters, wiring, mounting and racking equipment—and nonhardware factors such as sales, installation and permit fees. (The panels, inverters and labor are the most expensive parts of a PV system.) Although efforts are underway to standardize the permitting process, currently permitting costs vary from state to state and range from as low as $50 to as much as $1,000.
There are two types of PV: Crystalline silicon panels and amorphous or thin-film silicon. Crystalline panels, the rigid panels we most often associate with solar power, come in two varieties: Monocrystalline is the oldest, most efficient technology for energy conversion, but it’s difficult and expensive to manufacture. Polycrystalline panels have lower efficiencies, but they are cheaper to manufacturer and less costly than monocrystalline. Over the last few years, the cost to manufacture crystalline PV panels has dropped significantly thanks to advances in technology, lower raw material costs and increased manufacturing efficiencies. “In 2000, the average solar panel could capture 10 to 12 percent of the sunlight that hit it, but today medium- to high-quality panels capture 15 to 21 percent,” says Tor Valenza (aka “Solar Fred”), a solar energy advocate and communications strategist.
Amorphous or thin-film silicon solar cells are a relatively new technology that comes in rolls or on prefabricated panels. Thin-film technology offers advantages: Compared with crystalline, it is simpler and less costly to manufacture and typically performs better in partial shade; and it’s lightweight and can be seamlessly integrated with roofing shingles. However, thin-film has lower efficiencies—generally about half that of crystalline—which means the cells require more space for the same output. “People are excited about the potential for thin-film,” says John Rayfield, vice president of marketing at Nanosolar, a thin-film solar cell manufacturer. “All of the visionary projections for the future of solar—such as rolled-on solar panels or solar roof shingles—are in development. As with any product, development is driven by consumer adoption. These products must become cost-effective for residential applications, then we will see more suppliers and greater uses for them.”
Manufacturers are using thin-film technologies in residential roofing products today, but they currently comprise a relatively small segment of the residential market. Nevertheless, it is a growing segment of the renewable energy certificate (REC) market, in which utility companies get valuable credits for providing a portion of their electricity from renewable sources, so the technology might become available to you via your utility company. Nanosolar is focusing on utility-scale projects larger than 1 megawatt in size. “Instead of selling our panels to thousands of individuals, Nanosolar sells to one power plant developer or utility customer, which in turn enables them to deliver solar energy to thousands of people,” Rayfield says. “In fact, the price of our panels for large commercial and utility-scale customers will soon rival energy produced from gas-powered energy plants—meaning the solar value proposition for the utility-scale market will become more compelling than fossil fuel.”
PV systems are less expensive than ever before, but the rapidly advancing technology may make you wonder whether the panels you purchase today will be obsolete in the near future. Probably not, says Robert Nolan, a principal at NanoMarkets, a market research firm for emerging technologies. Although efficiencies have increased dramatically since the advent of solar panels, solar technology builds on itself; today’s panels won’t be obsolete anytime soon. “Efficiencies are going to increase incrementally, but the cost of solar panels has already dropped significantly. If you can afford solar, and it makes sense where you live, there is no reason to wait,” Nolan says.
While solar panel prices may continue to drop, the costs associated with designing and installing PV may or may not. Valenza believes now is the time to buy because, “while panel prices are coming down, labor costs and permitting costs are not. You are still going to have to pay skilled people to install them and pay to have them inspected,” he says. He emphasizes that, when you invest in solar, you essentially lock in today’s utility rate for the life of the system, shielding yourself from rising nonrenewable energy costs.
Financing a PV system these days is similar to financing a car—you can take out a loan to buy a system, or you can lease one. And as in vehicle financing, buying incurs higher upfront costs, but you save more over time. On the other hand, a solar lease doesn’t require a large cash outlay, and most leasing companies guarantee that your post-installation electric bill and lease payment combined will be 10 to 15 percent less than your old electric bill. “You’re going to save money either way,” Valenza says, “but you may save more through buying. A lot depends on your tax status, state incentives and loan interest rate.”
The average cost to purchase a solar electric system before incentives is $25,000 to $35,000, according to Jared Blanton, communications manager with the Solar Energy Industries Association. After incentives, prices typically fall to $12,000 to $15,000. “The payback can be as fast as seven years depending on regional incentives and system output. Most systems produce electricity for 25 to 30 years,” Blanton says.
Leasing a residential solar energy system is an increasingly popular choice for homeowners, and innovative web-based companies such as Sungevity, SolarCity and SunRun bundle 10- to 20-year leases with services such as solar design, installation, monitoring, maintenance and cleaning, as well as a performance guarantee. Most solar leases are transferrable if the home- owner moves; the owner can either directly transfer the lease, or prepay it and incorporate the price into the home (recent studies from the Lawrence Berkeley National Laboratory show solar power systems increase home values). However, solar leases are only available in states that offer rebates and tax incentives for solar energy. For example, SolarCity currently operates in 11 states: Arizona, California, Colorado, Hawaii, Maryland/District of Columbia, Massachusetts, New Jersey, New York, Oregon, Pennsylvania and Texas. Another way to finance a solar system may be through Property Assessed Clean Energy (PACE), an initiative that enables cities and counties to provide low-interest financing for energy-related home improvements, including installing a PV system. “Energy-efficiency improvements are spread out over several years and paid back on your property tax bill until the loan is paid off,” says Katherine Austin, an architect from Sebastopol, California. As with a lease, if the property owner sells the property before the loan is repaid, the remaining balance—along with the renewable energy system—transfers to the buyer. The program hit a snag getting approval from the Federal Housing Finance Agency, but Gina Lehl, replication manager at Sonoma County Energy Independence Program says the hurdle is in the process of being cleared and that 27 states have already enacted PACE legislation. To find out if your state is among them, visit the PACENow blog.
Learn more about paying for a solar electric system in our PV Financing Options chart.
Community-based solar sharing opportunities are sprouting up across the country, and they go by many names: solar gardens, solar farms, community-supported energy, solar communities and solar cooperatives. All are grassroots efforts that allow people who are not able to install their own rooftop panels to buy a “subscription” to a solar system. Though they operate in a variety of ways, most of these groups use virtual net metering (VNM), meaning the group sells the solar power its system generates to the power company, reducing members’ energy bills. “The utility credits you for your portion of the solar energy created, even though the solar panels are not located right on your roof,” Valenza says. Community solar laws are in effect in many states, and they’re on the horizon in more. Today, 43 states allow VNM, although some local utilities have resisted its use. Early adopters are helping streamline the billing process. In Colorado, VNM allows each customer in a solar farm to see a credit on her utility bill matching her portion of energy generated, says Joy Hughes, founder of Solar Gardens Institute. And, though she says she has seen a wide range of reactions to VNM proposals from utility companies, many are very eager to get involved.
Writer TRACY FOX loves reporting about alternative energy. She is happy to say that today’s solar energy technology can make sense, even in verdant Portland, Oregon, where she resides.
Intrigued by consumer demand for energy-efficient homes, national home-building companies such as KB Home and Lennar Corporation are partnering with solar providers such as SunPower and Westinghouse Solar to install solar systems in newly constructed homes. Advanced technology makes it easier than ever to install solar power—four years ago, Westinghouse pioneered the integration of the racking, wiring and grounding directly into the solar panel, making PV systems that are as plug-and-play as possible and reducing installation costs. “Our solution has about 80 percent less parts than ordinary systems,” says Gary Mull, Westinghouse vice president of marketing. “The installation process requires so little unique expertise, [builders] can install solar without having to use a solar engineer.”
The costs of residential energy systems vary widely by location based on available incentives, energy production and a number of other factors. Solar systems can be purchased or leased. Below are industry averages provided by SolarCity.
• To purchase on a net basis (after incentives are taken out), small systems typically range from $6,000 to $10,000; large systems can cost up to $35,000. Purchasing a system delivers long-term savings after the upfront cost is recovered.
• $0-down leases can start for as little as $30 or $40 a month for small systems in high-incentive areas. A lease typically reduces the monthly electric bill more than the amount of the lease payment, creating immediate savings.
Database of State Incentives for Renewables & Efficiency
searchable incentive database
Residential Energy Services Network
certified energy auditors/raters
Solar Energy Industries Association
information, events, news
Solar Energy International
nonprofit educational organization
Solar Gardens Institute
helps organize community solar
The Vote Solar Initiative
works to implement pro-solar programs and policies
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