Calculating Solar Power Costs

Your solar power cost is determined by the components needed when installing a photovoltaic (PV) power system for residential or commercial use. Those items, although somewhat costly to purchase up front, can be proven cost-effective in the long term.

But, it does require some careful planning and the proper technology. The information given on this page will help you to calculate the total expense of your planned solar project.

How to Make Homemade Power Affordable

Calculating Solar Power CostCalculating the Total Solar Power Cost
(Source: ©iStock/InkkStudios)

How to Estimate Solar Power Costs

A solar project needs to be gone about the right way to be affordable.

So, let's get started...

To begin with, you will need to figure out how much electricity you'll actually need to power your household. Obviously, if you want the freedom that a completely off grid solar power system offers, you'll need a system large enough to meet ALL your current and future electrical needs.

However, if you merely hope to supplement your electricity needs through a grid-tied system, then just calculate the "percentage of power" you need to offset and aim for that figure. Your overall solar power cost will be less.

Using copies of your electric bills for the previous twelve months, it should be easy to calculate your average household power requirements in kilowatt-hours. Most utility bills will show the electricity used month by month throughout the year, often in a helpful chart format.

However, bills from some utility companies will just show the billing month's usage, often comparing it to the same month from the previous year, so you will need to add the monthly amounts to get a total wattage amount.

For instance, here's a copy of my Ontario Hydro One household electric bill for August, 2012 showing daily kWh averages for 6 months. Notice how it compares the 33 days from Jul 20, 2012 - Aug 22, 2012 to roughly the same period in the previous year. The average electricity used per day increased by 5 kWh, likely because of the extra air conditioning needed during a hotter August.

Household Electric Bill for AugustHousehold Electric Bill Showing Electricity Use
(Source: ©Don Bell)

Don't worry if you haven't kept your electricity bills. Your local utility company should be able to supply you with copies, or a printout of the information you need. Some companies freely offer the information online when you login to your account history at their website.

Once you know how much electricity you have used throughout the past year, you can simply divide by 365 days to average the total amount, provided your monthly usage doesn't vary by much, or you can use the "peak demand" figure.

What is meant by "peak demand"?

If you plan to go to an "off grid" PV system and rely totally on your home power setup, then focus on the peak demand, the days when you use the most electricity. If your solar panel output can match the peak demand, you will be equipped to meet most of your daily and seasonal power requirements.

For instance, here's a copy of my electricity usage for April, 2012 -- just be thankful it's not your bill! See how it shows the amount of hydro used over Ontario's coldest winter months. The coldest months were January and February, when my average electricity used per day was 116 to 117 kWh. Therefore, my "peak demand" figure is 117 kWh.

Household Electric Bill for AprilHousehold Electric Bill to Calculate Peak Demand
(Source: ©Don Bell)

By using your calculated figures, you can estimate how many PV panels you'll need depending on their output size. PV is short for "photovoltaic" which refers to the method most solar cells use to convert the sun's rays into useful electrical current.

Each home solar panel will have a given output of Watts (a measurement of how much electrical power is available for use) at a given cost. The larger the power output of your panels, the fewer you'll need. When the panels are properly connected in an array, power output adds up, so determining the total electrical output and your possible solar power cost is a simple matter.

By applying some basic arithmetic, you can also calculate your south-facing roof area or an open yard area, and determine how much space you have available for your new PV system. A ground mount system is often preferred over a rooftop system provided you have the unobstructed yard space available.

Just remember that the sun won't shine continuously on your photovoltaic panels. Uncontrollable factors such as darkness, rain, snow, heavy cloud cover, and dust will reduce the "insolation" as it's called, lessening the sunlight available for solar power generation.

So, if you plan an off grid solar project, you'll want to install a storage battery system as a backup power source. Conversely, the owner of a grid-tied system can always draw backup power from the local utility company during those times when it's needed.

Other Solar Power Costs to Consider

So far we've only considered the cost of solar panels and optional battery storage, yet there are other components involved. The panels need to be mounted and connected to the home's power system, so there are connectors, clamps, wires, panel mounts, and a power inverter adding to the final cost. The cost of these items will vary, depending on the type of solar power installation.

Keep in mind when planning the expense that there will be labor costs for the installation of your PV system. Most homeowners don't have the necessary DC electrical skills themselves and will need the services of a qualified professional solar installer.

Note that your home PV system will need to be approved by the utility company before they'll entertain a grid-tied agreement with you. Actually, most municipalities will require that you have your solar power installation inspected and approved even if you go off grid. This is to ensure that your system is built in a manner that's safe for both the occupants and for local linemen who may be working in the area.

During power outages, linemen need to be sure there's no electricity running back through the lines from your house when they're making connections while on the poles, so your system must be properly installed to code to guarantee their safety.

Offsetting the Cost of Solar Power

A solar energy project costs money, but keep in mind that tax rebates, and various other programs, might be available to help you offset your investment and keep your total solar power cost affordable.

After adding up the cost of PV panels, mountings, connecting components, storage batteries (optional), installation costs, inspection fees, and other expenses, most PV systems for a modest sized home could run somewhere around $30,000 to $60,000 -- some less, some more.

Keep in mind that your total solar power cost will be offset by what you would normally pay for electricity from the utility company over the lifespan of the system, usually at least 20 years.

You can also expect that your home system will at times output more solar electrical power than you need. Some utility companies offer net metering agreements whereby they'll buy any excess power you transfer into their grid system.

Technically, your meter will run backwards as you supply the utility company with your surplus solar electricity, whereas it normally runs forward as you draw power from the grid. The more it runs backward, the more money you earn.

Affordable Solar Power IS Possible

The setup cost of a PV system is significant to be sure, but so are the potential long-term savings both to the homeowner's pocketbook and to the environment.

Component prices are gradually lowering, and solar panel efficiency continues to improve each year. Meanwhile, the price of electricity continues to rise making solar more affordable.

You need to do the math before deciding whether it's feasible to generate your own electricity. Yet, after calculating a realistic solar power cost, you are likely to find a solar project worth your while, at least on a limited basis to start.

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