Evaluating whether solar or photovoltaic (PV) power is right for your home is easy to do.  If you have a proposal (see my proposal here) from a local firm, the process is extremely easy. If not, you simply need to collect some additional information.

During  2011, the question of whether solar power makes sense has been answered due to the drastic decrease in the cost of solar equipment.  Yes!  Solar power makes sense for most people given the current federal and local rebates and credits.  Here’s what you need to know.

Residential solar power pays for itself over the lifetime of the equipment and is many situations can make money.  But, do not think that firms are giving away the equipment.  Each firm is in business to make as much money as possible.  In every proposal, it pays to know what you are getting and how much it is costing you.

It is critical to know whether the proposal you are considering is the best for you.

What you need to know:

1. Type of system, mainly the solar panel (PV) modules.
2. Manufacturer make and model numbers. Get the details!
3. Cost of entire system installed. Net net, what you will write a check for.
4. Federal and local incentives. Free money, spend the time to figure it out.
5. Cost of electricity charged by your utility.

These general answers should help you decide if solar and the proposed system are right for you.

Type of System

• Crystalline silicon / higher efficiency + slightly higher cost / Samsung, Suntech, Yingli Green Energy, Trina Solar.  Two main types, monocrystalline and polycrystalline.
• Thin-film / lower efficiency + lower cost / First Solar
• Inverters are quickly evolving.  Most residential installations utilize a single, high quality and high-efficiency inverter which acts as the single point to convert all DC power to AC.  Benefits of this system are cost, however the downside is power generation and flexibility.  Micro-inverters install an inverter on EACH PV module which is currently more expensive, however module manufacturers should gain a competitive advantage by manufacturing PV modules with integrated micro-inverters.

 Hint – Crystalline silicon (c-Si) and specifically monocrystalline silicon is the way to go due to its high-efficiency and quickly declining manufacturing cost.

Manufacturer make and model numbers

Stick with the major module manufacturers.  They have the volume to produce high quality and efficient panels.

• Samsung – a strong brand new to the solar module market.  Expect great products at aggressive prices as it begins its domination of this market.  It has formidable marketing clout and name recognition which will help it globally.
• Suntech, LDK,  Canadian, Trina and Yingli – stick with one of the top 5.  Don’t confuse the top 5 solar “cell” manufacturers with the “module” manufacturers.  You want the best at delivering the end product – the module.  Suntech, Trina and Yingli as tops in both cell and module production; a good bet for a high quality integrated product.

Hint – Samsung is delivering a phenomenal product.  Stick with the big boys and the names you know.  The Samsung LPC244SM is a monocrystalline high-efficiency PV module which delivers exceptional price/performance.

 

Cost of Entire System

Know up front how much you will be expected to write a check for.

• State and local rebates are not guaranteed by your installer or the agency providing them.  My energy company, Austin Energy, rebates $2.50 per watt-AC.  Solar panels produce DC current which is converted, with some loss (assume 23% loss), to AC.
• Federal tax credit is a delayed benefit realized when you file income tax papers for the year the system is installed. Currently the federal tax credit is 30% of your net cost which “should” be the amount of the check that you write.

Hint – Solar pays for itself today BUT ONLY with the local and federal rebates/credits and it takes a long time (15-25 years).  If you cannot write a check for the initial out-of-pocket expense, there are ways to finance that cost over the life of the equipment.

 Federal and Local Incentives

• Know all of your rebates offered by local, state and/or federal agencies.  You local utility is the best place to start and end, but their information may be difficult to read.  Search the web, some solar planning websites include local rebate information, but it is your responsibility to confirm it with your agency.
• Federal tax credit of 30% of final costs are available to most US taxpayers, but this program is currently set to expire in 2016.
• Tax Credit Details: 30% of the cost
  Expires:  December 31, 2016
  Details: Existing homes & new construction qualify. Must be your principal residence. Rentals and second homes do not qualify.

Cost of Electricity

Many Americans do not know how much they are being charged per kilowatt-hour (kWh).  Your utility bill gives you all the information you need, but note that rates vary greatly by location.  The US Energy Information Administration has provided a 2011 national “residential” average of 11.6¢ per kWh.

Hint – To compare the cost of you electric utility to the cost of your solar electricity, you need to divide the cost by the kWh produced over the equipment’s lifetime.  If the amount of your check is $10,000 and your system produces 7,500 kWh per year, the calculation is $10,000 divided by 7,000 (kWh) divided by 20 (years).  $10,000 / 7,000 kWh / 20 = 7.14¢ per kWh.

 

The U.S. Energy Information Administration, www.eia.gov, has analyzed electricity prices which vary by locality.

The average retail price of electricity in the United States in 2010 was 9.88 cents per kilowatt-hour (kWh). The average prices by type of utility customer were:

• Residential: 11.6¢ per kWh
• Transportation: 11.0¢ per kWh
• Commercial: 10.3¢ per kWh
• Industrial: 6.8¢ per kWh

The three States with the highest average price of electricity in 2010 were:

• Hawaii (25.12¢ per kWh)
• Connecticut (17.39¢ per kWh)
• New York (16.31¢ per kWh)

Those with the lowest average prices in 2010 were:

• Wyoming (6.20¢ per kWh)
• Idaho (6.54¢ per kWh)
• Kentucky (6.75¢ per kWh)

 

I enjoyed performing a full analysis, however it is time-consuming and requires a deeper understanding of the manufacturers (PV modules, inverters, rack mount systems and monitoring software) and a fair understanding of finance (IRR).  Feel free comment or contact me with any of your questions.