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Will A Solar-Powered Home Pay Off?

Will A Solar-Powered Home Pay Off?

What Is Residential Solar Power?

Homeowners who install photovoltaic power systems get a slew of advantages, including decreased electric bills, reduced carbon emissions, and potentially greater home values. 

However, these advantages usually come with high installation expense, and the amount of the improvements varies greatly from one home to the next. This article will assist homeowners in performing the necessary financial calculations to establish the practicality of solar electricity in their houses.

The Most Important Takeaways

  • Those who want to be green should think about installing solar panels on their roof.
  • Solar energy is not only excellent for the environment, but it also allows you to make money by selling extra electricity back to the grid.
  • While prices have decreased in recent years, solar panel installation and upkeep may still appear expensive.
  • Solar panels work best in homes that get plenty of sun throughout the year.
  • Before committing to solar energy, make sure you're aware of the social and economic implications.

Solar Power: An Overview

Photovoltaic (PV) solar technology has been present since the 1950s, but it has only been regarded as a financially viable technology for widespread use since the turn of the millennium due to falling solar module prices.

The theoretical electrical output potential of solar panels is measured in watts. The typical output realized for installed PV systems, referred to as the "capacity factor," is between 15% and 30% of the theoretical output. A 3 kilowatt-hour (kWh) household system with a 15% capacity factor would produce 3 kWh x 15% x 24 hours/day x 365 days/year = 3,942 kWh/year, or around one-third of a typical Australian household's power use.

Costs of Solar Power for the Home

Solar power is a capital-intensive technology, and the majority of the cost of ownership is incurred when purchasing the equipment. The solar module will almost definitely be the most expensive component of the total cost.

An inverter (to convert the direct current produced by the panel into the alternating current used by household appliances), metering equipment (to see how much power is produced), and other housing components, as well as cables and wiring gear, are all required for installation.

However, because there is little reason to speak of "average" results, this estimate may be misleading; in fact, solar may make sense for one home but not for the next door neighbor. This disparity can be explained by the financial and practical factors that go into deciding viability.

Some people think about battery storage as well. Batteries have always been considered prohibitively expensive and pointless if the utility pays for surplus electricity supplied into the grid (see below). The cost of labor for installation must also be considered.

There are certain additional costs connected with operating and maintaining a PV solar array in addition to the installation price. Apart from cleaning the panels on a regular basis, inverters and batteries (if fitted) usually need to be replaced after a decade of use. These times are becoming longer though as technology continues to improve.

While the aforementioned costs are reasonably straightforward—a solar installation firm can frequently provide a quote for these for a homeowner—determining government and/or local utility subsidies can be more difficult.

Homeowners can also check with their local utility provider to see if they offer financial incentives for solar installation, as well as what their policies are for grid connectivity and selling excess electricity into the grid.

Benefits of Solar Power for the Home

A decreased energy cost is a significant benefit of PV installation, but the extent of this benefit is determined by the amount of solar energy that can be produced given the available circumstances and how utilities charge for electricity.

The first factor to consider is the amount of solar irradiation accessible in the home's location. When it comes to solar panels, the closer you are to the equator, the better, but there are other aspects to consider.

Similar maps and data can be found in other nations, frequently through government environmental agencies or renewable energy organizations. The orientation of the home is also crucial; for rooftop arrays, a north-facing roof with no trees or other things blocking sunlight maximizes the amount of solar energy available. If this is not possible, panels can be put on exterior supports and installed distant from the home, but the extra hardware and wires will add to the cost.

The timing of solar power output and how utilities price for electricity are the second factors to consider. Solar power generation occurs predominantly in the afternoon and is higher throughout the summer, correlating reasonably well to overall electricity demand in hot climates because air conditioners consume the most energy at these times. As a result, solar energy is beneficial because other energy production methods (typically natural gas power plants) utilized to fulfill peak energy demand are often costly.

Residential customers, on the other hand, are frequently charged a set fee for electricity, regardless of when they use it. This means that rather than mitigating the high cost of peak electricity generation, homeowners' solar power systems simply offset the price of electricity they are charged, which is significantly closer to the average cost of power generation.

The final advantage is the possible increase in a home's value as a result of the installation of a solar array. Solar panels, in general, are expected to increase the value of most properties.

First and foremost, having cheaper electricity costs as a result of a solar array has indisputable financial benefits. Second, the trend toward "green" living is driving up demand for homes with lower carbon footprints and are powered by renewable energy sources. Finally, buying a home with solar already installed implies that the investment is financed through the mortgage (for the homebuyer). Because of the accessibility of financing, solar could be more economical for a homeowner than buying a property without solar and then adding one later.

COsts of Solar Energy Calculation

A solar system can theoretically be analyzed using the discounted cash flow (DCF) approach if the above costs and benefits have been estimated. Outflows would be installation expenses (net of subsidies) at the start of the project, with inflows coming later in the form of offset electricity costs (both directly and through net metering).

Instead of utilizing DCF, the viability of solar power is commonly assessed by calculating the levelized cost of electricity (LCOE) and comparing it to the local utility's cost of electricity. The LCOE for residential solar will most likely be computed as cost/kilowatt-hour ($/kWh or /kWh), which is the same format used on power bills. The following equation can be used to approximate the LCOE:

LCOE ($/kWh) = Lifetime Cost of Ownership ($) / Lifetime Energy Output ($) = Net Present Value (NPV) of Lifetime Cost of Ownership ($) / Lifetime Energy Output ($) (kWh)

A PV solar module's useful life is often estimated to be 25-40 years. The total cost of ownership includes maintenance charges, which must be discounted in order to calculate the net present value. The LCOE can then be compared to the cost of power from a utility; keep in mind that the relevant price is during or around peak PV solar production hours.

Solar Panels for Your House: Advantages and Disadvantages

Solar power has advantages and disadvantages, just like everything else. At the same time, some financial expenses may be offset by social benefits to the environment and a reduction in your carbon footprint, which go beyond a simple monetary assessment.

Pros

  • Reduce your carbon footprint with green energy.
  • Net metering allows you to resell any extra energy you generate.
  • Certain tax savings may be available to you.
  • Reduce power bills

Cons

  • The costs of installation are still significant.
  • Solar energy is only useful while the sun is shining.
  • Sometimes, parts of the system must be replaced.
  • Some tax incentives may have already expired or will soon.

Final Thoughts

It may seem difficult to decide whether or not to build a PV solar system, but keep in mind that such a system is a long-term investment. From a budgetary standpoint, solar power is a smart alternative in many places.

Even if the cost of solar power is found to be marginally higher than the cost of electricity purchased from a utility, homeowners may want to install solar to avoid future potential fluctuations in energy costs, or simply to use solar for "green" living, regardless of their personal financial motivations.

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