Over the past decade, the cost of solar panels has witnessed a remarkable decline, resulting in increased value for commercial users and homeowners seeking solar systems. Also, many countries support solar transition through tax benefits, rebates, loans, and feed-in tariffs, which add more appeal to investors. However, it is essential to acknowledge that solar panels are just one element of a comprehensive solar system, necessitating consideration of additional installation costs.
Average Expense of Solar Panels Over Decade
The cost of solar panels has experienced a significant decrease over the years due to the maturation of the industry and its extensive production on a global scale.
From 2010 to 2023 (present), solar panel prices witnessed a remarkable decline of approximately 90%. Simultaneously, the worldwide deployment of solar energy has surged by more than 400%. This exceptional growth rate throughout the global solar supply chain has played a pivotal role in reducing prices substantially.
Similar to computers, large-screen TVs, and cell phones, solar panels have benefited from economies of scale, resulting in a significant cost reduction that has fundamentally transformed the energy sector.
In numerous regions worldwide, utility-scale solar installations have become more affordable than any other form of power generation. This trend is expected to persist, leading to the gradual replacement of older, more polluting power plants fueled by coal and natural gas.
Furthermore, homeowners now have the opportunity to possess their cost-efficient power generation systems like never before.
How to Calculate Solar Panel Cost?
There are two primary methods for determining the cost of a solar system:
- Price per watt ($/W): This metric is valuable when comparing many solar proposals. It involves calculating the cost of the solar system per watt of installed capacity.
- Cost per kilowatt-hour (cents/kWh): This measurement is beneficial for comparing the cost of solar energy to that of grid energy. It entails evaluating the expense of generating one kilowatt-hour of electricity through solar power.
- Solar calculators
Let’s explore each of these measurements in more detail.
Price Per Watt ($/W)
The price per watt (PPW) of a solar system refers to the cost incurred by homeowners for each watt of solar capacity installed.
Determining the price per watt for a solar system is a simple process. It involves dividing the total system cost (contract value) by the number of watts in the system. By doing so, one can obtain the price per watt value accurately.
The price per watt ($/W) enables a fair and direct comparison between different solar quotes, considering potential variations in total wattage, solar panel brands, and other factors. On average, the price can be as low as $2.75 per watt. However, this cost may vary depending on additional requirements such as ground-mounting, main panel upgrades, installation of an electric vehicle (EV) charger, and other factors that may necessitate special adders.
Cost Per Kilowatt-Hour (cents/kWh)
Contrary to the price per watt, this approach evaluates the dimensions of the solar system. The price per kilowatt-hour (kWh) reflects the expenditure of the solar system per unit of energy generated during a specific duration. In some countries, the method is also known as the levelized cost of energy (LCOE).
A kilowatt-hour (kWh) is a unit of energy that signifies the consumption of 1,000 watts, or 1 kilowatt, of power for one hour. Although the price per watt plays a crucial role in comparing the cost differences among various solar proposals, the price per kilowatt-hour is primarily utilized to demonstrate the economic advantage of solar energy in comparison to purchasing electricity from the grid.
Solar Calculators
Solar calculators are online tools or software applications designed to estimate the potential savings, costs, and benefits of installing a solar energy system. These calculators employ multiple factors such as location, energy usage, system size, sunlight availability, and financial incentives to provide an analysis of the potential return on investment (ROI) and other essential metrics. So, if you do not want all calculation hassles, use a solar calculator to calculate the expense of solar PV systems.
Cost of Solar System
It is crucial to recognize that the cost of a solar system extends beyond the prices of solar modules alone. The combined cost of solar panels, inverters, and other equipment, referred to as the balance of the system, represents just over half of the total system cost.
The remaining portion is “soft costs,” which include various factors such as labor expenses, accounting for approximately 5% of the overall system cost. Additionally, soft costs encompass the following:
- Sales tax (if applicable): Taxes imposed on the purchase of the solar system
- Permitting, inspection, and interconnection: Costs associated with obtaining necessary permits, inspections, and connecting the system to the electrical grid
- General overhead: Business expenses that are not directly linked to installation, such as rent, equipment or building maintenance, and administrative staff.
- Profit: A portion of the overall cost serves as profit for the solar system provider or installer.
It is essential to consider both the equipment expense and the soft costs when evaluating the total outlay of a solar system.
The Bottom Line
Before investing in solar panels, it is crucial to conduct thorough research on reputable solar providers and suitable equipment options. Also, take full advantage of available federal and state incentives to maximize cost savings.
