Cost Efficiency of Solar Panels

Solar Panel Expense > Cost Efficiency of Solar Panels

The Cost Efficiency of Solar Panels

Solar panel cost per watt (CPW), or price per watt (PPW), is an essential metric for evaluating different solar quotes and determining which offers the best value for your investment. In this guide, we'll delve into the method for calculating CPW, how to utilize this metric to compare various solar quotes, and the key factors that affect the cost of solar panels.

Hard costs for a solar panel system include expenses related to hardware, such as the solar panels themselves, inverters, solar mounting racks, and potentially a battery for storage. These costs represent the physical components required to install and operate the system.

In 2010, hard costs accounted for approximately two-thirds of the total cost of a home solar project. However, according to recent data from the National Renewable Energy Laboratory (NREL), this percentage has decreased to around 45% today.

Looking ahead to 2024, solar panels are estimated to make up about 13% of the total project cost, while inverters and balance of system (BOS) equipment contribute approximately 33% to the total cost of an average project.

Calculating the Cost of Solar Power: Price Per Watt (PPW) Explained

Calculating the price per watt (PPW) of a solar system is straightforward. You take the total cost of the system in dollars and divide it by the system's power output in watts:

PPW = Total Cost / Power Output

Solar systems are typically measured in kilowatts (kW), so to find the power output in watts, multiply the kilowatts by 1,000. For example, a 5.5 kW system is equal to a 5,500-watt system.

It's crucial to differentiate between the PPW based on the system's gross cost (before incentives) and the PPW after accounting for incentives (net cost). The difference in PPW can be significant when considering available incentives, such as a 30% tax credit.

A Guide to Analyzing Price Per Watt

Knowing the price per watt (PPW) of solar energy serves two important purposes.

First, it enables you to quickly estimate the cost of a solar system for your home. By using the provided article to calculate how many solar panels your home would need, you can then multiply the size of the system by the Solar Energy Industries Association’s average PPW rate of $3.27 to get a projected total cost.

Second, PPW helps you easily compare different solar quotes for various system sizes. For instance, if you have three solar companies design a custom solar system for your roof, each might suggest slightly different system sizes and costs due to variations in their design approaches, equipment pricing, installation fees, and operational overheads. PPW allows you to make a clear comparison of the solar capacity you’re receiving in relation to the cost, providing you with a straightforward apples-to-apples analysis.

When comparing quotes for solar systems, Quote 1 initially appears to offer the most economical choice due to its lower upfront cost. However, upon calculating the price per watt (PPW) for each option, it becomes clear that Quote 3 is the most cost-effective, providing a better value at $3.25 per Watt.

In general, larger solar systems tend to have a lower PPW. This is because certain costs like permitting, installation, inspection, customer acquisition, and overhead remain consistent across projects and do not increase the system's energy production.

Additionally, other factors can impact the PPW of a solar system, including:

What influences the price per watt of a solar system?

System size

When you install a solar system, there are certain fixed costs involved that remain the same whether you're installing a 5-kilowatt system or a 20-kilowatt system. For instance, the installer will have to apply for a permit for your project, regardless of its size. These fixed costs can become more expensive in proportion to the total cost of a smaller system.

As the size of the solar system increases, the cost per watt for the installation can decrease. This allows the installer to offer you a lower price per watt for larger systems, as they can spread out the fixed costs over a greater output.

System Adders

In addition to the basic costs of solar installation, there are certain additional expenses known as "adders" that may be factored into the solar cost per watt. These adders include:

Electrical work
Roof work
Trenching
Electric Vehicle charger installation
Interior conduit
Atypical roofs

These added costs do not change the size of your solar system but do increase the overall system cost, thereby raising the project’s total cost per watt.

Certain roof types may incur additional charges due to the complexity of installing solar panels. Examples of roofs that may come with extra costs include:

Spanish clay tile roofs, often found in California
Metal standing seam roofs
Flat roofs

Moreover, if your solar installer needs to travel a long distance to your home, there could be an added travel charge, which can increase your project cost per watt. This is one reason why choosing a local installation company may be advantageous.

Premium Solar Equipment

In addition to the basic costs of solar installation, there are certain additional expenses known as "adders" that may be factored into the solar cost per watt. These adders include:

Electrical work
Roof work
Trenching
Electric Vehicle charger installation
Interior conduit
Atypical roofs

These added costs do not change the size of your solar system but do increase the overall system cost, thereby raising the project’s total cost per watt.

Certain roof types may incur additional charges due to the complexity of installing solar panels. Examples of roofs that may come with extra costs include:

Spanish clay tile roofs, often found in California
Metal standing seam roofs
Flat roofs

Sales Markup

There are numerous reputable solar companies available, but some may employ questionable sales tactics. When working directly with an installation company, their salesperson might have the discretion to set prices based on what they believe you're willing to pay, which can result in per-watt prices varying significantly from $3 to $6. There's no standard for sales markup, so a notably high cost per watt could signal potential quality issues with the company.

To avoid overcharging or potential scams, it's crucial to obtain multiple quotes from local installers. Gathering three or more bids allows you to gauge fair pricing and compare different offers.

Getting Quotes for Solar Energy

The way you gather quotes for your solar project can significantly impact the price per watt (PPW) of your installation. A 2018 study from the National Renewable Energy Laboratory found that using quote platforms, rather than reaching out to installers directly, can save around $0.20/W to $0.40/W. This translates to savings of $1,000 to $2,000 for a standard 5-kW residential solar system. The study focused on Pick My Solar, which powers the marketplace at solar.com.

Exploring the Expenses of Solar Installations

The way you gather quotes for your solar project can significantly impact the price per watt (PPW) of your installation.

A 2018 study from the National Renewable Energy Laboratory found that using quote platforms, rather than reaching out to installers directly, can save around $0.20/W to $0.40/W.

This translates to savings of $1,000 to $2,000 for a standard 5-kW residential solar system. The study focused on Pick My Solar, which powers the marketplace at solar.com.