Solar Panel Installation Cost Estimator
Solar Panel Expense > Solar Panel Installation Cost Estimator
Solar Panel Installation Cost Estimator
Understanding the cost of solar panels early on is beneficial for several reasons. Firstly, it helps you recognize deals that might be too good to be true and avoid scams. Secondly, it prepares you for the expenses involved and reduces any surprises. Lastly, it allows you to set financial targets, whether that's saving money or enhancing your credit score to secure financing for your solar investment.
Monthly payment
For a cash purchase, your monthly electric bill with solar panels mainly consists of fixed fees that are not impacted by net metering and any remaining electricity charges (this particularly applies to California). If you opt for financing, your monthly payment is the cost of your 20-year loan.
Your actual loan payments might change depending on the current interest rates. Keep in mind that solar loan terms can range from 5 to 25 years.
This section addresses the question: How much money do you save monthly with solar panels?
To estimate your potential monthly savings, subtract your post-solar payment from your pre-solar payment.
Cutting Costs
This chart shows the estimated portion of your utility bill that you might be able to offset in the first year after installing solar panels. If your monthly loan payments exceed your average utility bill, there may not be an immediate reduction in your bill. Nevertheless, investing in solar energy can lead to significant savings over time.
Total Energy Expenditure Over Time
If you choose to pay in cash, the total reflects the estimated cost of your solar system and any additional fixed expenses that your system may not be able to cover.
If you opt for a 20-year loan, the total cost includes the price of the system, fixed charges, and the interest payments accrued over the loan period.
Long-Term Wealth Accumulation
An analysis of the lifetime energy cost before and after installing solar panels reveals a significant disparity. With a cash purchase, the total cost tends to be much higher upfront due to the absence of interest payments, as opposed to financing options such as loans or leases. This means that cash purchases require a greater initial investment, but they often result in long-term savings as the cost of energy is reduced over time.
Before solar, the average utility rate is calculated based on the assumption of annual rate increases of 3-5%, depending on the location. This gives an estimate of the average utility rate over the next 20 years.
After going solar, the lifetime energy cost is divided by the total energy production of your solar system to calculate the cost per kilowatt-hour (kWh).
For instance, considering the example system above:
$45,102 / 242,483 kWh = $0.19 per kWh
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If you choose to purchase the solar system outright, the cost per kWh is expected to be significantly lower.
Electricity Price Per Unit
Is Solar Power a Real Cost-Saver?
A different way to conceptualize the initial investment in solar panels is as a long-term, discounted purchase of electricity for over 25 years. This approach not only secures your energy at a lower price, but it also provides predictable costs, unlike utility electricity prices that fluctuate monthly and increase over time.
Comparing solar adoption to homeownership, the upfront cost can seem daunting, similar to a mortgage. However, just as a fixed mortgage payment becomes more cost-effective than rising rental prices, so does the flat rate for solar energy compared to the upward trajectory of utility rates.
Estimating Solar Panel Costs in California: A Guide
California's home solar landscape stands apart from the rest of the U.S., especially with the implementation of NEM 3.0. This new solar billing policy significantly decreased export rates by 75% for customers who install solar panels after April 15, 2023, and are part of PG&E, SCE, or SDG&E.
With these reduced rates, it's more challenging for customers to fully offset their monthly electricity bills, leading to additional charges for any remaining power consumption. Consequently, the long-term savings from solar-only systems are not as substantial as they were under the previous 1-to-1 net metering model.
Advantages of Utilizing a Solar Cost Estimator
Understanding the average cost of solar panels helps homeowners make more informed decisions when they begin to seriously compare solar quotes. By using a solar calculator, homeowners can establish a baseline for solar panel costs, similar to checking the Kelley Blue Book value of a car before purchasing. This knowledge can help prevent falling for scams, mitigate the impact of high prices, and aid in planning finances for solar panel investments.
However, it's important to note that there are some limitations to using a solar calculator, such as its inability to provide a more detailed breakdown of solar costs.
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Guidelines for Estimating Solar Panel Installation Expenses
First, the calculator does not provide an in-depth explanation of how it calculates the cost of the solar system because each project varies greatly and involves many assumptions. Estimating costs like labor for solar panel installation or comparing the price differences between high-quality and budget-friendly panels can be challenging. However, a helpful approach is to reference the cost breakdown for solar panel installations from Q1 2022 data, analyzed by the National Renewable Energy Laboratory (NREL). This data can serve as a guideline for understanding potential costs involved in solar projects.
NREL discovered that in 2022, labor costs for installing solar panels accounted for approximately 5% of the total expenses for residential solar projects, while the cost of solar panel modules constituted about 18% of the overall cost.
Given a lifetime energy cost estimate of $26,099 for a cash purchase, the installation labor would likely amount to around $1,300, while the solar modules themselves would cost approximately $4,700.
The key insight is that labor and solar module costs represent a relatively small portion of the overall project expenses when compared to non-labor soft costs. This suggests that waiting for cheaper labor or hardware may not be an efficient or advisable strategy for reducing the cost of a solar system.
Will Solar Panel Prices Drop in 2023?
In 2023, the price of solar panels is subject to various competing market forces. The lingering impacts of the pandemic have disrupted supply chains, leading to increased costs and delays.
Additionally, trade tariffs have placed pressure on solar panel prices, while a surge in US manufacturing and changes in local policies are also influencing the market.
These factors have created a complex landscape that affects the cost and availability of solar panels. During the 2010s, prices for solar panels experienced a significant decline due to technological advancements and widespread adoption.
However, this trend was disrupted during the pandemic, as shutdowns and material shortages caused supply chain challenges and led to price increases across multiple industries.
The following chart provides an overview of these market dynamics.
With inflation stabilizing, there may be a possibility that solar panels will become more affordable in 2023.
The cost of polysilicon, a key material used in solar panels, has consistently decreased this year, which could lead to a drop in module prices as well.
Manufacturing solar panels in the US has gained significant momentum due to the incentives provided by the Inflation Reduction Act, which could influence solar panel prices.
Producing solar panels domestically can lower shipping costs and increase the availability of panels. However, higher labor costs and stricter regulations in the US may lead to more expensive locally manufactured panels.
In California, the implementation of NEM 3.0 on April 15, 2023, has already caused a decline in demand for home solar installations, prompting many companies to lower their prices.
Streamlining Processes with SolarAPP+ to Lower Soft Costs
An emerging software called SolarAPP+ aims to simplify the permitting process for residential solar installations, potentially shortening timelines and reducing associated soft costs.
Colorado has allocated $1 million to support the implementation of SolarAPP+ in local communities, and according to CALSSA, approximately 66% of California's population may soon benefit from this software.
As non-labor soft costs make up 44% of residential solar expenses, the adoption of SolarAPP+ could significantly decrease the overall cost of solar installations for homeowners.
Drawbacks of Solar Panels: Exploring the Downsides
One aspect our calculator doesn't address is the potential drawbacks of solar panels. Just like any energy source, solar energy comes with its own set of advantages and disadvantages. Rooftop solar systems are no exception to this balance.
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Variability in Renewable Energy Sources
A significant drawback of solar panels is their reliance on sunlight to generate electricity, which means they cannot produce power during nighttime or on cloudy days. This intermittent production necessitates a system like net metering or battery storage for solar energy to be effective.
Net metering is a billing system that lets solar panel owners earn credits by feeding excess energy into the grid. These credits can then offset the cost of electricity they draw from the grid when their panels are not actively producing power.
While many states currently have net metering policies in place, there is a trend towards revising or eliminating these policies.
Utility companies in various states are pushing to modify or eliminate net metering, which could impact the benefits solar power users receive.
Following the recent approval of NEM 3.0 in California, other states may begin to consider similar changes, potentially leading to less advantageous billing practices for solar energy users in the near future.
Financial Constraints
A second drawback of solar panels is their high upfront costs, which can be a significant barrier for low- and moderate-income households. The installation of solar panels typically costs around $25,000 before taking into account any incentives or subsidies. Many homeowners may not have immediate access to this kind of capital or may not qualify for financing due to weak credit. As a result, these households miss out on the potential energy cost savings that come with solar power.
Additionally, there is a concern that residential solar can indirectly increase electricity costs for lower-income households that cannot afford to install solar panels. This phenomenon, known as the "cost shift" theory, suggests that utilities might compensate for the loss of revenue from wealthier households using solar panels by raising rates for those who remain dependent on the grid. This could potentially exacerbate the energy burden on lower-income households.
Deceptive Practices and Unreliable Installers
When considering the solar industry, it's important to be aware of scams and subpar installers, which can complicate the experience for customers. Many regrets related to solar panels arise from negative interactions with installers who deliver substandard work and provide poor customer service.
Ultimately, installing solar panels is a construction project that requires hiring a trustworthy contractor with a proven history of high-quality work.
At solar.com, we simplify the process of finding reliable local installers by thoroughly vetting every solar company in our network. Only around 30% of applicants meet our stringent criteria, ensuring that you work with trusted professionals.