Solar

PV cost factors

To determine the economic costs and benefits (of a residentially or commercially sited PV system, the California Energy Commission has provided the Clean Power Estimator

Using many of the factors described here, the National Renewable Energy Laboratory has developed a system's Break-even Turnkey Cost on a state-by-state basis so that solar stakeholders can target high-value markets for customer-sited systems. Using factors such as availability of rebates and net metering, tax credits, and utility electricity rates, the BTC is the highest amount a consumer can pay per PV kilowatt (before the value of any incentive are deducted) without gaining or losing money over the life of the system. For example, in California, because of generous incentives and higher-than-average retail rates, the cost of a system can be as high as $7,000 per kilowatt, while a system in Ohio - where there are no consumer incentives – becomes uneconomical at a cost of more than $3,000 per kilowatt. For the full NREL report on Turnkey Break-even Costs, see Customer-sited Photovoltaics: State Market Analysis.

Capital Costs

Like other renewable energy technologies that don't have added fuel costs, the costs for solar power consist mostly as capital outlay followed by predictable payments debt service and operations and maintenance. Capital costs vary depending on the chosen PV technology (e.g. crystalline silicon or thin-film), installation specifics such as the type of roof and contractor costs, the size of the system and the supplier's retail mark-up. The PV modules are the fundamental components of a PV system, and constitute roughly half of the installed capital costs. Other capital costs include: the balance-of-system which includes the mounting equipment, the ac-to-dc power inverter, and the electrical wiring and connection equipment; and site evaluation, permitting, and design and installation services, (although these services are sometimes included as "BOS" as well).

Installed cost breakdown for 3kW grid-tied system

Cost component	% total
PV cell	40%
PV module	20%
Balance of System (equipment only)	25%
System design and installation	15%

Operations and Maintenance

O&M costs for PV systems are proportionately insignificant at less than $.01 per kilowatt-hour. Fuel costs are of course zero, and scheduled maintenance consists mostly of washing the modules to remove dirt and dust. Technical failures of the modules themselves are very rare. Inverters have historically been problematic, but are showing improved reliability.

Utility retail rate and rate structures

Whether it comes from solar power or an on-site wind turbine, grid-connected customer-sited generation is intended to offset some or all of a customer's utility electricity purchases. In determining the payback periods for the system investment, the value of the electricity generated by the PV system is equal to the dollar amount of the kilowatt-hours not purchased from the grid. Therefore, higher utility rates increases the value of the solar kilowatts and decreases the time required to pay off the investment.

Some utilities have implemented rate "tiers" in which the charges a customer pays for electricity increases with consumption. In these areas, PV system owners can have shorter payback rates than those in areas without price tiers, because they are generating a portion of their own electricity and paying for fewer kilowatthours in the more expensive tiers.

Also, in California net metering has been extended to Time-of-Use commercial (and in some places, residential) customers. This adds value to the kilowatthours in those areas where peak PV output matches the highest TOU rates.

Solar Resource

Although PVs will work anywhere, the more sunlight hitting a PV system, the fewer kilowatthours a customer must buy from the utility and the more kilowatthours over which to spread its fixed costs, and the better the overall system economics. To estimate the number of kilowatthours that a system can produce in specific geographical locations, check the National Renewable Energy Laboratory PV Watts website.

System size

In general, the larger the system, the lower the per-kilowatt and per-kilowatt-hour cost. This is because some costs such as site inspection and permitting are fixed across all system sizes while retail markup, installation and the costs of some components, like the inverter, do not increase in direct proportion to the number of modules in a system. Utility-scale systems of 100 kW or more are less expensive, per unit of output, than residential or off-grid systems, largely because of installation economies.

Installation

Installation costs are influenced by the local contractor market, which is, in turn, affected by the local cost of living. Also, some roof types can complicate the installation of PV arrays, adding extra time and cost to the installation process. For example, it is easiest to install an array on composite shingles; while the Spanish tiles – found on many rooftops in California are the most difficult.

In PV Installations, a Progress Report, a paper available from the Sandia National Laboratory, the authors claim that almost half of all customer-sited PV installations are done incorrectly, impeding optimal energy production.

To minimize the potential for inefficient or faulty installations there is a national movement to certify solra practitioners and installers. The North American Board of Certified Energy Practitioners Board was formed to address the need for qualified installers. The Interstate Renewable Energy Council Web site contains information on the activities and progress of the Board's Certification Project.

Financing

How a buyer finances a system greatly impactS its economics. Homeowners most often choose a mortgage or home equity loan, or a conventional bank loan. For commercial PV owners, a company's existing sources of capital financing are often the best option. The California Energy Commission provides information on financing options for residential and commercial customers for installing PV systems.

Favorable incentives and policies

It's a simple fact that solar electricity needs financial incentives to make it economically attractive to customers, no matter how otherwise strong their motivations to purchase. Governments and many utilities have implemented a number of financial incentives and rules intended to bring down customer costs and facilitate the commercialization of customer-sited PV markets, including net metering, tax credits and rebates. Very often these incentives have minimum and maximum size eligibility requirements. For more information on any of these incentives, and their availability by state, see the Database of State Incentives for Renewable Energy.

To see current solar power activities in the California legislature, see the California Solar Center's Legislation site.