How to Analyze Economics of a Home PV Installation

Before installing a photovoltaic system, you need to analyze the economics. The primary factors are the capital (product and installation) and operating costs. Capital costs are the initial costs of designing, purchasing and installing a photovoltaic (PV) system. Operating costs will not be high relative to the capital costs, but will include the cost of maintaining the PV system over its intended life.

The factors that affect both capital and operating costs include:

• > Cost of the system hardware
• > Size of the system (surface area)
• > Will the system be connected to the grid
• > Amount of sunlight (intensity and duration of radiant energy

Electricity Consumption

How much electricity do you use? It's important to determine what the electrical load is in your home in order to determine how large a PV installation you will require. If you will still be on the electrical grid (getting electricity from your local utility), then you'll need to determine how of of your electrical load should be sourced from your PV system. You could analyze it backwards, by simply determining how much area you have available to install solar panels and see how many kilowatts of power that area should generate.

As you think about energy consumption and your attempt to be energy self-reliant, you'll also likely reduce your electricity consumption. This is natural as you become more aware of 'wasteful' energy habits. This is for the better, because it will allow you to install a small solar system as your electrical needs are less.

If you are designing and building a new home, consider methods to increase the 'R' factor of the design so that less energy will be required to heat or cool your home. Design has a very significant affect on your energy efficiency and hence, diminishes the need for as large a solar system.

PV Cost Considerations

The costs of solar PV systems is coming down as more and more manufacturers produce solar panels. We believe that prices will drop even more sharply over the 2008-2010 time frame due to a large number of newly opened factories that will be producing panels. The result will be lower prices which should be an important factor in your consideration of a system.

System cost factors:

• > Cost of design and installation
• > Amount of electricity produced and resulting local utility energy savings
• > Rebates/incentives received
• > Lifespan of your PV system (at least 15 years)

Locate a solar installer and discuss with them what your needs are and determine what the costs will be. You should be able to calculate what your ultimate cost per kilowatt hour will be from your installed system. You can then compare it to the cost of electricity from your local utility.

Solar rebate programs, subsidies, and other incentives are very important in your analysis of how economical your solar installation will be. Incentives in some parts of the U.S. can reduce your capital cost by 25%, but in others, there are no incentives. Be sure to check for federal and local government incentives. It may come in the form of a direct rebate or a tax reduction.