How much does it cost to install solar on an average US house?

Because of my engineering background and my interest in the topic of renewable energy, people sometimes ask me how much it would cost to install enough photovoltaic (PV) solar panels to generate all of one’s own electrical energy.  There are websites to help with this, but they can sometimes be confusing unless you’re a technologist so I’ve developed some simple guidelines that will help to put a PV solar system’s cost in perspective.   

In the U.S., a rule-of-thumb is that an average house consumes electricity at the rate of 1 kW.  Since there are about 730 hours in each month and the average price of a kW-hour of electricity is about $.10, an average monthly electric bill should be around $73 for 730 kWh of electricity.  I will say that this can vary considerably if you have some non-standard items like a hot-tub or some electrical appliances running continuously.  It will also increase significantly in months when you run an air conditioning unit.  The cost of electricity varies widely across the U.S. as well from a low of $.07/kWh in West Virginia to a high of $.24/kWh in Hawaii, so you’d need to adjust my guidelines accordingly because what I’m writing about here applies to an average home with average electricity costs.

A conservative value to use for a solar panel’s generating capacity is 10 watts/sq. ft.  This represents a panel conversion efficiency of about 12% which is typical.   That means that for every kW you need to generate, you’d need about 100 sq. ft. of solar panels.   If the sun would shine 24 hours a day, you could put up 100 sq. ft. of panels and you’d have enough to power an average home.  But as we all know, the sun doesn’t shine all the time.  The sun is only available during the day and the amount of sunshine per day is very dependent on cloud cover.   Also, the length of each day is dependent on the season. Fortunately, there are resources on the web to help you figure out how many hours per day on average you can count on the sun to shine based on where you live.  The numbers across the U.S. vary from an average of around 3 hours per day in places like Seattle, Chicago, and Pittsburgh to 5 or 6 hours per day in states like Colorado and California to a high of 7 hours a day in Arizona.   What that means is that the size of your solar panel array can vary from around 400 to 800 sq. ft. (i.e., 4 kW to 8 kW) respectively, depending on where you live.   You’ll need more panels if you live in a location that gets less average sunshine per day and fewer if you live in a location that gets higher amounts of average sunshine.

If your utility company allows you to have net metering, that is, they supply you with a special meter that will spin backwards when you generate more electricity than you use, your annual bill can average out to be zero.  Because of the change in the length of the day in the winter months, you’ll likely be a net purchaser of electricity in those months and in the summer months, you may be a net producer.  A grid-tied system like I’m describing is different than off-grid systems, such as those used in remote locations with no electrical service, since those require batteries and that can significantly increase the overall system cost.

At the time of this writing, the installed cost of solar panels runs between $7 to $9 per watt, so a 5 kW system would cost on the order of $35,000-$45,000 and an 8 kW system would be anywhere from $56,000 to $72,000.  Many utility companies are offering incentives with some subsidizing as much as 50% of the cost of the system.  Even so, a system that generates an average of $73 of electricity per month would take a long time to pay for itself even if you could get it at half cost.  For example, a system that cost $18,000 would have a payback period on the order of 20 years.  The panel cost today is around $4 per watt and the extra cost that brings it up to $7 to $9 installed is to cover the installation labor and the electronics needed to tie it into your existing electrical system. 

The good news is that the installed cost of PV solar panels is expected to continue to drop as thin film panels from companies like First Solar, Nanosolar, and AVA Solar become available to the residential market.  Right now, First Solar is only selling to commercial customers.  Nanosolar and AVA Solar have yet to ramp up their production facilities.   It will be interesting to see where this all goes in a year or two since these companies are talking about very aggressive price targets and volumes, on the order of $1-2 per watt and volumes that are several times today’s total output.  Assuming that the installation and auxiliary equipment costs can be reduced to around $1 per watt, then a 5 kW system may cost as little as $10,000 and the payback would be on the order of 10 years even without subsidies, which begins to make PV solar much more attractive.  Of course, all this assumes that electric rates stay constant.  However, if anything, electric rates are likely to continue to rise as fuel and other infrastructure costs increase so payback periods for solar panels are likely to become even shorter in the future.  I expect we will begin to see many more of them being installed on roofs, especially in areas with favorable solar conditions or higher than average electricity rates.