How Much Is Solar In 2022
Solar costs have dropped significantly over the past decade — average solar cost in Texas is now at $2.70 per watt. To determine your cost of going solar, consider the equipment, system size, incentives, and purchasing method.
You’ve probably seen the advertisements — No cost solar; Get solar $0 down; Free solar install… While those are eye-catching, a capital investment has to come from somewhere. So how much is solar in 2022, and what should you be aware of when considering going solar…
The Cost of Solar
Solar systems are priced in dollars per watt. Pricing varies from state to state, and the average solar system cost in Texas is $2.70/watt. With that in mind, a 6 kW solar system would cost around $16,200.
$2.70/watt x 6,000 watts = $16,200
The price per watt figure incorporates more than just the solar panels themselves. It also includes labor, installation, interconnection, and other system components such as inverters.
Equipment prices vary. Solar panels are generally priced on their efficiency — the percentage of light exposure they’re able to convert to electricity. The higher the percentage efficiency, typically the more expensive the panel. Nowadays, prominent solar panel manufacturers have panels with efficiencies greater than 20%, with the most efficient panels nearing 23%.
The type of inverter you select also impacts system cost. String inverters are the economic option, but they tie together the production of an entire row of panels — the whole row is brought down by the lowest producing module. On the other hand, micro-inverters are more expensive, yet they allow each solar panel to generate electricity independently of the others.
As a whole, the solar system should be quite reliable and robust. Still, it’s important to understand the extent of the moving parts so that you feel secure in your investment.
There is no such thing as an ‘all-inclusive’ warranty.
Equipment and workmanship warranties are often discussed, but other warranties such as shipping, labor, and product warranties often fly under the radar. All are important in understanding the protection you have and the amount that you could have to pay in the case your system needs repairs down the road.
How Big Should Your Solar System Be
As with all products circulating throughout the economy, prices per unit drop with greater volume. Economy of scale applies at the micro level of your rooftop solar system as well, so the larger your system is, the better deal you’ll be able to get on a price per watt basis.
That doesn’t mean, however, that you should get an unnecessarily large system to reduce your per unit cost of solar.
Solar system size should be based on your energy consumption — the more energy you consume, the larger your solar system should be.
There are a number of ways to calculate your annual energy usage:
12 months of bills — Collect your previous 12 months of electric bills and add up the kWh consumption on each. This is the most reliable way to calculate your usage.
A single bill — Review the annual usage graph on a single utility bill to estimate your annual kWh consumption. This is not as precise as collecting 12 months of bills, yet it can give you a ballpark estimate of your annual energy usage.
Calculation of square footage — If you are a new homeowner and immediately want solar, it’s unlikely you’ll have utility records to calculate your energy consumption. In this case, you can estimate your projected kWh consumption based off your home’s square footage. As a general estimate, you can expect your monthly electric bill to cost about $0.10 per square foot.
This $0.10/sqft. figure will be further impacted by factors such as lifestyle preferences (do you use the AC a lot?; how many people will be living in the house?), house facilities and appliances (is there a pool? a jacuzzi?), as well as the home’s energy efficiency (how’s the insulation? does the house have LED lighting?).
Once you have your estimate for annual kWh consumption, there is one more crucial consideration before sizing your solar system:
what is the solar compensation plan granted by your energy provider?
This is important to understand because it helps design the system size that optimizes your savings.
For instance, if you are compensated for your generated solar at a rate below retail value, then you will have to oversize your system to cover all of your usage charges.
On the other hand, if your provider offers favorable time-of-use Net-Energy Metering (NEM), then you may be able to leverage solar credits produced during peak hours to offset a greater amount of energy usage when electric costs are cheaper. In this scenario, you could potentially offset all of your utility bill’s kWh charges with an undersized solar system.
With those two questions asked and answered, you now have an understanding of what size solar system will best suit your needs.
What Incentives Are Available
There are a number of federal and local incentives available to drive down the cost of going solar.
The federal solar tax credit is still at 26%, meaning that you’ll receive a dollar-for-dollar tax credit equal to 26% of your total solar system cost.
If your solar system costs $16,200, then you’ll receive a tax credit for $4,212.
16,200 x 26% = 4,212
Tax credits can be applied directly against your tax liability. The filing paperwork is straightforward, and there is even an opportunity to roll the credit forward if your tax appetite is not big enough to take advantage of it all in one year.
There are also a number of local incentives that can be claimed in addition to the federal tax credit. Some of these incentives have a funding limit, and once funds are exhausted, new solar projects will no longer be eligible for that incentive until it’s reopened.
What Is The Best Purchasing Option
Because of the reliability of solar technology, financing options are available. This is where those appealing tag-lines come in:
$0 down on solar & No-cost solar install
Qualifying homeowners can draw out payments on their solar system over a 5-20 year loan. Due to the interest factored into a loan, payback is less than purchasing the system outright. But it alleviates the headache of a high upfront cost.
Going solar with a loan has the potential to be immediately cash-flow positive. When the sum of your remaining electric bill and your new loan payment are less than what you would be paying the utility without solar, then you are cash-flow positive — all while adding value to your home, taking advantage of tax incentives, and reducing your environmental impact.
There are also solar leases and Power Purchase Agreements (PPA). In these cases, you don’t own the solar system on your roof. Another company owns the system, takes advantage of the financial incentives, and sells you electricity at a rate lower than your utility provides. This may be a suitable option for someone who has no tax appetite or that is only interested in solar for cost savings. If going this route, be sure to note if there is a price escalator embedded in the agreement. There are horror stories of people paying more for electricity with leased solar than they otherwise would have without a system because the escalator outpaced the rise in utility costs.
What Is The Savings Potential
It’s possible to heavily reduce or even eliminate your electric bill with solar. The extent of savings depends on your energy usage, solar system capacity, and grid connection.
The overwhelming majority of people who get solar stay tied to the grid. This provides advantages, because it allows you to essentially use the grid as your battery — use solar energy while your system is producing and pull from the grid when solar energy is unavailable. Without the grid, you’d have to equip yourself with enough battery storage to be self sustainable, and that can be very costly.
With a grid-connected system, you will likely still have some residual electric utility charges for maintaining that connection. Some electricity providers allow excess solar produced by your system to offset these residual charges whereas others only offer compensation to go towards kWh consumption charges.
With that said, the amount of savings you experience will depend both on your solar system’s capacity to satisfy your energy needs as well as the rate plan structure from your electricity provider.
Solar is reliable technology. Capacity to cut costs, enable tax incentives, and improve sustainability… there are a lot of benefits to going solar. Even so, a solar system will be providing power for the next 25-30 years, so you want to make sure that you feel comfortable and confident in your decision.
It is important to work with solar professionals you trust, so that you can navigate the process of sizing your system, identifying available incentives, and determining the best purchasing option in a way that is informative, comfortable, and with your best interest in mind.