Total Cost of Solar Panel System Ownership
Homeowners are looking for cost-effective ways to save on electricity cost. This is a great time to research solar panel power systems – they’re one of the most cost-effective and environmentally friendly renewable energy options available today! And with federal tax credits, you could save up to 30% on your solar power system cost. Plus, if you own your home and have good solar access, you could see even greater savings!
What are the costs of owning a solar panel power system? The cost of a typical 5kW system in the U.S. is $16,800 before installation and other costs. With the federal tax credit, your cost could be as low as $11,880. After adding in the cost of installation, your total cost could be as low as $14,000. In some cases, utility companies offer solar rebates that could further offset your cost.
Solar panel power systems have a variety of benefits – they’re good for the environment, they can save you money on your electricity bills, and they can increase the value of your home. If you’re considering going solar, be sure to research all the costs involved so you can make the best decision for your needs.
The cost of solar power system ownership is the total sum of various expenses, including:
- Equipment
- Insurance
- Maintenance
- Part replacements
Some people prefer signing a solar Power Purchase Agreement, where the system provider assumes the costs mentioned above. When you sign the solar PPA, you will only have to pay for kilowatt-hours. This offers immediate savings. This article will analyze the major expenses that owners will incur for solar power systems.
Solar panel installation costs vary depending on a wide range of factors. A homeowner in the United States can pay about $3 per watt. A 5000-watt solar panel installation, for example, will cost around $15,000. This estimate does not include the solar tax credits that reduce costs by 30 percent to about $10,500.
Economies of scale exist in solar energy systems. It means that, even though the overall cost rises, a large installation would have a lower cost per watt. Medium-sized companies can get solar systems for less than $2 per watt. That is less than the cost of installing a solar panel in a home. Solar energy in large facilities can achieve an installed device cost of less than $1 per watt.
Solar power for residential use does not have such a broad price range. However, due to size, you should expect a minor price variation. While a 10-kW solar system would cost more than that for a 2-kW system, the cost per watt would be marginally lower.
Reliable solar companies have websites with cost calculators that offer customers an idea of how much they are expected to pay. However, a professional assessment of your property is the only one that can determine an accurate installation cost of your solar panel.
Solar Power Installation Costs
Most people assume ownership cost of deploying a solar power system upfront. For small projects, you may have to part with less than $1,700 per kilowatt installed. After deducting the rebates that the Renewable Energy Scheme for small-scale offers, it is possible to reach lower than $1,000 per kilowatt.
In most cases, the upfront expenses of installing a solar system are between 60 and 70 percent of the overall ownership cost. When the solar array is functioning, you are left with small expenses such as part replacement and maintenance. When a financial institution finances your solar system installation with a loan, you will have to pay for interest. Once you have the solar system installed, getting insurance is the best decision. Over time, companies can denigrate their solar array, which is not an expense but can be included in the balance sheet.
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Maintenance Cost
Among the wide range of power generating equipment, experts characterize solar panels by their low maintenance costs and simplicity. The annual cost of maintenance and operation may even be below $10 per kilowatt. That means that a solar system installation of 100-kW will have an operation and maintenance cost of around $1000 per year.
Depreciation
Since the solar system comprises various parts, it can depreciate with time, and you will find that some components have become faulty and may need replacement. When using a solar panel with a solid warranty, component replacement should not be an issue. Also, it is vital to include labor costs if you are planning to replace damaged components. However, the overall replacement costs are always below 10 percent of the initial investment over time.
Replacing inverters is the second most costly expense when owning a solar power system, and it occurs after a decade. However, inverters from reputable brands now provide customers with products with a warranty of not less than 20 years.
The overtime total parts replacement cost for a 100-kW solar system is below $10,000, assuming less than 10 percent of the initial investment. If spread over a period of 20 years, this is below $500 annually.
Financing and Insurance Cost
Interest payments are applied to total costs, especially when a financial institution finances the solar system with a loan. For instance, if you take a loan of $100,000 with a 5% annual interest rate and a ten-year maturity term, the annual payment is $1,061, for a total of $127,320 over the course of ten years. In this case, the gross interest paid is $27,320.
Solar power system insurance premiums are usually less than 1% a year, resulting in a premium of less than $1,000 for a 100-kW solar system in this case.
Solar Tax Credit
The federal tax credit of 30 percent has helped interested individuals to install solar power systems without financial strain. For instance, a solar installation that goes for $15,000 now has a total cost of $10,500.
The tax credit is also applied to solar batteries too. However, there are conditions such as:
- The solar batteries and panels must be of the same owner.
- Credit only goes to batteries that get 75 percent of solar charge or any other renewable energy.
If you are not interested in taking a loan to build a solar energy unit, leasing is also another alternative. The cost of a solar panel lease is estimated to be less than the savings on your power bill so that you will have money in your wallet from the first month of usage. It is essential to consider the advantages and disadvantages of each choice when deciding between leasing and solar loans. Since you own the installation, you can claim the solar rebates and tax credits with loan financing. You, on the other hand, are solely responsible for machine upkeep and component replacements. Solar leases make the provider liable for maintenance and deny you ownership benefits