Solar Basics: How Much Does a Home Solar System Cost?

Many homeowners finance their solar panels, which can increase property values by roughly the cost of the system plus 10%. With the state rebates that are now offered, many home owners end up coming out way ahead!

Solar Basics: Contents

Top 5 reasons to consider solar energy
How much does an average residential solar system cost?
Is solar power for my home a good investment?
Is my home and location suitable for solar power?
Who are the major manufacturers of solar equipment?
I'm going solar! How do I get started?

Approximate Costs for Solar Residential Systems

Residential Solar Electric Systems are generally priced by the system size. For example. a 2,500 square foot house in California with AC requires probably a 3-4 kW system. The table below gives a rough estimate of what a residential system would cost after rebate.

* 1 kW system X $12.00 per W = $12,000

* 2 kW system X $10.00 per W = $20,000

* 4 kW system X $9.00 per W = $36,000

* 6 kW system X $8.50 per W = $51,000

Step 1: Reduce your Energy Load

The key to an affordable solar panel system is to reduce your energy load from the get go. Nowadays it is easy to cut you electricity bill by 1/3 or more simply through a few Energy Saving No-Brainers -- like switching to CFL light bulbs, using energy-saving power strips, or buying an Energy Star fridge.

Step 2: Size the System

The sizing of your solar power system depends on a number of factors -- including your current energy use, your sun exposure, and rebates and other incentives. A solar installer will come to your house for free and calculate the exact size of your system. Here are some examples of total monthly costs for 4 different system sizes in several US climate zones, calculated on Sunpower's Clean Power Estimator.
If you have a direct southern exposure for you panels, you're in luck. You will gain 10% or more in efficiency and will be able to reduce the size of your system, saving you even more.

Based on your current monthly electricity bill, you can approximate how much you would be paying per month for your solar power, factoring in basic rebates and tax incentives. Keep in mind, that the payments could be much lower or zero if you take advantage of additional incentives, energy savings measures, or refinance with an EEM (energy-efficient mortgage).

Step 3: Get Rebates and Smart Financing

The average American home spends close to $100 a month on electricity. Though a home refinance, monthly payments on your home loan can end up matching your already-existing monthly payments, which means if you already have $100/month budgeted to pay your electricity bill, a solar system could be installed for $100/month – or less. One added bonus: the interest on a solar system loan is tax-deductible, while nothing on your residential electric bill is.

And with solar panels on your roof, you may be eligible for an EEM, or Energy-Efficient Mortgage. EEMs provide financing for energy improvements as part of a home mortgage package. EEMs can also allow home buyers to automatically qualify for a larger mortgage to pay for efficiency improvements. This is possible because the lender knows that your saving more in an average month's energy bill than the added cost of the mortgage. Lenders provide EEMS under the rationale that the mortgagee will have greater disposable income from savings on utility bills and can therefore afford a greater monthly mortgage payment. To learn more about EEM's contact the Home Energy Rating Organization in your area.

In addition, most states have alternative energy rebates and tax incentives. These can range from 10% to 80% depending on your location and are provided by a variety of sources including the federal government, state government, and utility companies. To get an idea of what's available in your area check out the government's Database of State Incentives for Renewables and Efficiency -- a comprehensive source of information on state, local, utility, and federal incentives that promote renewable energy and energy efficiency.