The Average Cost of Switching to Solar Energy

The up-front costs of installing solar electricity systems are large.
The up-front costs of installing solar electricity systems are large. (Image: Jupiterimages/ Images)

Since the 1970s, many homeowners have pondered the benefits of adding solar power to their homes, whether inspired by energy-saving or money-saving concerns, or both. Solar energy theoretically can provide cost-free electricity to the user once the solar cell technology is installed. In practical fact, the cost of developing a solar system depends on the building’s energy consumption, and it often takes years for investors to reach the break-even point.

Average Installation Costs

The number of photoelectric cells a home needs to become self-sufficient using solar power depends on how much energy its residents consume. On average, a system costs about $10 per kilowatt of generated power as of April 2011, according to Solar Energy Facts. The average home requires about a 200-kilowatt energy supply to achieve self-sufficiency. That means a homeowner would invest about $20,000 to install a photovoltaic system large enough to handle a home’s electrical demand. Consult your electric bill to determine your peak monthly electric consumption to compute your home’s needs.

Solar Hot Water Installation Costs

Home owners with south-facing areas on their property may install a hot-water heater powered by solar energy. Depending upon the system type and the amount of water it heats, solar water heater costs can average from $1,000 to $4,000. Most solar water heaters supplement a traditional electric or gas water heating system, and don’t eliminate costs altogether. While these systems may reduce heating bills, a homeowner’s savings will depend on the efficiency of the water heater the solar unit replaces, with savings between highly efficient gas heaters and solar much smaller than electric gas heaters.

Solar Electricity Cost-Benefit Analysis

Homeowners solely motivated by cost-saving implications of installing photovoltaic energy systems must prepare themselves for a long-term investment strategy. Because the average cost of these systems is high, it takes years to recoup investment costs: If your average electric bill is a steep $200 a month, it will take eight years and four months before you will start seeing savings from the average $20,000 investment. Maintenance and repair costs may stretch that time out, as many photovoltaic systems need repairs after five years, according to Solar Energy Facts.

2011 Tax Credits

The Internal Revenue Service provides tax credits as of the 2011 tax year that help reduce some of the cost of solar water heaters and solar electric systems. Homeowners who install qualifying systems of either kind may claim a nonrefundable tax credit for 30 percent of the system’s cost. There is no limit to the amount that can be claimed on this tax credit.

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