If you are considering adding solar panels to your home, you are making a great decision. Not only might you lower your energy bill from day one and save a tremendous amount of money over time, but you will also decrease your exposure and insulate yourself from rising utility costs. You will help reduce our country’s dependence on fossil fuel production and the amount of carbon released into the atmosphere. Those are all very positive outcomes. The problem for some homeowners is that they know little about solar and often get taken advantage of by less than scrupulous solar companies and salespeople and pay too much for their solar system. So, the big question is, what should solar panels cost?
The Solar Industry Has Been Taking Advantage of Homeowners for Decades
There are so many factors that go into determining the best system design for a home and therefore there is no accurate way to compare one system to another regarding price. Solar companies can use this confusion to price a system at virtually whatever price they want. They know that a homeowner who has not had solar system design training has no way of knowing whether they are getting a good price or not. In fact, in some solar companies, salespeople are applauded and recognized for getting high commissions on a sale.
Are You Getting a Good Price for Your Solar System?
With most items that you buy, it is easy to determine what price you should pay. You can simply go online and look for the same or similar product sold elsewhere and comparison shop. Even when buying a car that has various options available, it is not that difficult to determine a fair price for that car. However, it’s far more confusing when trying to figure out what solar panels cost. Why?
It is impossible to compare the system needed for your home with any other solar system ever installed. Every solar system installation is unique and customized for your home. Here are the variables that must be considered:
- Annual Energy Consumption by the Occupants
- Utility Rate per kWh and Annual Cost
- Utility Company Reimbursement Rate for Excess Energy Production (the kWhs your system will send out to the grid)
- Sun Exposure of Roof Planes
- Size and Pitch of Roof Planes
- The Number of Roof Planes That Will Have Solar Panels
- Additional Components such as Main Panel Upgrade and Batteries
- State and City Incentives
All of these things must be considered when designing a system for your home. So, if your neighbor has solar you can’t simply use what they paid as a comparison to what your solar panels cost or should cost. But you can use the price per watt that they paid as a comparison.
The Secret Revealed – How to Easily Know If You’re Getting a Good Price
Remember this term, Price Per Watt or PPW. The PPW of a project determines what solar panels cost. Every component and service that goes into a solar system installation has a Price Per Watt (PPW) attached to it. PPW is also used to determine commissions for the salesperson. To determine the PPW simply take the price you are being quoted and divide it by the size of your system in watts.
Typically, solar systems are sized in kilowatts (kW). One kW equals 1,000 watts. So, if you are told that your system is a 9kW system, it is a 9,000-watt system.
When the PPW is determined it is done on the cash price of a system. When financing solar systems, dealer fees are added to the financing and price. That is a cost outside the scope of what the solar company can control. You can look for better ways to finance your system than using a solar finance company to lower that cost such as an equity line of credit or paying cash. But keep in mind that the PPW is simply on the cash price of the system before financing costs are added in.
What is a Good PPW for a Solar System Purchase?
Here are some guidelines for you to follow when determining what solar panels cost or should cost.
Determine the Price per Watt or PPW - you do this by dividing the cash price of the system (even if you are financing it) by the number of watts. An example is if your system is 11.5 kW (11,500 watts), and your cash price is $31,625, your Price per Watt or PPW is $2.75.
If you are getting quotes from more than one company which I highly recommend, assuming the equipment is the same on these quotes, simply determine the PPW. Divide the cash price before financing costs into the number of watts and compare.
You can use the calculation of PPW to have solar companies bid for your business.
Examples of Recent Sales I’ve Done
State
Colorado
California
Florida
Connecticut
Texas
Oregon
Colorado
Ohio
Florida
System Size in Watts
19,760
23,600
12,540
12,320
9,315
9,625
6,545
6,545
15,790
PPW
$2.29
$2.37
$2.73
$2.92
$2.48
$2.00
$2.70
$2.40
$2.15
Why Would the PPW be Different on Each Sale?
There are hard costs (the cost of installation) associated with each sale and installation costs can vary from one area to another. As an example, if wages and shipping costs are higher in New England, the hard cost of installation will be higher there.
The installation cost also affects the pricing more dramatically on a smaller system than on a larger system. The Site Survey, permits, inspections, and transportation costs are the same for a smaller system as they are for a larger one.
Utility Companies Play a Bill Role in Solar Systems Costs
Utility rates vary from state to state also. In California, homeowners are paying from .30/kWh to over .40/kWh. In Oregon, homeowners are paying less than .13/kWh. This typically makes it easier to show a California homeowner savings from going solar than it is to show a homeowner in Oregon. So, we need to lower the PPW in Oregon.
Yet another factor that must be taken into consideration is the reimbursement rate from the utility company to the homeowner for excess energy produced by their solar system. Solar systems only work during the day when the sun is beating down on the solar panels. Typically a solar system will produce more energy during the daylight hours than the house will use during those hours. If storage batteries are not a component of the system, the excess energy will be sent out to the grid and the homeowner will receive credits from their utility company for each kWh exported.
Utility companies are in complete control over the reimbursement rate. Some credit homeowners the retail rate, the rate that the homeowner pays the utility company per kWh. Others pay what is called the export rate which is the wholesale amount the utility company pays to produce or procure the energy. This can vary substantially. So, in Florida for example, where utility companies pay the retail rate, homeowners will typically see more savings from solar. Therefore a higher PPW can be justified. However, in Texas, the reimbursement rate is typically one-third of the retail rate. Therefore we have to lower the PPW to show savings to a homeowner.
However, even though I may charge a higher PPW in Florida, that Florida homeowner will see significantly higher savings from going solar than a homeowner who pays a lower PPW in states like Texas, Oregon, Georgia, and others where utility rates are relatively much lower.
Lastly, is the cost of added equipment. For example, not all homes need a new main electrical panel or sub-panel. But if these or other items are needed it will increase the price and therefore, the PPW.
So, PPW will vary. But as I said above, it should in very few instances be over $3.00 per watt.
How to Make Sure You Are Getting a Good Price for Your Solar System
If you have a quote from a solar company and want to know if you’re getting a good deal, give me a call at 619-252-9670 or visit my appointment calendar to schedule a Zoom Meeting with me. I’ll look at it for you. If you’re getting a good deal, I’ll let you know. If not, I’ll get you a great deal!