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How to Cost a Photovoltaic System - Worked Example

We're going to go through an example of what photovoltaics cost. This is just a general study, to get a picture of how the maths can work.

You buy a photovoltaic system that gives you 2 kWh per day for $8000. This is before tax rebates. This system includes batteries and all the extras required to plug into your house electrics. If you lived in Denver, and paid $0.10 per kWh, you would save $380 a year.

Calculate Photovoltaics Cost Savings

One way to calculate this is find out the cost per kilowatt hour (kWh.) To get an idea of watts and kilowatts, a typical home uses several hundred kilowatt hours per month. If you have a 100w lightbulb and leave it on for one hour, it will use up 0.1kWh. If you leave it on for 10 hours, it will use 1 kilowatt hour (1000 watts.) So if your power company charges $0.10 per kilowatt hour, running this lightbulb would cost you $0.10 a day - $0.70 a week.

Solar powered electricity can be calculated the same way. First you take the total lifetime of a photovoltaic panel - 25 years. Then you calculate roughly how much electricity could generate over 25 years. This figure, divided by how much the system cost, gives you a price per watt of your solar energy.

The cost of solar electricity in 2005 ranged from $0.30 to $0.60 per kWh. In the same year, power companies charged between $0.04 and $0.50 per kWh. So at a first glance, it is cheaper to buy power off the grid, right? Well, not entirely. Most solar cells are warrantied for 25 years. It is also likely that they can last up to 35 years. Once your photovoltaic system has 'paid itself off' all energy generated will be profit. Another benefit is that by using solar energy, you are protecting yourself from rises in energy costs - possibly for the next 25 years.

The Future of Photovoltaics and Energy Prices

One last thing to consider is that photovoltaics cost less every year. At the same time, energy prices are steadily rising, and oil prices have increased dramatically. Oil price has a 'knock-on' effect to energy prices across the board.

The solar energy market is growing by a huge 30% a year and the race is on. Companies around the world are working to be the first to make pv's power cheaper than grid power from day one. 

If you look at the life cycle cost of solar energy vs. grid power, solar energy is competitive. This is especially when you take into account the increase in value solar energy brings to your house, as well as tax rebates that are now available for solar energy.

Another growing market is the trading of REC's or renewable energy credits. This fast growing market has potential to increase the return on investment for solar power producers of all sizes.