“The Cost of Solar, and the Price you Pay”
Part One, “The Cost of Solar”
Let’s assume you recently decided to go solar. You’ve heard the stories from friends and family bragging about low electric bills while you gripe about yours. They forget the days when their electric bill looked more like their mortgage payment. That’s what made you decide, “It’s time to go solar.”
There’s one catch. You also know a few friends and family who have purchased solar and have nothing good to say about it. They add their payments and their true-up (end of year bill for solar customers), and they are actually paying more now than before they had solar.
Some have even had trouble selling their house. The time comes for the new home-owners to assume a lease, or a solar contract such as a “power purchase agreement” (or “PPA”). The new home owners are hesitant to sign, and the sale was lost.
Thus you are here, reading this blog titled "the cost of solar, and the price you pay”.
The cost is actually very reasonable, and you can save money from day one and have a full return on investment in 6-10 years. You just have to do a little research on your own, and consider a few variables. First off, how much does solar cost?
In short, solar costs: Labor + Materials + Permit Fees + Company Overhead + Company Profit. For the most part, the last two criteria- overhead and profit- are where companies differ in their prices. This is why your solar quotes may differ greatly for a solar system with the same materials. In most cases, a higher price doesn’t indicate you are getting “ripped off”, but rather that the higher priced company has more overhead, or perhaps has chosen to seek a higher profit margin. This makes it difficult to determine how much a system really “should” cost.
However, there are some ways to “cheat”, for a quick estimate, that the pros use. Here are two examples.
One very simple way is price per panel, which in my area of California it is assumed a system will cost about $1000 per panel. Of course, there are so many variables when using this method that you probably should wave this number 25% more or less, if you want to be realistic. But it does give you a very rough idea.
Another example is price per watt. Every solar panel’s production is measured in watts. When I first moved on my property in 2010, my friend and I purchased panels. The watts were 170 each. In 2016, my wife and I purchased solar. Our panels were 285 watts (W) each. Today, when our company sells solar systems, the average panel is 300W. The high powered panels are exceeding 360W. A system’s size is determined in watts. For instance, 20 panels at 300W each, is a 6000W system. Or, a 6kW system (= six thousand watts).
According to the Lawrence Berkeley National Laboratory (LBNL) solar was $12 per watt in 1998, slowly dropping to under $10 per watt in 2003, and dropped under $6 around 2011. The downward trend continued, and today in my area of California prices are around $3.20 - $4.50 per watt installed, assuming it’s a roof-top residential solar system. (Ground mounts with long trenches will often exceed the $4.50/watt price, as will battery storage systems)
“Price per Watt” is one quick trick for estimating the cost of a solar system. This doesn’t mean at all that you should think the closer to $3.00 per watt the better, this is simply a price range.
Your contractor will know the work involved, and that work involved will help determine the price. Expense of materials vary greatly. This makes it very difficult to compare quotes, unless you know you’re comparing like-for-like. Speaking from experience, 360W panels can cost nearly twice that of 300W panels, both of high quality and reputation, and of the same dimensions (same “footprint”). The only difference is the power produced. Then there are discount panels that some install that other contractors refuse to even offer, let alone sneak into a contract. These panels work, but are made cheaply and flimsy (installers can testify!).
That’s only panels, think about all the other material such as racking, the inverter, and all the nuts and bolts to put your system together. Even electrical connectors, although a very inexpensive part of the project, can be purchased cheaply if the contractor disregards quality of material.
Of course, there is another area that heavily influences prices. Over-head. Some may be surprised to know that overhead in the business world includes debt. Therefore, a company can compensate for their “overhead” by charging you more, when the only thing you’re paying more for is their interest payments to creditors. Then there is the more legitimate and customary thought of “overhead”, such as office administrators, store-fronts, office rent, company vehicles, phone and internet, marketing and advertisement, worker’s compensation, insurances, etc. If you go with a smaller company with no debt and low overhead, it’s to be expected that the price will be 20-30% lower than your other bids.
When considering a home improvement project amounting to $10-$50,000 - such as a solar project - it’s important to know the price range you should be in. Once you have a few quotes in that price range, and you have narrowed down your selection, ask yourself if their quality of product and services are comparable. If they are, it is best to go with the contractor you feel has the skills and determination to perform the highest quality work. This includes designing your system to meet your needs, and installing your system in a way that is aesthetically appealing AND (possibly more important) structurally sound in every way.
No matter the size of the company or the warranty, nothing is more disappointing than a home improvement project that caused more problems in the future, or left you completely and unexpectedly disappointed at the end result. Craftsmanship should always take priority over price when hiring a contractor. Still, no one should fault you for expecting the price to fall within an expected range, as discussed above.
To be continued: Part Two, “the Price you Pay”