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Have You Considered Installing Solar Panels?

Image of Dana Bres, PD&R Senior Advisor for Disaster Response.Dana Bres, PD&R Senior Advisor for Disaster Response.

Solar panels (also known as photovoltaic panels) rely on the reaction of electrons in the panels to sunlight to generate electricity. Although photovoltaic technology has been known for more than 150 years, it became commercially viable only in the late 20th century. Solar energy was first used in satellites during the early days of space exploration and was prohibitively expensive for consumer use, but in recent years, decreasing costs have made solar panels a viable option for powering homes and businesses.

Currently, solar electrical systems with a capacity of less than 10 kilowatts are common in residential installations. Large utility-level systems are capable of generating more than 100 megawatts, or 10,000 times more output than the 10 kilowatt systems.

The past 25 years have seen a dramatic increase in the use of solar power for residences. Residential systems consist of the solar panels, an inverter, and the necessary switches and connections to safely connect the system to the home and electric meter. Most residential installations do not use storage batteries, relying instead on systems that send power not immediately needed at the home to the larger electric grid.

The U.S. Department of Energy’s (DOE’s) Energy Information Administration provides information on the installed capacity of the solar industry. By 2020, solar energy (including both utility- and small-scale installations) is expected to equal the current U.S. hydroelectric generation capacity of approximately 79 gigawatts — a remarkable achievement considering that in 2015, the nation’s solar capacity was less than one-third of its hydroelectric capacity.

Since 2005, the number of homes with solar panels has increased from approximately 100,000 to 2 million. This growth can be attributed to improved panel efficiency, less expensive panels, a desire to use renewable energy, and the availability of tax credits for making homes energy efficient. Since 2005, the federal government has offered tax credits of up to 30 percent of the installation cost of solar electrical systems, and some states also offer their own tax credits. The DOE-supported Database of State Incentives for Renewables and Efficiency catalogs programs to encourage the use of renewables.

Bar chart showing the monthly output of the author’s solar pals in kilowatt-hours per month.

In the 1990s, solar panels cost approximately $23 per watt. (This reflects the cost of the installed panels and their electrical output) Since then, the cost has fallen dramatically because of market capacity, competition, manufacturing improvements, and improved performance. In early 2017, I installed solar panels on my home. The size of my roof limited the installation to 16 panels. I selected panels that each generate 285 watts for a total of 4.56 kilowatts at a cost of $3.05 per watt. The 30 percent federal tax credit reduced this cost to $2.14 per watt. At the time, the vendor I used offered three other panel options that would generate 320 watts ($3.35 per watt), 300 watts ($3.15 per watt), and 270 watts ($2.75 per watt), before the tax credit.

The government of Arlington County, Virginia, partnered with a nonprofit solar cooperative, Virginia Solar United Neighbors, that allowed local homeowners to purchase solar installations for their homes as a group to access discounted rates from vendors. Other local governments may offer similar support for residents.

Actual Performance and Cost

The actual performance of the panels depends on the weather. Although day-to-day electricity generation may vary considerably, the energy output is consistent from year to year. For my installation in Arlington, Virginia, the annual production over a 35-month period from February 2017 through December 2019 varied by only 3 to 7 percent. (Energy output for 2018 was less than that for 2017 or 2019, likely because of the record rainfall in the Washington, DC metropolitan area that year). Seasonal variation in the angle of the sun as well as the number of daylight hours also affects power generation; in the DC metropolitan area, daylight lasts 9 hours and 26 minutes of daylight during the winter solstice and 14 hours and 53 minutes during the summer solstice. Figure 1 shows the monthly output from those panels.

A screenshot of a mobile application for monitoring the status of solar panels, showing solar production over time.

Over the 35 months, the panels generated 15,917 kWh, offsetting approximately $1,900 in electricity costs. During this period, the solar panels generated about one-third of the total power used at my home. Considering the system cost of $9,735 after tax credits, the simple payback for the system would be about 15 years.

This payback period may be shortened in states with initiatives that promote the use of renewable power. Some states require utilities to generate a portion of their electrical power from renewable sources. To meet these requirements, the utility companies often buy Solar Renewable Energy Certificates (SRECs). Depending on the market, these certificates may be quite valuable. In the District of Columbia, one SREC is worth roughly $440 per megawatt-hour, so I would receive approximately $2,200 in additional payments per year for my home’s panels if I lived in the District. In Maryland, one SREC is worth approximately $70 per megawatt-hour. No market for SRECs exists in Virginia. Adding this $2,200 to the existing energy savings and tax credits would change the simple payback period for solar panels in the District of Columbia to slightly more than three years.

Installation in the Home

Before installing solar panels, homeowners must weatherize their home. Weatherization is critical because energy conservation is almost always less expensive than solar power. Strategies such as relamping, installing energy-efficient appliances, air sealing and weather stripping, insulating, or other approaches can be performed quickly and cost effectively. Homeowners considering solar panels should pursue an energy audit to identify the sources of energy waste. An energy audit will cost less than a few solar panels, and most of the strategies identified in the energy audit will help reduce your energy demand.

For homes north of the equator, solar panels typically are installed on an unshaded south- or west-facing roof. The installer will generally verify the feasibility of installation onsite or with satellite imagery. This first step will allow homeowners to make more informed decisions and achieve satisfactory results. The installation also includes an inverter to convert the direct current from the panels into the alternating current used in the home. Because most residential installations do not include batteries for energy storage, solar panels go offline during power outages. Although having the panels be inoperable during a power outage may seem nonsensical, this feature helps protect utility workers who are restoring the power grid; if the panels were live and connected, their power could “backfeed” into the grid, which could be fatal. Battery storage, while not widely used, allows homes to maintain power during outages.

Because I installed my panels through a solar cooperative, I didn’t have to research and select a capable contractor. If the solar cooperative were not available, the process to identify potential contractors would have been more involved. Getting referrals from the active community of solar advocates is one good way to identify good contractors and avoid pitfalls.

Solar panels have been installed on the roof of a home in a wooded area. A ladder on the left side of the home provides access to the roof for the workers installing the solar panels.Solar panels installed on the author’s roof.

Before installation, the contractor will determine whether the panels can be safely installed, identify the locations of the necessary equipment, and develop an installation plan. The average system takes approximately a day to install. If the roof shingles are not in good shape, this is a good time to replace them.

After the necessary building permits have been secured and the panels have been installed and inspected, the contractor coordinates approval from the local electric utility company to connect the system to the power grid. This approval allows the residential system to deliver power in excess of the home’s needs to the local grid. Most states permit some degree of net metering; Virginia, for example, limits residential systems to 20 kilowatts.

The contractor typically is affiliated with a manufacturer and will provide tools for monitoring the status of the panels using your smartphone, as shown above.

Financing the Installation

Homeowners can pursue three general strategies to finance solar installations. The first, a solar lease arrangement, allows a low- or no-cost installation with a long-term payment for the lease. In essence, the solar company provides the panels, and the homeowner agrees to buy the power generated by those panels. In a second approach, some communities have a property assessed clean energy (PACE) program in which homeowners finance and pay for the panels as part of their property tax. Both approaches can result in a long-term obligation that may complicate a future home sale — the purchaser would be obligated to assume responsibility for the payments. The third approach involves directly purchasing the panels with no obligation for future homebuyers.

The decision to install residential solar is likely based on both economic and environmental reasons. This note is intended to facilitate awareness and inform the decision making process.

Note:

The watt is the unit measuring energy produced (or consumed). The amount of power produced over time is a watt-hour. A solar panel producing 200 watts operating for 5 hours will produce 1,000 watt-hours, or 1 kilowatt-hour (kWh). My home uses an average of 800 kWh of electricity each month. In my community, each kilowatt-hour costs approximately $0.13. One thousand kWh, or 1 million watt-hours, is a megawatt-hour (MWh), and 1,000 MWh is a gigawatt-hour.

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Virginia Solar United Neighbors (VA SUN) operates a solar cooperative in Virginia. Similar organizations exist in the District of Columbia, Maryland, West Virginia, Ohio, and Florida operating as part of the Community Power Network and similar cooperatives exist across the United States.

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This estimate does not consider inflation in the cost of electricity or the opportunity cost if I had invested the money differently.

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To satisfy a state requirement for power from renewable sources, SRECs allow utilities to purchase the “credit” for the production from residential solar systems. The money from those purchases is then provided to the owner of the home with the solar panels.

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Battery systems would include switches to disconnect the home from the electric grid during outages. These disconnects are widely used when installing backup generators.

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Note: Guidance documents, except when based on statutory or regulatory authority or law, do not have the force and effect of law and are not meant to bind the public in any way. Guidance documents are intended only to provide clarity to the public regarding existing requirements under the law or agency policies.