How do you calculate solar power system costs over time?

1 Determine your energy needs

The first step is to figure out how much electricity you use and need on a daily, monthly, and yearly basis. You can check your utility bills, use an online calculator, or consult a solar installer for this information. Your energy needs will affect the size and capacity of your solar power system, as well as the amount of excess or deficit power you might generate or consume from the grid.

2 Choose your solar power system type

The next step is to decide what type of solar power system you want to install. There are two main types: grid-tied and off-grid. Grid-tied systems are connected to the utility grid and can sell excess power back to the utility or buy power from the grid when needed. Off-grid systems are not connected to the grid and rely on batteries or generators for backup power. Grid-tied systems are usually cheaper and easier to install, but they also depend on the grid availability and rates. Off-grid systems are more expensive and complex, but they also offer more autonomy and resilience.

3 Estimate your system cost and performance

The third step is to estimate how much your solar power system will cost to buy and install, and how well it will perform over time. The cost of your system will depend on the size, type, quality, and location of your solar panels, inverters, batteries, wiring, mounting, and labor. The performance of your system will depend on the solar irradiance, orientation, tilt, shading, efficiency, degradation, and losses of your components. You can use online tools, quotes from solar installers, or formulas to calculate these values.

4 Factor in your incentives and savings

The fourth step is to factor in the incentives and savings that you might qualify for or benefit from by installing a solar power system. Incentives are financial or regulatory benefits that encourage or support solar adoption, such as tax credits, rebates, subsidies, net metering, feed-in tariffs, or renewable energy certificates. Savings are the reductions in your electricity bills or costs that result from generating your own power or selling it back to the grid. You can research the incentives and savings available in your area and apply them to your system cost and performance.

5 Calculate your payback period and return on investment

The fifth step is to calculate how long it will take for your solar power system to pay for itself and how much profit it will generate over its lifetime. The payback period is the time it takes for your cumulative savings to equal your cumulative costs. The return on investment (ROI) is the ratio of your net profit to your initial investment. You can use online calculators, spreadsheets, or formulas to calculate these metrics.

6 Compare your options and scenarios

The final step is to compare your different options and scenarios for installing a solar power system. You can vary the parameters and assumptions that affect your system cost and performance, such as the system size, type, quality, location, incentives, savings, degradation, and inflation. You can also compare your solar power system to other alternatives, such as staying with the grid or switching to another renewable energy source. By comparing your options and scenarios, you can find the best solution for your energy needs and budget.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?