Energy from the sun is free. However, capturing and utilizing this free energy does have associated costs, such as installing and maintaining the equipment needed to harness the energy.
Residential System Pricing
Solar Thermal System Pricing
Solar water heating systems generally produce the biggest economic return on investment. A typical residential solar water heating system sized for a family of four costs about $6,000 to $8,000.
Solar Electric System Pricing
The initial investment required to purchase a residential solar electric system can be significant. A turn-key system equipped to produce enough power for the average home can be as much as $30,000 - $36,000, which is why most homeowners choose a solar electric system that is designed to offset only a portion of the home's electrical energy consumption.
An average home in Alabama consumes 1,200 kWh of electricity each month. A solar electric system rated at one kilowatt will produce approximately 100 kWh of electricity per month in Alabama, which means the average house would require an approximately 12-kilowatt (kW) system with battery back-up in order to meet 100% of the household electricity needs.
Installing a solar electric system without batteries averages between $2,500 to $3,000 per kW. Therefore, the average homeowner would have to make an initial equipment investment of $30,000 to $36,000 for a 12-kW system. In Alabama, with electric costs averaging $0.125/kWh, the annual electric utility cost for the average homeowner would be $1,800.
Without incentives, it would take over 20 years to get a return on the investment of a whole-house solar electric system.
Tax Credits and Incentives
For a typical household, the prospect of paying up to $100,000 for solar panels is prohibitive; however, incentives in the form of tax credits and low interest loans can help offset the cost. A 30% federal tax credit is currently available through 2016 for installing a solar energy system.
When you install your solar system, 30% of your project expenses apply toward a credit to offset any taxes you owe that year. This federal tax credit is a major incentive to go solar, but it is being phased out by 2022.
Most people are eligible to claim this credit (you must owe federal taxes to be eligible).