Pricing PV Systems and Financing Ideas
The cost of a PV system depends on the system size, equipment options (panels and inverters), permitting costs, and labor costs. Prices vary depending on other factors as well, such as whether your home is new, where the system is installed on your premise, the PV manufacturer, and other factors.
For example, the total average cost of an installed residential PV system under the California Solar Initiative is $8.70 per Watt (including installation, as of January 2011). That translates to about $34,800 for a four-kilowatt system, the average size of a residential installation. To see real average cost data for solar projects installed near you, visit the Find a Contractor page on California Solar Statistics.
Because of the declining rebates in the California solar programs, the sooner you install your system, the better your incentive and rebate will be. Click here to view the current rebate levels at the CSI Trigger Tracker.
Depending on your pre-installation electricity usage, you can expect rates of return between 9% and 14% on your PV installation. Please see Calculators to estimate the full cost of your solar system. For example, using the Clean Power Estimator, a south-facing three-kilowatt system installed at a 30-degree angle on a single-family home with a utility bill of $180 per month in San Francisco would cost a customer an estimated $19,282 with a payback period of 12 years.
- Is there a buy-out provision?
- What happens if the contractor goes out of business?
- Is there opportunity to pay some up front and some later?
Financing a Solar Energy System
Solar customers have multiple options when financing their solar energy systems:
Home Equity Loans – Many customers go through their commercial lenders to finance their solar energy systems, and home equity loans have been the most common method for homeowners to purchase their solar systems. To find out more about home equity loans, you can contact your local providers, though many solar contractors have partnerships with existing lenders.
Power Purchase Agreements – Under a “PPA,” a third party owns and maintains the customer solar system, selling the kilowatt-hours back to the customer. Thus, customers who opt for a solar PPAtypically have low capital costs and pay only for the electricity their solar systems generate. Both SolarTech and the Rahus Institute offer helpful guides and additional information on solar PPAs.
Solar Leases – By leasing a solar system, customers can get the benefits of owning a solar system without the capital costs. Solar customers opting for solar leases simply rent the solar system from a company as they would any other home appliance while earning the benefits from the electricity the system produces. Solar leases are attractive options for home or business owners that plan to at their business or office for less than five years. For more reading, Mother Jones Magazine has an excellent February 2010 article titled: “If You Can’t Afford to Buy a PV System, Consider Renting One“.
Property Assessed Clean Energy (PACE) – Solar customers likewise may have the option to finance their solar systems through their local governments. Local governments can create property tax finance districts to issue loans for energy efficiency and renewable energy such as solar PV systems. PACE allows local governments to provide low-cost, 20-year loans to eligible property owners seeking to install these technologies. The solar customer then pays more on the annual property tax bill to repay the loan. The loans are permanently fixed to real property, so that residents need not worry about their system’s break-even point and can pass the loan payments on to subsequent buyers of the property. Renewable Funding offers helpful additional information about PACE, and presently PACE programs are in place in the following communities:
- Western Riverside Council of Governments
- City of Yucaipa’s Energy Independence Program
- Sonoma County, California Energy Independence Program
- Palm Desert, California Energy Independence Program
- San Francisco, California GreenFinanceSF Program
- Los Angeles County, California
Note that affordable housing customers that wish to deploy solar systems have different pricing mechanisms and incentives with the California Solar Initiative through the Single Family Affordable Solar Housing (SASH) and Multi-Family Affordable Solar Housing Programs (MASH). For more information and program eligibility, please see theAffordable Housing section.
The California Solar Initiative Incentives Explained
Because of the triggering mechanism in the California Solar Initiative, as explained below, the sooner you purchase and install your system, the better your incentive and rebate will be. Incentive amounts will likewise vary depending on your solar system size, system performance, customer class, utility provider, and program deployment phase.Click here to view the current incentive and tariff levels.
The California Solar Initiative offers financial incentives for solar installations based on the expected performance of a given solar installation. The expected performance is derived from the size of the solar array, and also takes into consideration the angle and location of the system installation. For larger systems, the incentive is based on the actual performance of the system over the first five years.
The incentive level available to a given project is determined by currently available incentive in each utility territory for each customer class. The CSI was designed so that the incentive level decreases over ten steps, after which it goes to $0, as the total demand for solar energy systems grows.
The CPUC divided the overall goal of 1,750 megawatts by these ten declining steps. Each step has megawatts allocated to each Program Administrator and customer class, residential and non-residential (a combination of commercial and government/non-profit). Once the total number of megawatts for each step is reached within a particular customer class, the Program Administrator moves to the next step and offers a lower incentive level for that class. Therefore, high commercial demand in SCE’s territory will not lower the incentive level offered to PG&E’s residential customers, and so on. Figure 1 offers a visual explanation of the increasing megawatt installations and decreasing incentive levels over the life of the program. The orange box in each “Incentive Step Level” represents the available megawatts at that incentive value. The yellow box represents the cumulative installed megawatts as the program proceeds through the steps.
The California Solar Initiative pays solar consumers their incentive either all-at-once for smaller systems, or over the course of five years for larger systems. The program’s two incentive payment types are:
Expected Performance-Based Buy-Down, or EPBB:
In 2008-9, systems smaller than 50kW in capacity can receive a one-time, up-front incentive based on expected performance, and calculated by equipment ratings and installation factors (geographic location, tilt and shading). EPBB payments are provided on a $ per watt basis. EPBB is available for systems under 30 KW after 2010. Systems eligible for EPBB can choose to opt-in to the PBI system described below.
Performance Based Incentive, or PBI:
The PBI pays out an incentive, based on actual kWh production, over a period of five years. PBI payments are provided on a $ per kilowatt-hour basis. As of 2010 all systems over 30 kW must be on PBI, though sized system can elect to take PBI.
Solar customers should also check with their local government agencies for additional programs, incentives, or information. See the Solar Incentives by Utility page for a full list of California solar programs, or click here to Find Your Utility.