Prices for Solar Energy

In comparison to conventional hydrocarbon fuels such as coal or oil in generating electricity, the cost of solar energy is significantly higher. To compare energy cost, a common equivalent is required, so it’s best to measure energy costs by converting costs to kilowatt-hours (KWH). A ton of coal on the average produces approximately 6,182 KWH of electric at a cost of about $36 per short ton. Under this measure, coal costs less than $0,01 per KWH. To make a comparison, let’s take barrel of oil at $70/barrel, which produces 1,700 KWH at a cost approximately $0,05 per KWH.

In comparison to solar energy, the hydrocarbon fuels costs are significantly lower without rebates, tax benefits or the cost of carbon emissions. A two-kilowatt (KW) solar energy system costs about $45,000 and covers roughly half of a typical American household’s energy needs. A $45,000, a solar energy system equates $9,000 a kilowatt. The $9,000 per KW for solar energy isn’t very helpful in comparing electric generation costs to other fuels like coal or gas. Since coal, oil and gas can be measured on a cost per KWH, we should measure solar costs on a KWH basis.

Some of the considerations for solar energy system include to 20 to 30 year lifespan of the system and the hours of available sunlight. The hours of available sunlight depends on latitude, climate, unblocked exposure to the sun, ability to tilt panels towards the sun, seasonality and temperature. On the average, approximately 3,6 peak sunlight hours per day serves as a reasonable proxy to calculate the average annual output of electric from solar energy panels.

If we consider that average system costs approximately $95 per square foot, and that average solar panel output makes 10.6 watts per square foot, we’ll get that average solar energy system costs $8,95 per watt. In order to compare the solar energy to conventional hydrocarbon fuels, we must convert the $8,95 per watt into KWH, so a $45,000 solar energy system produces about 119,246 KWH of electric over its lifespan meaning that average costs equals $0,38 per KWH.

The relatively high solar energy costs in comparison to conventional fuels should improve with utility rebates and government tax incentives. In addition, solar panel prices should continue to decline as volume production increases.

Before making any conclusion, you have to know that there is considerable variance in the cost of solar energy because sunlight availability varies by geography and climate.