Author: Phil Taylor-Parker

The Pros & Cons of Solar Leases and Solar PPAs

The Pros & Cons of Solar Leases and Solar PPAs

Summary: Solar Leases & Solar PPAs

Under solar leases and PPAs (power purchasing agreements), your solar installer will build a system on your property, then charge you a monthly fee to use the power it produces. These contracts offer a great way for homeowners to go solar for no money down upfront, but the tradeoff is a much lower return on investment over the life of the system.

Solar leases and solar PPAs (power purchasing agreements) offer a way for people to put solar panels on their homes with no up-front cost.

In simple terms, a solar lease / solar PPA is a rental agreement between a solar installer and the homeowner. Under these agreements, the installer builds a solar power system on the homeowner’s property, but the solar installer retains ownership of the system. 

The homeowner then rents the use of the system, paying a monthly fee to use the energy generated by the panels.

We have traditionally been opposed to solar leases and PPAs because the terms of the contracts heavily favor the installer. For those who want to maximize ROI and save as much as possible on their energy bills, buying your system with cash is a much better option than leasing solar panels.

However, if a cash purchase isn’t in the budget, leases and PPAs still cost less than buying power from the utility. So we still think it’s a great way to go solar for people who don’t have the option to purchase a system outright.

In this article, we’ll explain how solar leases and PPAs work, then compare the pros and cons of these agreements vs. buying your system with cash.

How Do Solar Leases and Solar PPAs Work?

First, let’s look at how solar leases and PPAs are structured.

For both options, the leasing company installs a system on your home, which they own. This detail is important because it allows the leasing company to claim the 30% Federal Tax Credit and any other local rebates and incentives, which are awarded to the owner of the system.

Once it’s installed, you pay a monthly fee to the leasing company for the power produced by the panels. This is where leases and PPAs differ:

Under a solar lease, you pay a flat monthly fee to use the system. The fee is calculated based on the average estimated production of the system. The true production will likely be higher in the summer and lower in the winter, but in either case you pay a fixed monthly fee.

Under a solar PPA (power purchasing agreement), you are only billed for the energy you use. The contract sets a price-per-kWh which is typically a few cents less than what the utility company charges. For example, if the utility rate is $0.14/kWh, your solar PPA may bill you at a rate of $0.11/kWh.

Pros of Solar Leases & PPAs

Go Solar For $0 Down

The main benefit of solar leases and PPAs is that they don’t cost the homeowner anything upfront. The installer builds the system for free, and the homeowner immediately benefits from a lower monthly power bill.

It’s a win-win situation: the installer makes their money by claiming tax incentives and charging a monthly fee for the system’s output, while the homeowner saves on power bills and goes solar for no money down.

No Obligation To Do Maintenance / Repairs

The other nice thing about leasing is that the leasing company is typically responsible for any maintenance or repairs to the system. They’re responsible for the system’s upkeep, so whenever repairs or replacements are needed, you won’t need to go through the hassle of filing warranty claims or finding a contractor to do the work.

Solar panels don’t need much maintenance, but other parts may be due for replacements over the life of the system. For example, string inverters typically need to be replaced once or twice because they have a 10-12 year warranty (compared to 25 years on solar panels). It’s nice to be able to leave this work to the leasing company so you don’t have to worry about it.

Cons of Solar Leases & PPAs

You Miss Out On Tax Incentives & Rebates

As the owner of the system, the leasing company has the right to claim the 30% Federal Tax Credit, as well as any state or local incentives available. 

If you purchase your system, you would be eligible to claim those credits for yourself. For an average-sized system worth $10,000, that credit would put $3,000 back in your pocket. 

Tax credits and incentives have a major impact on the payback period and ROI of your system. Forfeiting those incentives to the leasing company means you pay significantly more for your system.

Yearly Rate Escalations

Leases and PPAs contain a yearly escalation clause that increases your rate each year. A rate increase of 3-4% per year is typical.

If your lease payment starts at $100/mo., that would double to $203/mo. by the end of the 25-year term.

What’s worse, the rates in solar leases and PPAs escalate about twice as fast as the cost of electricity from utility companies (around 1.5% per year). So the payment may start way lower than your current electric bill, but that gap will likely shrink near the end of your contract.

To many customers, leases and PPAs can seem like a better deal than they really are, because they underestimate how much the yearly escalator will cost them.

One of the benefits of buying a solar system is locking in your cost of electricity. Once you own your system, you’re free from paying your monthly electric bill for the next 25 years. That makes you immune to annual rate increases from the utility company, but only if you own your system. 

It’s Harder To Sell Your Home

If you decide to move, you will need to find a buyer who is willing to inherit your solar contract—or buy it out yourself.

Once you get deeper into the contract, the escalators can make it so the solar payment becomes higher than the cost of electricity from the utility—which makes it a losing proposition for the prospective buyer. 

The other option is to buy out the system yourself, but that defeats the purpose of leases and PPAs, which are appealing mainly because they let you pay $0 down upfront to go solar. If you end up buying your system when you sell your home, that negates much of the value of your agreement.

For a first-hand account of the challenges of buying and selling a home with a leased solar system, check out this Bloomberg article: 

“What Happened When I Bought a Home With Sunrun Solar Panels”

Reduced Energy Savings

By sacrificing the tax credit and agreeing to a yearly rate increase, you miss out on most of the money you could save if you purchase the system yourself.

Here’s a comparison of the potential savings on a $5,765 system under four different payment plans:

  • Cash purchase
  • Personal loan of $11,000 at 5.75% interest rate over 7 years
  • Solar lease @ $75/mo. with 3%/yr. escalator
  • Solar PPA @ $0.12/kWh with 3%/yr. escalator 

For the purchase and personal loan options, the value of the 30% tax credit is included because you own your system. We also factor in a $1/watt installation charge for these options.

For leases and PPAs, we did not add the installation charge because it is included as part of the package. We also leave out the tax credit, because that belongs to the solar company that owns the system.

You can see that buying your system outright puts you in a hole up front, but the ROI breaks even with leases and PPAs before the 10-year mark. By the end of the warranty period, buying a system is roughly 3x more valuable than entering a lease or PPA agreement. 

The latter options are still profitable, but the energy savings are severely limited by the terms of the contract.

Are Solar Leases and PPAs Worth It?

Leases and PPAs are quite comparable in terms of value. It’s hard to say one option is better than the other, because it all comes down to the terms of the contract. 

If you enter a solar lease or PPA, examine the terms of the contract carefully and do the math to understand how much payments will increase over the life of the system. Use our guide to calculating solar ROI to work out your energy savings over the life of the contract.

However, one thing is clear: buying your system is a better option financially than either leases or PPAs, and it’s not even close.

If you would prefer to own your system, but a cash purchase isn’t in your budget, we would strongly recommend an alternative to solar leases or PPAs: taking out a personal loan at your bank.

By financing your system with a personal loan, you’ll still be the owner of your system. That allows you to claim any tax incentives and protects you from future rate increases, which has a major impact on your return on investment, as you can see in the graph above.

To put it simply: if you are looking for a way to finance your solar system, the smartest options (in order from best to worst) are:

  1. Cash purchase
  2. Personal Loan
  3. Solar Lease / PPA
  4. Buying Power From Utility

In conclusion, there’s no wrong way to go solar. But leases and PPAs are certainly the least appealing option of the bunch.

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The Federal Solar Tax Credit, Explained in Plain English

The Federal Solar Tax Credit, Explained in Plain English

What is the federal solar tax credit?

When you install a solar system, 30% of your total project costs (including equipment, permitting and installation) can be claimed as a credit on your federal tax return. If you spend $10,000 on your system, you owe $3,000 less in taxes the following year. The solar tax credit expires in 2022.

The 30% Federal Solar Tax Credit can save you thousands when you switch to solar. But how does it work?

We’re here to explain the Federal Solar Tax Credit in plain English. If you want a basic overview of solar incentives without wading through the tax jargon, you’re in the right place.

What is the Federal Tax Credit for Solar?

When you install a solar power system, the federal government rewards you with a tax credit for investing in solar energy.

A tax credit is a dollar-for-dollar reduction of the income tax you owe. $1 credit = $1 less you pay in taxes. It’s that simple.

A quick but necessary disclaimer: we’re solar experts, not tax accountants! We do our best to give accurate advice, but please check with a professional to be sure you’re eligible to claim the credit.

For example, let’s say you owe $5,000 in federal taxes this year. If you claim a $3,000 tax credit, that pays off part of your liability. You would be left to pay just $2,000 in taxes after the credit is applied.

It’s different than a refund, because you have to owe taxes to claim the incentive. But since most people owe taxes, most people end up being eligible.

How much money do I save with the Federal Tax Credit?

Right now, the Solar Investment Tax Credit (ITC) is worth 30% of your total system cost. This includes the value of parts and contractor fees for the installation.

If it costs $10,000 to buy and install your system, you would be owed a $3,000 credit.

You are only allowed to claim the credit if you own your system. This is why we’re strongly opposed to solar leasing if you can avoid it. If another company leases you the system, they still own the equipment, so they get to claim the incentives.

You still get the benefits of cheap, renewable energy. But missing out on the tax credit is a huge blow to getting a positive ROI from your system.

solar guide

Free Federal Tax Credit Guide

Learn More »

It makes more sense to finance instead. You’re still on the hook for a loan, but you retain rights to the incentives that help make solar such a sound investment.

How Long Will the Federal Tax Credit Stay in Effect?

As the saying goes, “all good things must come to an end.”

Soon, the federal government will begin trimming back on its 30% tax credit incentive.

The credit steps down in value over the next few years, until it disappears completely for residential customers in 2022. Here’s the value of the federal tax credit over the next five years:

  • 2018: 30%
  • 2019: 30%
  • 2020: 26%
  • 2021: 22%
  • 2022: 0% (10% for commercial projects)
The rate of the federal tax credit for solar installations through 2022.
The Federal Tax Credit is slated to be phased out by 2022.

You can claim the credit in the same year you complete the installation.

The tax credit plays a major part in the return on investment you see from going solar. It won’t be around forever, but the good news is you still have at least another year to capitalize on the full 30% credit.

How do I claim the Federal Tax Credit?

So let’s get to the good stuff. What do you need to do to actually get your hands on this money?

Our first bit of advice is to keep all your receipts from the start. The more you spend on your project, the larger your credit – make sure to keep track of everything!

Here are some of the expenses that you are allowed to claim:

  • Solar equipment
  • Freight shipping costs
  • Solar consulting fees
  • Professional installer fees
  • Electrician fees
  • Engineer fees
  • Tools bought or rented
  • Wiring, screws, bolts, nails, etc.
  • Equipment purchased or rented (scaffolding or a man-lift, for example)
  • Permitting fees
  • Permitting service costs

Costs will vary depending on the approach you take to installation. Hiring a contractor is an expense that can be claimed.

You can also choose to install the system yourself. Although you can’t claim your own labor as an expense for the credit, you still come out far ahead on overall project costs.

The graph below shows a comparison of the total installed costs (post-Federal Tax Credit) of the same exact system when you choose to DIY, hire locally, or source the work to a national installer:

Solar Installation Costs after Federal Tax Credit has been applied

How to File Form 5695 With Your 1040 Individual Tax Return

Once you’ve spent the money, you’ll need to prove it to the government to claim your tax credit. For that, you need IRS Form 5695 to claim the residential energy credit.

If you file your own taxes, use the steps below to claim your Residential Renewable Energy Tax Credit.

  • Gather all your expense receipts and put them in a safe place.
  • Confirm you are eligible for the tax credit. (If you own the system and owe taxes, you’re probably eligible. Check with a tax specialist if you’re not sure.)
  • Complete IRS Form 5695 to add up your renewable energy credits (click the link for a step-by-step walkthrough on filing your tax forms).
  • Add your renewable energy credit information to your typical form 1040.

That’s it!

We hope this serves as a good introduction to the Federal Tax Credit and helps you navigate the research process. If you need help from a solar designer, get in touch with us for a consultation. We’re happy to walk you through any questions you may have.

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How many solar panels do I need to power my home?

How many solar panels do I need to power my home?

How many solar panels do I need to power my home?

Solar systems are sized based on your energy usage in kilowatt-hours (kWh). But if you don’t have those numbers handy, this article offers ballpark system sizes based on familiar reference points, like square footage or number of bedrooms in your home.

When people first consider the idea of going solar, one of the very first questions that comes to mind is “how many solar panels do I need to power my home?”

Though the only accurate and reliable way to size a solar system is based on your personal energy usage, we understand not everyone has that information readily accessible. For those of you just beginning your solar research, we wanted to provide benchmark system sizes based on familiar reference points, like square footage and number of bedrooms in your home, to give you a starting point for your research.

Before we go further, we should be clear: these tables are estimates projected based on US national averages. Your energy needs may differ from what is typical of the average American home.

These tables give a benchmark to help you answer preliminary questions like how many panels can fit on your roof and whether going solar fits within your budget. If you decide to move forward, you will need to gather energy usage data and size a system around your individual needs.

Jump to the data:

How many solar panels do I need…

Methodology

We referenced US Census data on average household energy usage, cost of electricity, and occupancy per square foot in the US to work out these projections. In all cases, the tables shown reflects how many solar panels you would need to fully power an “average” American home based on the data available to us.

Because panels come in a wide range of wattages, we’ve run the numbers for two different panel sizes: 315W and 375W. If you opt for lower-efficiency panels, you’ll need more panels in your array to hit the target production number.

Keep this in mind if space is a concern. With limited roof space, you may need to invest in more efficient panels to be able to fit the array on your roof. We’ve provided a range in our projections (from 315W to 375W) to give you a sense of how much it impacts the physical layout of the array.

How many solar panels do I need based on the square footage of my house?

Know the square footage of your home? This table cross-references on US Census data on the average household square footage against the average monthly electric usage of an American household to estimate how many panels you may need based on the size of your home.

Square FootageTypical System Size# of panels (375W)# of panels (315W)Sample System
2500.66 kW23Shop
5001.33 kW45Shop
7501.99 kW67Shop
1,0002.66 kW89Shop
1,2503.32 kW911Shop
1,5003.99 kW1113Shop
1,7504.65 kW1315Shop
2,0005.32 kW1517Shop
2,2505.98 kW1619Shop
2,5006.65 kW1822Shop
2,7507.31 kW2024Shop
3,0007.98 kW2226Shop
3,2508.64 kW2428Shop
3,5009.31 kW2530Shop
3,7509.97 kW2732Shop
4,00010.64 kW2934Shop
4,25011.30 kW3136Shop
4,50011.97 kW3238Shop
4,75012.63 kW3441Shop
5,00013.30 kW3643Shop

How many solar panels do I need based on the number of bedrooms in my home?

If you don’t know the square footage of your house off the top of your head, we’ve also estimated average system size based on the number of bedrooms in your home. 

These estimates are based on research from the NAHB (National Association of Homebuilders) which reports the average American home has 3.38 bedrooms. We’ve referenced that figure against the average monthly electric usage of an American household to produce the table below.

BedroomsTypical System Size# of panels (375W)# of panels (315W)Sample System
11.94 kW67Shop
23.88 kW1113Shop
35.82 kW1619Shop
47.75 kW2125Shop
59.69 kW2631Shop
611.63 kW3237Shop

How many solar panels do I need to eliminate my electric bill?

Lastly, let’s assume you pay the national average rate for electricity, which is 13.3 cents/kWh.  Here’s how many solar panels you would need based on your average monthly electric bill.

Electric BillTypical System Size# of panels (375W)# of panels (315W)Sample System
$201.08 kW34Shop
$402.16 kW67Shop
$603.23 kW911Shop
$804.31 kW1214Shop
$1005.39 kW1518Shop
$1206.47 kW1821Shop
$1407.55 kW2124Shop
$1608.62 kW2328Shop
$1809.70 kW2631Shop
$20010.78 kW2935Shop
$22512.13 kW3339Shop
$25013.47 kW3643Shop
$27514.82 kW4048Shop
$30016.17 kW4452Shop
$32517.52 kW4756Shop
$35018.86 kW5160Shop
$37520.21 kW5465Shop
$40021.56 kW5869Shop

How many solar panels do you need based on your kWh usage?

The tables above simply give a starting point to get you in the ballpark. If you decide to move forward with your project, you’ll need to go through a more accurate sizing process based on your personal energy usage.

Energy usage is measured in kilowatt-hours (kWh), which can be found on your monthly electric bill. 

Ideally, you want to base your system design off the past 12 months of electric bills, to account for peaks and valleys in usage. Bills tend to be higher during summer and winter due to the need to run A/C and heat.

The table below shows benchmark system sizes based on your average monthly energy usage. This is the most accurate way to size out your system, so if you have your energy usage data available, we’d recommend starting here.

Monthly kWh UsageTypical System Size# of panels (375W)# of panels (315W)Sample System
1000.72 kW23Shop
2001.43 kW45Shop
3002.15 kW67Shop
4002.87 kW810Shop
5003.58 kW1012Shop
6004.30 kW1214Shop
7005.02 kW1416Shop
8005.73 kW1619Shop
9006.45 kW1821Shop
1,0007.17 kW2023Shop
1,2008.60 kW2328Shop
1,40010.04 kW2732Shop
1,60011.47 kW3137Shop
1,80012.90 kW3541Shop
2,00014.34 kW3946Shop
2,25016.13 kW4452Shop
2,50017.92 kW4857Shop
2,75019.71 kW5363Shop
3,00021.51 kW5869Shop

To hone in on a more accurate figure, head over to our solar cost calculator and enter your ZIP code and energy usage data. We’ll provide an accurate cost and system size estimate that takes your usage and local climate into account.

Download our free solar panel buying guide!
Bifacial Solar Panels Aren’t Quite Ready For Primetime

Bifacial Solar Panels Aren’t Quite Ready For Primetime

Over the past few years, there have been some interesting developments in the solar industry focused on getting the most production possible out of solar panels. One such development is bifacial solar panels.

Since solar panels come in standardized sizes (either 60-cell or 72-cell), manufacturers are looking for creative ways to increase a panel’s efficiency without increasing its size. With bifacial solar panels, manufacturers have developed solar cells that absorb sunlight on both sides to maximize production from light that reflects on the back of the panels.

Bifacial panels are a creative idea, however they are not as appealing as they first sound. In this article, we’ll explain why we think it’ll be at least a few more years before they catch up to traditional solar panels and start to make sense for more solar projects.

What are bifacial solar panels?

Let’s start with the basics.

Traditional solar panels can only absorb light that hits the front of the panel. Bifacial solar panels produce power from light that hits both sides of the panel.

Using dual-sided solar cells gives bifacial panels more surface area to absorb sunlight, and therefore, higher efficiency in the same form factor.

Why would you use bifacial solar panels?

When sunlight hits the face of the panel, not all of it is absorbed on the first pass. Even the most efficient panels only have an efficiency rating of 20-23%, which means around 80% of the potential energy is “lost” as it passes through the PV cells.

Bifacial solar panels seek to solve this problem. By installing the panels over a reflective surface, the light can bounce back through the panel a second time, giving the cells on the backside of the panel a second chance to capture and convert energy.

Since the panel has a second opportunity to reabsorb sunlight, bifacial panels enjoy increased efficiency over their traditional counterparts. Given that bifacial panels provide higher output from the same form factor, it’s easy to see why the solar industry is excited about them.

BUT… (yes, there is a “but”).

Why aren’t bifacial solar panels a good idea (yet)?

Bifacial solar panels are designed to improve efficiency and output more power, but they come at a higher cost—not only for the panels, but for associated materials to mount them properly.

For bifacial panels to work properly, the back of the panel must remain unobstructed. That means you’ll pay a bit more to build a racking system that gives enough clearance from the ground or roof surface where they’re mounted. The materials for these mounts will cost more than a standard roof mount system like the IronRidge XR100.

In addition, you’ll need to create a reflective surface behind the array, either by using reflective white rocks, a shiny coat of white paint, or a layer of reflective material like a TPO roof membrane

The extra costs associated with properly mounting bifacial panels negates any money you might have saved from the slight efficiency bump. Bifacial panels really only make economic sense for large (utility-scale) solar projects. Right now, for residential and small-scale commercial projects, it’s more cost-effective to simply buy a few more panels if you need to squeeze a bit more efficiency from your array. 

The verdict: bifacial solar panels aren’t quite ready

Bifacial solar panels are a great idea, and as they have time to improve with more research and development, we think it will make sense to stock them at some point.

But as of right now, they are not quite ready for primetime. Without the right racking setup, there is no guarantee you will get the efficiency boost from the backside of the panel. And the extra mounting costs to meet those requirements don’t justify the modest efficiency boost for small-scale installations.

We will need to see some combination of improved efficiency, lower price, and/or less restrictive mounting requirements for us to feel comfortable recommending bifacial solar panels for residential installs.

Bifacial panels may make some sense for large-scale commercial installs. Trackers are more economical to install on a large scale, and they allow for more dense PV systems, which helps make the most of the space available. The land-use efficiency can be beneficial for larger projects, since utility-scale systems are often designed to maximize production from the limited space available for the installation.

Need help picking the right solar panels for your project? Learn which panels are best for you with our free Solar Panel Buyer’s Guide.

Download our free solar panel buying guide!
How Hiring a Local Solar Contractor Can Save You Money on Your Solar Project

How Hiring a Local Solar Contractor Can Save You Money on Your Solar Project

How To Save on Your Solar Project

By sourcing equipment from a distributor and hiring a local solar contractor to install your system, you can potentially save thousands on your solar project. This article explains how much you can expect to save by managing your own solar project and outlines the steps you need to take to get it done.

There’s no doubt that going solar is less expensive than buying power from the utility over the long run. But the upfront costs for solar equipment and labor is a hurdle that gives many Americans pause as they consider whether to make the switch to solar. 

National turnkey solar installers bid the cost of installation based on the total number of kilowatts the solar electric system will generate. A recent industry report estimates national installers charge right around $3/watt on average for a full-service solar installation.

That works out to a $20,700 bid for a 6.9 kW (6900-watt) system, which would be enough to cover the energy usage of the average American household.

Though many studies prove solar pays for itself, shelling out 20 grand up-front is still a tough decision to make. So naturally, people ask: “is there a way to get this done for less money?”

The simple answer is that you can save a significant chunk of money if you are willing to manage part or all of the project yourself. Hiring a local solar contractor to install your system can save around 20% compared to the average quote from a turnkey provider. If you’re comfortable installing the system yourself, it’s possible to go solar for half of what you’d spend with a large turnkey provider. 

In this article, we’re going to explain how you can save money on your solar project by sourcing the equipment directly from a supplier and present two approaches to installing your system: doing it yourself or hiring a local solar contractor to install it for you. 

In each case, we’ll outline a step-by-step overview of the project timeline and do the math to show you exactly how much money you stand to save by managing your project yourself.

Note: Before we go any further, we should point out that we are a solar equipment supplier. So naturally we’re not free from bias on this topic. We have made every attempt to present this information in a neutral way, providing sources where possible to back up the data presented in this article so you can make an informed decision.

How much can I save by hiring a local solar contractor?

It depends on your household energy usage, as well as how much effort and involvement you want to put into on your project. 

If you are willing to act as the project manager for your installation, including sourcing the equipment and soliciting bids from local contractors, you could stand to save thousands of dollars on a typical installation.

(For a detailed account of this process, check out our customer’s Reddit post about their experience working with us – complete with pictures, cost breakdowns and insider advice.) 

Here is a cost breakdown for three different approaches to going solar:

  1. Full-service installation from national installer (Turnkey): $3 per watt (source)
  2. Source equipment and manage the project yourself (Hire a Contractor): $2.10 to $2.65 per watt
  3. Source equipment and install the system yourself (DIY): $1.35 to $1.65 per watt (source)

Here’s how that would break out for an average-sized system:

  1. Turnkey: $20,700
  2. Hire a Contractor: $16,387
  3. DIY: $11,224

Don’t want to do any solar installation labor yourself?  No problem, you can still save some serious cash.

For the average American home, you can save more than $4,000 on your solar project if you are willing to source your own equipment and hire a local solar contractor.

Don’t forget the Federal Tax Credit and your state and Local rebates for additional savings.

Interested? Here’s the work you’ll have to take into your own hands if you want to take this approach.

What steps do I need to take to manage my own solar project?

Here’s a step-by-step list of project milestones you will need to complete to go solar. These tasks would typically be managed by a full-service solar provider, but you can easily take them into your own hands with a bit of research and planning.

1. Estimate your energy needs.

Use Wholesale Solar’s cost calculator to see what size system you need to offset your energy usage. The size will depend on unique factors like your energy consumption and sun exposure, so it’s important to get a recommendation that is tailored to your needs.

2. Work with Wholesale Solar to select the right system components for your unique needs.

Do you want American or imported panels? Ground or roof mount racking? String inverters or micro-inverters?

Spend some time looking through our buying guides and resources (like the video above) to pick out the products you like. We’ve put together pre-assembled grid-tied packages to take the guesswork out of sizing and compatibility. 

We recommend checking out our Crash Course to get acquainted with the basics, or take a deep dive into our extensive DIY Solar Workshop for a more extensive step-by-step guide to installing your own system.

Manage My Project

I want to manage the project myself by sourcing the best equipment and hiring a local contractor to install it. Take me to the 1-hour Crash Course.

  • Learn what questions to ask to ensure you get a great deal.
  • Watch videos on basic solar concepts and read our free Buying Guides to pick the best components.
  • Ideal for people who want to learn the fundamentals before hiring a local solar contractor.
Join Crash Course

DIY Install

I want to save even more by going the DIY route and installing my own system. Take me to the DIY Solar Workshop and teach me everything there is to know about going solar.

  • 10x more videos than the introductory Crash Course.
  • All the reading material needed to get your DIY project off the ground.
  • Ideal for people who want to install their own Grid-Tie or Off-Grid System.
Join Workshop

3. Contact a designer to finalize your plans.

Before you buy, it’s best to speak with a professional solar designer to check for compatibility issues and sizing errors. System sizing is a complex process, and the final design is based on a number of factors including:

  • Energy use
  • Local sun exposure
  • Site factors (shading, temperature, etc.)
  • Inefficiency factors (the system won’t always produce at peak output)
  • Future plans for expansion and backup

Enlist a solar professional to double-check your plans to make sure your design is sound. In our case, you can request a free design consultation with our solar techs, and every plan is checked for accuracy by our tech department before being cleared for shipment. We also provide a line-item quote that gives you the information you need to begin the permitting process.

4. Shop around for a solar installer.

Once you have a quote, seek out solar installers in your area to bid on the installation. 

As a benchmark, local solar installers typically charge 75 cents to $1 per watt for installation labor.

Depending on local regulations, your installer may not necessarily need to be someone who specializes in solar. Roofers, electricians, HVAC companies and general contractors should be capable enough to install your system. As you search Yelp or Google for the right installer, you don’t necessarily need to limit your search to a contractor with “solar” in their business name. 

We strongly recommend contacting multiple installers to shop for the best bid. For more direction on this step, read our article on how to find a solar installer you can trust.

5. File for a permit.

With an itemized quote in hand, you have enough information to fill out your permit applications. You will need two permits: one from your city planning department to approve new construction, and one from your utility company to connect to the grid.

The permit applications will ask for model numbers and technical information about the products you plan to use, which can be found on the specification sheets for the products that have been quoted. They will also ask for a line diagram showing how the system will be wired, a service which is included in the cost of Wholesale Solar’s packages.

If you need assistance sorting through the technical information in this step, services like Solar Permit Services and Gemini Solar Design offer full-service permitting plan sets for a modest fee.

Looking for a more in-depth overview of the permitting process? Check out our free solar permitting guide.

6. Place your order.

With approved permits in hand, you’re clear to order your system! Equipment delivery typically takes 1-2 weeks by freight.

7. Schedule your installation.

Contact your installer once your delivery date is solidified and schedule the installation. Most solar installers work in teams of 2-3, and it takes a few days to complete a standard installation. More complicated installations may take a bit more time. For example, if you go with a ground mount, you’ll need time to dig trenches, pour a concrete foundation, and let it set before completing the rest of the install.

What’s Next?

Fortunately, there’s no wrong way to go solar. Grid-tie customers stand to save money on their power bills no matter which approach they take—it’s a matter of deciding how much you want to save on the initial installation.

If you opt for a turnkey, full-service solar provider, you will have a quick and hassle-free project, but should expect to pay more for the convenience.

If you’re willing to spend a bit more time directly involved with the project, you can save a good chunk of money by becoming your own project manager and following the steps outlined above.

Ready to take the next step and save on your solar investment?  Choose the option that best suits you to get started.

Manage My Project

I want to manage the project myself by sourcing the best equipment and hiring a local contractor to install it. Take me to the 1-hour Crash Course.

  • Learn what questions to ask to ensure you get a great deal.
  • Watch videos on basic solar concepts and read our free Buying Guides to pick the best components.
  • Ideal for people who want to learn the fundamentals before hiring a local solar contractor.
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DIY Install

I want to save even more by going the DIY route and installing my own system. Take me to the DIY Solar Workshop and teach me everything there is to know about going solar.

  • 10x more videos than the introductory Crash Course.
  • All the reading material needed to get your DIY project off the ground.
  • Ideal for people who want to install their own Grid-Tie or Off-Grid System.
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What is a micro-inverter?

What is a micro-inverter?

What is a micro-inverter?

A micro-inverter is device that connects to a single solar panel, converting DC (direct current) from the panel into AC (alternating current), which can power household appliances or be sent into the grid for energy credits. Unlike string inverters, micro-inverters control the output of a single panel. This article outlines the pros and cons of using micro-inverters in your solar power system.

In solar power systems, the inverter is like the brain of the system. It takes the DC (direct current) electricity produced by solar panels and converts it into AC (alternating current), a format that can be used to power your appliances and sent into the utility grid.

Traditional inverters, called string inverters, are designed to manage groups (or series strings) of panels plugged into an input on the inverter. For example, you might wire 24 solar panels into an SMA Sunny Boy inverter in two strings.

But micro-inverters are different. In a micro-inverter system, each micro-inverter is paired to its own panel. So in the same 24-panel system, you would have 24 micro-inverters installed—one on each panel.

On a per-panel basis, micro-inverters like the Enphase IQ7+ cost a bit more than basic string inverters. But micro-inverters come with features that can optimize the overall output of your system, providing a boost in efficiency that offsets the higher up-front cost.

In this article, we’ll explain what a micro-inverter is, then outline the pros and cons of micro-inverters to help you decide whether you should consider them for your solar project.

What is a micro-inverter?

In simple terms, a micro-inverter is an inverter that controls the output of a single solar panel. Each micro-inverter that is paired with a solar panel essentially creates a self-contained solar energy system. 

Mount it to the back of the panel, plug it in, and you’ve got a system that produces energy, regardless of whether you’ve installed 1 panel or 100.

Advantages of Micro-Inverters

Due to the way they’re configured, micro-inverters have a few key advantages compared to string inverters that justify the higher price tag.

Power Optimization

In order to explain the problem micro-inverters are built to solve, we first need a bit of background context about how string inverters work.

With a traditional string inverter, groups of panels are wired in series. If you have 8 panels in a string, all 8 panels are part of the same circuit, which means they are subject to the same electrical characteristics. 

If the output of a single panel drops, the whole circuit drops to match the reduced output of the under-performing panel. You might have a string of 350W panels, but if one panel falls to 300W output, every panel in the string is restricted to that 300W mark.

Using string inverters, a drop in production from one panel drags down the output of the rest of the array.

With micro-inverters, each panel is isolated from the rest of the array. One shaded panel may drop to 300W, but the rest of the panels remain unaffected and continue to produce at its 350W capacity.

With micro-inverters, a drop in production from one panel doesn't affect the rest of the array.

The net result is that micro-inverters allow you to produce more power out of the same panels. In areas where trees or other obstructions will cast shade on your panels, micro-inverters are well worth the investment. 

Isolated Equipment Failure

Similar to the above point, if a piece of equipment fails completely, the rest of the array won’t be affected. 

Let’s say a panel malfunctions due to faulty wiring and stops producing power. With micro-inverters, that panel is isolated, so the rest of the array keeps producing power. The other panels will continue to work, so you are not stuck without a working system while you file a warranty claim and get it replaced.

With a traditional string inverter like the SMA Sunny Boy, the entire string could be affected to the point where the inverter wouldn’t produce power. You could potentially be left in the dark until you replace the faulty panel.

Ease of Installation

Micro-inverters use standard AC wiring, similar to what is used throughout your house. They are also plug-and-play, with each unit plugging into the next. 

As a result, micro-inverters are extremely easy to install and connect because they use standard AC wiring and it only takes a few seconds to plug in each unit. 

Expandable Design

What if you want to start small and expand your system later? Maybe you don’t have the budget to offset 100% of your energy usage, but you want to get into a smaller system so you can start reaping the benefits of solar. Or maybe you want a self-contained array to power your shed as a “test run” to see if it makes sense to power the rest of your home with solar.

Due to their 1-to-1 nature, systems with micro-inverters can essentially be as small or as large as you want them. If you want, you can start with a single panel+micro-inverter pairing. Adding more panels later isn’t a problem, because none of the existing equipment needs to be moved or re-wired to facilitate the addition.

The same isn’t possible with string inverters, which have minimum string size requirements because the panels need to supply enough voltage to the inverter to power it on. In the linked example, the system is limited to 7-10 panels per string. Outside that range, the inverter may not function properly.

Which means that if you have any future plans for expansion, micro-inverters are the way to go. You can start with a small system now and add on to it later without hassle.

Flexible Array Layout

Panels produce the most energy when they face South (directly at the sun), while East- and West-facing panels will lag behind. 

With string inverters, you typically want all panels in a string to face the same direction. If you mix South- and East-facing panels on the same string, the panels facing East will drag the rest of the string down.

Micro-inverters give you more flexibility with the layout of your array. Depending on your roof configuration, you may need to design a system to distribute panels across multiple sections of your roof. With micro-inverters, the output of each panel is isolated, so you can distribute them however you want without sacrificing output.

Suniva 340 watt solar panel array
These panels have been split across different sections of the roof to take advantage of the limited space available.

Meets Module-Level Rapid Shutdown Requirements

Lastly, the IQ7+ is designed to meet Rapid Shutdown requirements outlined in the latest version of the National Electric Code without the need for any additional equipment.

In short, solar systems need to be able to “de-energize” quickly in case of emergency. If a house were to catch fire, the firefighters may need to climb on the roof and cut a hole to ventilate the smoke. In doing so, they could cut through the solar wiring, which is often routed into the attic to run alongside the roof rafters.

As a safety measure, roof-mounted systems need a way to quickly release the live current running through the wires, to prevent the risk of shock for first responders.

The IQ7+ meets Rapid Shutdown requirements by default. For the SMA Sunny Boy, you’d have to add something like the FireRaptor Rapid Shutdown Unit at an additional cost to meet the regulations.

It’s worth noting that this section only applies to roof-mount systems. Ground-mounted systems won’t interfere with first responders who need to work on your roof, so they’re exempt from the Rapid Shutdown requirements.

Disadvantages of Micro-Inverters

More Expensive Up Front

Of course, the flexibility and added features of micro-inverters make them more expensive than traditional string inverters. A system with Enphase IQ7+s will cost around 15-20% more per panel than an equivalent SMA Sunny Boy system.

That higher initial investment is well worth it if you live in harsh climates, where inclement weather can put a damper on production. It also makes sense if your site is shaded by trees or other obstructions. In these cases, micro-inverters will salvage production that would have otherwise been lost, easily offsetting their higher price tag.

But if your system will be built in a location with full sun exposure, a standard string inverter is a perfectly good option. If shading isn’t a concern, the SMA Sunny Boy will perform comparably to a micro-inverter system at a much lower price point.

Higher Odds of Equipment Failure

In the “pros” section, we mentioned that adding a micro-inverter to each panel can isolate equipment failures. Even if a panel malfunctions, the output from the rest of the array won’t be affected.

The flip side is that micro-inverters introduce more potential failure points. If your system has 24 micro-inverters, the odds that a piece of equipment will malfunction go up compared to a system with a single string inverter.

Another point is that micro-inverters may be more challenging to replace for rooftop installations. Since they are attached to your panels, it may be a pain to climb on the roof and replace one in the middle of an array. By comparison, string inverters are always installed at ground level, making them much easier to replace if necessary.

When Are Micro-Inverters the Right Choice?

Micro-inverters are the best option if you need to build your system under less-than-ideal circumstances. If your panels will be shaded, or part of the array will face East/West due to the configuration of your roof, micro-inverters ensure your system produces as much power as possible.

If you have plenty of space to build your array in full exposure to sunlight, a traditional string inverter may be the better bet, as it can perform the same job for 15-20% less money up front.

For more info, check out our reviews of a few inverters we carry:

You can also grab a free copy of our Solar Inverter Guide by clicking below.

Download your free solar inverter guide
16 Frequently Asked Questions About Solar Energy, Answered

16 Frequently Asked Questions About Solar Energy, Answered

As a solar equipment supplier that sells direct to the public, we get 200+ calls a day from people at every experience level, from seasoned solar installers to homeowners exploring the possibility of going solar for the very first time.

Naturally, there are some questions we receive on a daily basis. So for the sake of convenience, we decided to gather the answers to the most common questions we hear in one place.

For each question, we’ll give a (very brief) summary, then link to a resource providing a more detailed explanation if you want to research a particular topic in depth. 

Here are some of the most frequently asked questions about solar energy we receive. We’ve written the answers with newcomers in mind, so you don’t need any prior solar background to follow along.

Basic Questions About Solar

Cost, Financing & Return on Investment

System Design & Product Research

Basic Questions About Solar Energy

What is the difference between grid-tied and off-grid solar?

Grid-tie systems connect to the public utility grid. The grid acts as storage for the energy produced by your panels, which means you don’t need to buy batteries for storage. This saves a ton of money, which is why we always recommend connecting to the grid if you have a choice.

If you don’t have access to power lines at your property, you’ll need an off-grid system with batteries so you can store energy and use it later.

There’s a third system type: grid-tied with energy storage. These systems connect to the grid, but also include batteries for backup power in case of outages.

Learn more: Grid-tied vs. off-grid solar

What are the components that make up a solar energy system?

The main components for grid-tie systems are:

  • Solar panels, to capture energy from the sun
  • An inverter, to convert that energy to a format that can power our appliances
  • Racking, the foundation on which you mount your system

Battery-based systems also require:

Aside from these main components, systems also come bundled with small parts like meters, disconnects, and wires. Browse our system packages for a complete parts list.

How long will my system last?

Solar panels are warrantied for 25 years, so that should be your benchmark for system lifespan. However, you should expect to replace a few other parts along the way:

  • Grid-tie string inverters: 10-15 year warranty
  • Off-grid inverters: 5-10 year warranty
  • Batteries: 1-10 year warranty (varies widely depending on technology and model/manufacturer)

When looking at lifetime cost of ownership, be sure to account for scheduled part replacements along the way.

Can I install solar myself?

Many of our customers choose to install their own system to save money on their project. Some install the racking rails and panels, then bring in an electrician for the final hookup. Others simply source the equipment from us and hire a local contractor to avoid paying markup to a national solar installer.

If you are interested in installing your own system, take a look at the DIY solar timeline to get an overview of the process, or join our free DIY solar workshop for in-depth training and guidance on your project.

If you would like to hire someone to install for you, learn how to hire a solar installer you can trust.

How do I get a permit for my system?

Contact your local AHJ (authority having jurisdiction), the office that oversees new construction in your area, for instructions on how to permit your system. This is typically your local city or county planning office. 

You will also need to contact your utility provider to sign an interconnection agreement that allows you to connect your system to the grid (if applicable).

Download our free Solar Permitting Guide for detailed instructions on how to permit your solar system.

What is net metering?

Your utility’s net metering policy outlines the terms you agree to when you connect to the grid. It dictates the rates you are charged or credited for power bought from or sent into the grid. It also outlines terms like variable time-of-use rates.

Understanding your net metering policy is key to figuring out what kind of return you can get from your investment into solar. Read more about how it works in our net metering guide.

Cost, Financing & Return on Investment Questions

How much does it cost to go solar?

Here are our best “ballpark figures” based on your approach to installation. The average system cost is based on the national average energy usage for American homes (914 kwh/mo.), based on pricing as of October 2019.

  • Self-installed: $1.10-$1.60 per watt / ~$9,500 average system cost
  • Hire local installer: $1.85-$2.60 per watt / ~$15,352 average system cost
  • National installer: $2.50-$3 per watt / ~$18,975 average system cost

These are broad estimates. Prices will vary greatly based on your specific energy needs and usage patterns. Use our solar cost calculator to get a tailored estimate based on your location and usage data.

What tax credits and incentives are available?

The federal government offers a large tax credit for installing solar, which can be used to offset taxes you owe when you file. The credit is currently 30% of your total project costs, including installation, but the value drops after 2019.

Read our introductory guide to the federal solar tax credit, or watch the video above for a brief overview.

You may also be eligible for state and local incentives which provide additional savings on top of the value of the federal tax credit. Be sure to research programs in your area so you don’t miss out on any credits or rebates.

Is solar a smart investment?

Grid-tie solar systems pay for themselves by reducing your monthly electric bill. Grid-tie systems have a 5-10 year payback period depending on factors like local climate, cost of electricity, and approach to installation. Considering panels have a 25-year warranty, there’s plenty of time left over to profit off your investment into your panels.

Off-grid systems cost more because they require batteries, but they may still be a good investment compared to other methods of powering the property (like running a power line or using a gas generator).

Read more: Are solar panels worth it? Let’s do the math.

What financing options are available?

If you cannot buy your system outright, there are a few options to go solar with lower up-front cost:

Personal loan: A lender fronts the money for your system. You own the system and can claim any available incentives. You pay a monthly loan payment with interest to your lender.

Solar lease: A solar installer builds a system on your home. They own the system, so they claim any available incentives. You pay a monthly payment to the installer for the right to use all the power that the system generates.

Solar PPA (power purchasing agreement): Similar to a solar lease, except you pay for the power you use each month (at a rate slightly lower than utility power). The installer still owns the system and claims the incentives.

Learn more on our solar financing page.

Which is better: a solar loan, lease, or PPA (power purchasing agreement)?

Solar loans are preferable to leases and PPAs. Under lease and PPA agreements, the installer owns the system, and you are simply renting it from them. That allows them to claim the 30% federal tax credit and any other incentives, which can deprive you of several thousand dollars worth of value. 

Leases and PPAs are an appealing way to go solar with no up-front cost, but they are worse for the consumer in the long run. It is a much better deal to take out a personal loan, claim the credit and use it to accelerate your payback period. 

Learn more about the true cost of loans, leases and PPAs.

Solar System Design & Product Research Questions

What size system do I need?

Your system size depends on your monthly energy use, as well as site factors like shading, sun hours, panel facing, etc. Our solar calculator is a great way to get an estimate based on your personal usage and location in just a few minutes.

If you would like to learn more about the factors that go into the system design process, check out these guides:

What are the best solar products on the market?

Need help picking products? Take a look at our comparison articles:

What’s the difference between string inverters, micro-inverters, and power optimizers?

Inverters convert the power generated by your panels into a format that can be used by your appliances.

A string inverter allows a group (or a string) of panels to plug into a single input on the inverter. For example, a single string inverter may have 3 strings of 8 panels apiece wired into the inverter unit. This is the most cost-effective option, but they don’t perform as well if your panels are blocked by shade, poor weather, or other obstructions.

Micro-inverters are small units attached to every panel. Each micro-inverter controls the output of a single panel. If one panel’s production drops (due to malfunction or shade, for example), the rest of the panels are not affected.

String inverters with power optimizers combine the benefits of both other types. There is a central inverter unit that pairs with power optimizers which are attached to every panel. The inverter controls the power optimizers individually (like micro-inverters), but the centralized inverter keeps overall costs slightly lower.

Learn more about the pros and cons of string inverters, micro-inverters, and power optimizers.

What are the different types of solar batteries?

Lead-acid batteries are the most cost-effective option, but they require routine maintenance (every month or so) and they have a shorter lifespan.

Lithium-ion batteries are much more expensive up-front, but have a much longer lifespan and are maintenance-free.

Learn the pros and cons of each battery type and evaluate the lifetime ownership cost in this breakdown of lead-acid vs. lithium batteries.

Lead-acid batteries are further divided into a handful of different configurations. Read about the differences between flooded, gel and AGM (absorbent glass mat) batteries

Does solar increase the value of my home?

Yes, studies have shown that solar homes sell for 3-5% more than comparable non-solar homes. One NREL study showed that solar-equipped homes sold for $16,995 more on average. 

So if you want to go solar but aren’t sure whether you’ll stay in your house long enough for the system to pay itself off, you can rest assured that you can recoup most or all of your solar investment when you decide to list your home.

Read our analysis of the study: Do Solar Panels Increase Home Value?

More Solar Questions? Continue Your Research

Still have more questions about the prospect of going solar? Grab a free copy of our Getting Started Guide to get a grasp on the fundamentals.

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Are Solar Panels Worth It? Let’s Do The Math.

Are Solar Panels Worth It? Let’s Do The Math.

Is solar worth it for the typical homeowner in 2019? That’s the question we’ll set out to answer in this article. (Here’s a quick summary, though: if you own your home and connect to the grid, the answer is most likely “yes.”)

Some background for context: the solar industry has experienced rapid growth in recent years. In 2009, less than 20GW of solar capacity was installed worldwide. In 2019, that number has skyrocketed above 480GW—a rate of 24x growth in just a decade. 

That growth has been made possible by rapid technological advancements. In the same timeframe, the cost of a fully-installed system dropped from $7.14/watt in 2010 down to around $2.50/watt in 2019. That means you can go solar today for about one-third of what it would have cost 10 years ago.

So solar is getting cheaper, and the technology is improving all the time—but does that make it better than other options? 

solar panel guide

Free Solar Panel Guide

Learn More »

To answer that, it’s not enough to compare the cost of solar against historical benchmarks. We have to look at how solar stacks up against alternative methods of delivering power to your home, because solar is really only worth the investment if it can outperform the other options on the market.

For grid-tied systems, the math is pretty simple: compare the cost of solar against the cost of buying power from the utility company. Don’t worry—we’ve written this article to walk you through the math.

The math in this article focuses on grid-tied payback period, but the process can be applied to evaluate off-grid systems as well. Instead of utility power, though, you’ll need to compare solar to the costs of running a power line to your property (if possible), or look at alternative power sources, like wind, hydro, or a trusty generator. Sometimes a combination of methods (like solar + a backup generator) may be the smartest option.

How Solar Pays For Itself

Grid-tied homeowners buy electricity from the local utility company at a set rate. The national average in the US is around 13 cents/kWh (source). 

When you go solar and connect to the grid, that bill is reduced (or completely eliminated) because you are generating your own power instead of buying it from the utility.

To figure out whether going solar is a smart investment, simply compare the lifetime cost of utility power against the lifetime cost of going solar.

We use a 25-year timeframe to measure “lifetime” ownership, because that’s the standard length of a solar panel warranty.

Let’s break out the calculator and do some math. We use national averages for these examples, but make sure to plug in your own figures to see if solar is worth it for you!

Step 1: Find your local utility rate.

First you need to know how much you currently pay for utility power. The rate is typically printed on your electric bill. If you can’t find it, you can also Google “cost of electricity in (your location).”

Example: The national average cost of electricity is around 13 cents/kWh.

Step 2: Find your average energy usage over 12 months.

Figure out how many kilowatt-hours of electricity you use each month. Your usage will be higher in months where you have to run heat or A/C, so it’s smart to get an average for the whole year.

Example: The national average household electricity usage is about 867 kWh/month.

Step 3: Calculate the lifetime cost of utility power.

Multiply your results from the previous two steps to get your average monthly electric bill. Then multiply by 12 months (for a yearly bill) and again by 25 years (to arrive at the lifetime cost of utility power).

Example: 867 * $0.13 * 12 * 25 = $33,813.

$33,813 is the cost of buying power from the utility over 25 years. Keep this figure handy. At the end, we’ll compare it to the cost of owning solar over the same time period.

Step 4: Estimate solar system size and cost.

Use our solar calculator to estimate what size system you would need to cover your usage. You just need the 2 figures above, along with your ZIP code (so we can look up how much sun you get in your location).

The calculator returns a system size and cost estimate to use for our purposes here. You can also compare the system size recommendation to our pre-packaged systems to hone in on an exact cost. (Don’t forget to add tax to the published prices.)

Example: This 6.3 kW system produces about 870 kWh/month, perfect to offset our usage of 867 kWh/month from step 2. The system costs $9,669 at the time of publication. We’ll add another $1,500 as a rough estimate for taxes, shipping and permitting fees. Total cost estimate: $11,169.

Step 5: Add installation costs.

Local solar installers charge around $1/watt to install a system, which would amount to $6,300 for the 6.3 kW (6300-watt) system linked above. Many of our customers choose to install their own system to save this chunk of cash, which dramatically changes the payback calculations. 

If you choose to hire an installer, add that fee to the total cost of going solar.

Example: $6,300 if installed by a contractor / $0 if you DIY install

Step 6: Account for tax credits and incentives.

The government offers tax credits to incentivize the adoption of solar. Most people are eligible for the federal solar tax credit, which currently returns 30% of your total installation costs as a credit toward your federal taxes. There may be local incentive programs that stack with the federal credit for even more savings.

The credit applies to your entire project costs, not just the equipment. Shipping, permitting and contractor fees can all be claimed (but your own labor cannot be claimed if you install yourself).

Subtract the total value of incentives you can claim from the costs you calculated in steps 2 and 3. That money is paid upfront, but returns to your pocket in the form of a credit come tax season.

Example: ($11,169 + $6,300) * 0.7 = $12,228.30. Once tax credits have been taken into account, you will have spent about $12,228 to install your system, assuming you hired an installer.

Step 7: Account for part replacements

Panels are warrantied for 25 years, but some parts have shorter warranties. For example, the SMA warranty is 10 years, and SolarEdge is 12 years. However, Enphase micro-inverters also have a 25-year warranty, so you don’t need to factor in replacement costs on those.

Look up the warranty on other components, especially the inverter. Budget for inverter replacements over the life of the system if necessary.

Note that we calculate this after deducting the value of the tax credits because those replacements will happen in the future, after the federal tax credit has expired.

In our example, we’ll assume 2 SolarEdge inverter replacements at their current cost of $1,595 each.

Example: $12,228 + ($1,595 * 2) = $15,418.

This is our lifetime cost of solar ownership. It includes equipment, installation, and replacement over the 25-year life of the system.

Now we just need to figure out how this compares against the cost of buying power from the utility.

Step 8: Subtract lifetime solar cost from lifetime utility power cost to determine ROI.

It’s time for the big payoff. Subtract the lifetime cost of solar (step 7) from the lifetime cost of utility power (step 2). The result is your return on investment—the total amount you’d save on energy bills over 25 years.

Example: $33,813 – $15,418 = $18,395.

In this scenario, going solar would save you an estimated $18,395 over a 25-year period.

Not too shabby! Though solar is a significant investment up front, it proves to be well worth it in the long run. Over 25 years, going solar costs less than half what you’d pay the utility to produce the same amount of energy.

Over 25 years, going solar costs less than half what you’d pay the utility to produce the same amount of energy.

Remember, this breakdown assumes that you hire an installer to complete your project. Many of our customers DIY their project, which rapidly accelerates their payback period and makes solar an even better investment. If you want to get the most bang for your buck, consider a DIY installation to put the maximum savings in your pocket.

Factors That Impact Solar Payback Period

The example laid out above is based on national averages, but you may be working under different circumstances that can significantly alter the math. That’s why we encourage people to punch in their own figures and decide for themselves.

Installation Costs

The #1 factor that moves the needle is the cost of installation. As we’ve mentioned, taking on a DIY install can save several thousands of dollars and dramatically change the payback math. 

Even if you choose to hire an installer, rates can fluctuate wildly, from 75 cents/watt to $1.50/watt or more for the labor alone. If you go this route, try to compare quotes from multiple installers to shop for the most competitive rate.

Value of Incentives

We’ve run the numbers to include the Federal Solar Tax Credit, since most people are eligible for it. But you may be able to add on state or local incentives as well, and some of those can be quite significant. Check our local solar incentives database to make sure you claim everything available to you.

Home Ownership

These calculations assume you own your home and plan to live there over the full 25 years of ownership. Obviously, that isn’t always realistic. If you move during that time period, you’ll be happy to know that solar increases the value of your home, so you can recoup some of your investment if you decide to list it on the market. 

As you decide whether solar is worth it, think about whether you’ll be living in your home long enough for the investment to pay off.

Financing

In this article, we’ve assumed the system is being purchased outright. Committing to a solar lease or PPA (power purchasing agreement) puts a significant dent in the value of solar, reducing your total ROI. 

Under these schemes, you are not allowed to claim any credits or incentives—they are claimed by the installer, who owns the system. In addition, these contracts contain escalating interest rates that eat into your energy bill savings over time. Entering into a lease or PPA can reduce or completely negate your savings, depending on the terms of the contract.

Sun Exposure

Some areas receive more sun exposure than others, which means more time for the system to operate at peak production each day. Systems in sunny areas will produce more power each day, making them more valuable. 

Sun hours map
A map of average sun exposure in the US.

That said, solar is still financially viable in cold and cloudy climates—the ROI is less dramatic, but still positive for grid-tied systems.

So…is solar worth the investment?

For grid-tied homeowners, the math is clear: solar costs less than buying power from the utility company in the long run.

The payback period is around 8-9 years if you hire someone to install your system. When you measure that against the 25-year warranty on your panels, you’re looking at serious energy bill savings over the life of ownership. And if you decide to install it yourself, that payback period accelerates to 5-6 years with the money saved on installation costs?

Ready to learn more? Grab a free copy of our Getting Started Guide or dive right into the DIY Solar Workshop for a step-by-step overview of the process of going solar.

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Install of the Month – October 2019

Install of the Month – October 2019

Every month, we highlight our favorite customer projects in our Install of the Month feature. These galleries give our visitors an idea of what to expect from the DIY solar process.

Worked with us to build a system and want to show it off? Submit your install for a chance to have your system featured on our blog! We’ll send a WSS care package your way if we feature your project.

​This month’s featured project comes from Kristopher Z. out in Cottonwood, UT. Kristopher went the full DIY route, handling all the construction and electrical work on his own. The only money he shelled out to a contractor was $175 for a roof loading detail certification, a service the city required to be handled by a certified engineer.

By choosing to self-install, Kristopher reports his out-of-pocket costs came in below $1/watt, which is almost unheard of in the solar industry. (Full-service installers typically charge in the $2.50/watt range.) In addition to the money saved on installation, he got to ‘double-dip’ on tax incentives, pairing a $2,700 federal tax credit with a $1,600 state tax credit offered in his area.

That brought his total cost (after incentives) to $4,700 for a 5.5 kW system.

By keeping project costs low, the projected payback period for Kristopher’s system is 5-6 years. With a 25-year warranty on his panels, there will be plenty of time for him to turn a profit off of his investment into solar.

Check out photos of his completed project below, and read an interview with Kristopher after the jump.

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What solar system type did you install?

Grid-Tied

Did you have any previous DIY experience?

Yes. I am a software engineer, but growing up my dad did a lot of framing and deck building with me. And consequently I am pretty comfortable with construction and have done a lot of DIY projects around my house, including some kitchen remodeling, deck building, wiring, and more.

What was the most difficult part of the installation?

First, the installation overall really went smoothly. The kit Wholesale Solar provided was very complete, the male/female cable connections make it very easy to get all the wiring correct, and all the main components really went to together wonderfully. But as for challenges…

I had to make some corrections after my first inspection. The most difficult correction was the inspector wanted to ensure all the cables underneath the solar panels were clipped up tight enough that they didn’t touch the roof at all. Going back through all the panels and clipping up the cables as I lowered the panel, tight enough that they wouldn’t sag a few inches down to roof level was somewhat of a challenging and delicate dance.

This was complicated by the fact that I hadn’t noticed the wire cable clips that were included in my kit, that attach to the solar panel frames (I was just using the rail wire clips and finally added zip ties to try to tighten the cables). Eventually I was able to do this a more efficiently with the last few panels, after I found the metal panel clips, but surprisingly this ended up being the hardest part of the installation.

I also had to go back and put all the DC cables in EMT conduit (I hadn’t done that originally in the attic), but that was a pretty straightforward conduit/piping installation. The permitting process with our local city was also challenging because it was difficult to find the appropriate engineering approval for roof loading, but I think Wholesale Solar has some permitting/design suggestions that may have made this easier.

One thing that made the wiring easier for this particular project is that I had recently converted my dryer to gas, so I had a completely free 240v/30A circuit available that I easily rewired to the inverter.

How many helpers did you have?

0. I did the installation completely on my own.

Did you hire a contractor?

The only thing I contracted out was roof loading detail certification for the permits, which the city required to be provided by a certified engineer (which was $175). Everything else I did myself, including all electrical work and designs.

Were there any unforeseen additional parts or tools you needed?

The only thing was unforeseen was some zip ties and extra conduit. I bought conduit, flashing, and ground wire from home depot, but that was all probably less than a $100. I had also bought some extra MC4 connectors and a crimper, but never ended up using. Maybe I will if I expand and add more panels in the future.

How long was the full installation process?

I did this installation over the course of a few weekday evenings and two Saturdays mornings (from about 7am – noon).

How did it feel to get your solar project finished?

I think the best part is when the net meter arrived and I could turn on my system and start to watch the energy credits accumulate.

I am really proud of how this system turned out. The inverter is right next to my circuit breaker and network router in a nice cool basement root. The SolarEdge monitoring (and design) software is excellent, its fun to monitor and watch your panels generating power. And I am really delighted with the aesthetics of the half panel offset pattern on the roof with the all-black mono Canadian solar panels.

Who else did you consider before choosing Wholesale Solar?

I think there were a couple other places that showed in a google search results (GoGreenSolar), but Wholesale Solar seemed to have the best prices, most complete kits, and best information.

What was your total solar install costs? (Ball Park)

  • Total: $9,000
  • Wholesale Solar Kit: $7800
  • Taxes: $400
  • Permits/Net Meter: $540
  • Misc: $260

How much did you save on your taxes?

I should end up getting a refund of about $2,700 back in federal taxes and $1,600 in state taxes. This is almost half the cost of the installation, so costs after refunds for my 5.5KW system should be about $4,700 (less than a $1/watt!).

Components in Kristopher’s system:

Kristopher’s Solar Breakdown:

  • System Cost: $9,000 including installation
  • Yearly System Output: 8,061 kWh per year
  • Federal Tax Incentive: Qualifies for $2,700 U.S. Federal Tax Credit and $1,600 State Tax Credit
  • Utility Rates: 10.3 cents/kWh

It’s Your Turn

Thinking about making the switch to solar? Download our Getting Started Guide. We’ll walk you through everything you need to know about buying a solar energy system that covers your needs.

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Why You Should Oversize Your PV Array By 10-20%

Why You Should Oversize Your PV Array By 10-20%

Why You Should Oversize Your PV Array For Your Inverter

When designing a solar system, it is often smart to size components so that the panels supply 10-20% more wattage than the rating of the inverter. In this article, we’ll explain how oversizing your PV array can maximize your system’s overall efficiency.

Welcome to our solar tech tips series! In this article, we’re going to take a look at a concept that can create a lot of confusion during the system design process: oversizing your PV array for your inverter.

First, the basics: solar panels and inverters both have a wattage rating. For example, a 315W solar panel produces 315 watts, and a 290W micro-inverter can put out a max of 290 watts of power, if it’s available.

When the panel produces more power than the inverter can handle, the excess wattage is “clipped.” Anything above the 290W rating can’t be processed by the inverter, so if the 315W panel is producing at its rated output, 25 watts are wasted by the input limitations of the inverter.

Knowing all this, you might make the reasonable assumption that the panel wattage shouldn’t exceed the inverter wattage, because wasting power is generally a bad idea…right?

But that’s not quite true.

When designing a solar electric system, you’ll get the most bang for your buck if you oversize your panels by 10-20% in relation to your inverter. 

It’s counter-intuitive, but it’s true. Here’s why.

Why You Should Oversize Your PV Array

Note: this advice applies to grid-tie systems only. Off-grid systems have different sizing considerations – the inverter is sized to match your maximum load to run your appliances, rather than an average daily usage. Therefore, sizing considerations are different and this advice should not be applied to off-grid systems.

For help going off the grid, check out our off-grid system sizing guide.

In real-world conditions, the panel rarely produces at its rated output. There are two main reasons for that: 

  1. Efficiency Loss: real world factors like temperatures, shading and pollution affect the amount of light hitting your panel. This can cause the panel to produce below its rating.
  2. Production Curve: The array doesn’t produce a consistent amount of power throughout the day. Production is a curve, with less output during the morning and evening, and peak production at “solar noon.” During off-peak periods, the panel doesn’t produce as much as its wattage rating.

Let’s look at each of these points in more detail.

Standard Test Conditions vs. Real-World Conditions

When manufacturers test panels to give them a rating, they do so in ideal conditions:

  • Indoors, at a controlled temperature (about 77°F)
  • With a given amount of solar irradiance (1000 watts per square meter) 
  • At an ideal 90° angle of incidence (light shining directly on the panel)

These standard test conditions measure what the panel is capable in a perfect environment, but the real world rarely delivers these ideal conditions.

In reality, there are a number of factors that can reduce panel efficiency:

  • Hot temperatures
  • Tilt angle of the array
  • Time of day / sun’s position in the sky
  • Cloud cover and pollution

Under real-world conditions, a 315W panel rarely produces 315 watts of instantaneous power.

Our general rule of thumb is to ballpark 10% efficiency loss to account for real-world operating conditions. The true number changes based on your local environment, but 10% gives us a good baseline estimate.

Sun Hours & Peak Sunlight Window

For a solar panel to reach peak output, the sun has to be angled so it is directly perpendicular to the array, allowing it to absorb the maximum amount of light possible.

That only happens during a narrow window in the middle of the day. As the sun moves across the sky, the angle changes so that less light strikes the panels. This causes the panels to produce less power.

A map of average sun exposure across the United States.

We use the term sun hours to describe this concept. “Sun hours” refers to the amount of time the sun is in the right position in the sky so that the array can generate power. Sun hours are measured based on an irradiance of 1,000 watts per square meter—the same rating used to test panels under standard test conditions.

Most places in the US get between 4-6 sun hours per day on average, and all of the meaningful production from the panels comes within this short window. The production graph is a curve where production ramps up as the sun comes out, hits a peak when it is straight overhead, then falls off again into the evening.

The horizontal line represents the input limit of the inverter. Any production above the line (the light orange area) is clipped, or wasted.

The blue area below the line represents untapped potential production. In these periods, the inverter is capable of more throughput, but the panel is not supplying enough wattage to make full use of the inverter’s potential.

Our goal with system design is to balance out clipped production with “lost” potential production. On the graph, notice how the area of clipped production and lost production are roughly equal. 

By oversizing the array, you will make better use of your inverter’s capacity, producing more power overall. You want to find the “sweet spot” where you get the most overall production possible per dollar spent on your system – even if that means clipping a bit more power.

There’s another benefit to oversizing that takes advantage of this principle. Most electrical service panels can handle up to 7.6 kW input from solar. Anything larger makes the install more complicated, as you have to either derate the main breaker, or tap into the utility line side.

If you don’t want to tackle a complex install, it might be smarter to oversize your array on a 7.6kW inverter to extend the production window, so that you generate more power in the mornings and evenings, squeezing out that extra bit of production to bring you up to 100% energy offset for your property.

Guidelines for Oversizing Inverters

When designing your system, a good rule of thumb is that your solar panels should be 10-20% larger than your inverter. In hot climates, that can be extended up to 30%, due to greater efficiency losses from heat.

Two real-world examples:

For micro-inverters, we usually pair the 290W Enphase IQ7+ with a solar panel in the 320W-350W range.

For string inverters, the SolarEdge HDWave 7.6kW inverter can be paired with a 8360W-9120W solar array. For example, you could use 3 strings of 335W panels, with 9 panels in each string, for a total of 9,045 watts on a 7,600-watt inverter.

Note that the manufacturers recommend a much broader range in both cases—Enphase suggests 235W-440W panels for the IQ7+, and SolarEdge specs a max of 11,800 watts on their 7.6kW HD-Wave. These guidelines spec what the inverters can safely handle, but we recommend the narrower ranges above to help people maximize their production per dollar spent on their system. Keep in mind that this will vary depending on your climate and other factors that affect production.

Need help with the design process? Request a free consultation with our team. We’ve designed more than 10,000 systems since we came online in 2002, and we can help you navigate challenges like array oversizing to design the best possible system for your needs.

Download our free solar panel buying guide!