Solar Power Basics – Residential Solar Power, Part 1 of 3

March 2, 2023

Solar Power Basics: What You Need To Know

Solar power advertising is everywhere. Salespeople call, knock on doors, set up booths at fairs, and cover the Internet and television with solar power ads. It’s hard to know where to go, what to ask for, and how to know you’re getting a good deal.

As an advocate for green technology and sustainable living, even I approached the solar industry with caution. I was confused by all the different prices, options, and incentives, and the hundreds of different solar companies competing for my attention. Many people feel the same way.

My Residential Solar Power Series is a guide to help homeowners make informed decisions when choosing a solar power system. Unlike most of the solar information out there, this guide is NOT a sales tool.

Solar companies offer high commissions to people who refer business to them. I don’t make referrals. I just want to help my fellow San Diegans save as much money as they can, while getting their energy from the sun.

Part 1 of my Residential Solar Power series is Solar Power Basics. Here’s how solar systems work, different options to choose from, costs and incentives, and the benefits of buying vs. leasing a solar system. You can also read about other ways to finance green upgrades.

Solar Power Basics: How Solar Power Systems Work

I expected solar power generation to be a complicated process. Then I learned how simple the technology is.

This section has everything you need to know about:

Basic Solar Technology
Net Metering
Energy Measurement
System Size vs. Projected System Output
Maintenance

Basic Solar Technology

Residential Solar Power Systems are technically Photovoltaic Systems. Photovoltaic (PV) means “light that produces voltage.” Solar panels are also called photovoltaic modules.

Here’s how solar power production works: Sunlight strikes the PV cells on the solar panels, which causes the electrons to flow, creating an electric current, or a photovoltaic effect. The electric current produced by solar panels is direct current, or DC. The electric current that is used in the home is alternating current, or AC. The DC current generated by the solar panels passes through an inverter, which changes the DC current to AC current.

Solar Power Inverter — Central Solar System Inverter (left) connected to the SDG&E meter (right).

When you buy a solar power system, the two main items installed are the solar panels, and the inverter.

If there is a blackout, most solar power systems will stop sending power to your home. Grid-tied systems usually shut down whenever there is a grid power outage. As technology advances, there will be new inverters that will continue to power your home during a blackout. Some companies already have a system that provides up to 15 amps of power, enough for the refrigerator, TV, and phone.

Net Metering

Your solar system generates energy while the sun is shining on the panels. You still rely on the SDG&E grid for power at other times. Net metering allows you to “bank” excess electricity credits, by sending power you don’t use during the day back to the grid. At night, when your system is not generating energy, you can use those credits.

Energy Measurement

On your utility bill, electricity use is measured and billed in Kilowatt-Hours (kWh). This unit of measurement is also used to measure the capacity of a solar power system, or the total amount of power that it produces in one year.

Here’s a more detailed explanation of energy measurement:

Watt (W) – A Watt is a basic unit of power. A 100-Watt light bulb uses 100 Watts of power when it is turned on.

Kilowatt (kW) – A Kilowatt is 1,000 Watts. Ten 100-Watt light bulbs use 1,000 Watts, or one Kilowatt, of power.

Kilowatt-Hour (kWh) – A Kilowatt-Hour is a basic unit of energy. It is used to bill your energy consumption. A Kilowatt-Hour is the use of 1,000 Watts, or 1 Kilowatt, for one full hour. If you turn on ten 100-Watt light bulbs and leave them on for one hour, SDG&E will bill you for one Kilowatt-Hour. When you shop for a solar system, you will decide what size to buy, based on how many Kilowatt-Hours it is expected to produce per year.

System Size vs. Projected System Output

When describing a solar power system, the System Size is measured in Kilowatts (kW). The Projected System Output is measured in Kilowatt-Hours (kWh).

System Size – The size of a solar power system is calculated by the number of solar modules, multiplied by the Watt size of each solar module.

System Size (kW) = # of modules x Watt size

The photo to the right shows an array of nine solar modules. Each of these solar modules is rated at 255 Watts. The size of this system is 9 modules x 255 Watts each = 2,295 Watts, or 2.3 Kilowatts. We call this a 2.3 kW system.

Projected System Output – How much power a solar system will produce depends on many factors, including the amount of sun exposure, how it is installed on the roof, the angle of installation, solar orientation, and more. In Southern California, we use the Rule of 1700 to estimate projected output: each kW of solar panels produces approximately 1700 kWh each year.

Annual Projected System Output (kWh) = System Size (in kW) x 1700

In the nine module array we see above, the projected system output is 2.3 kW x 1700 = 3,910 kWh per year, or 326 kWh per month.

Solar Power System Maintenance

Solar power systems need very little maintenance. You should do an annual check on the areas where the panels are connected to the roof. Look for loose footings and any potential leaks, where there are any holes in the roof material. I recommend choosing a solar company that provides annual inspections and cleaning with your purchase.

Solar panels can lose some of their efficiency if they are covered in dirt or dust. This isn’t usually an issue in San Diego County. The cost of hiring a special cleaning service is usually much higher than the minimal loss in efficiency.

If you want to clean your solar panels yourself, use a mild detergent like car wash with a soft-fiber brush like a boat-cleaning brush. Be sure to rinse off the detergent with plenty of water. Solar panels are glass, and need to be treated carefully.

Solar Power Basics: What Are Your Options

When you buy a solar power system, you can choose from different types of panels, and different types of inverters.

Solar Panels – Crystalline Silicon vs. Thin Film

Crystalline Silicon solar cells are rigid crystals, like in the above array photo. They make up about 93% of the solar panel market, and have been around over 50 years. They have an average of 15% efficiency, which is how much sunlight is converted into energy. Both extreme heat and shading reduce their performance.

Thin Film solar cells, shown in the photo to the right, can be applied on different materials, such as roof tiles. They have an average of 7% efficiency, so you need about twice as much coverage as a crystalline silicon system. Heat and shading don’t affect their performance as much as crystalline panels. However, they tend to degrade faster than crystalline silicon. A thin film solar system costs about 60% more than a traditional crystalline system.

Inverters – Central Inverter vs. Micro Inverters

A solar power system with a central inverter has only one inverter. It is older technology, less expensive, and more reliable. You can’t see energy output at the panel level, and it’s harder to increase your system size, but these two issues may be irrelevant to you. Or, if you are planning on increasing your size in the future, start out with a higher-capacity inverter. Central inverters are installed next to the existing grid-connected meter.

A system with micro inverters has one inverter per panel. Micro inverters are located right next to the panels, on the roof. They are exposed to the elements, which may shorten their lifespan. Solar energy experts have reported major failures with micro inverters. Micro inverters are newer technology, less reliable, and more expensive. The benefit of micro inverters is your ability to increase your system size in the future.

Solar Power Basics: System Costs and Incentives

How Much Do Solar Power Systems Cost?

Prices can vary widely from company to company. The pricing structure is based on system size, in Watts. For example, if the solar company charges you $4 per Watt, and you purchase a 5 Kilowatt system:

$4 x 5,000 Watts = $20,000

The price per Watt depends on which types of panels and inverters you choose, and the installation requirements. Single-story, composition shingle roof installation is less expensive that two-story clay tile roof installation. Most solar power systems cost between $3-$6 per Watt. This price is before the 30% tax incentive (see below). If you buy the system, your cost after the incentive will be approximately $2-$4 per Watt.

Federal Tax Incentive (through 2034)

While prices of solar power systems vary, the federal tax incentive is the same, no matter what company you choose. Federal tax code allows for a one-time 30% Residential Clean Energy Property Credit to purchase home solar photovoltaic systems.

Currently, the 30% Residential Clean Energy Property Credit is available through 2032. It then falls to 26% for 2033, and then 22% for 2034. Finally, the credit will expire after 2034.

Solar Power Basics: Buying vs. Leasing Solar Power Systems

Buying Solar

Buying your solar power system outright is the least expensive option overall, and is the easiest to manage if you decide to sell your home. Many homeowners finance their solar power system purchase. Even when you finance a solar system, it is usually much less expensive than leasing.

Some popular ways to finance energy upgrades are a home equity line of credit (HELOC), a Renovation Loan, and PACE Financing. You can also read about 7 Ways to Finance Green Upgrades.

The California Housing Finance Agency (CalHFA) offers an Energy Efficient Mortgage + Grant program, that will give you up to 4% of the mortgage toward energy improvements when you buy a home. This program is not available for refinances. Read my article about CalHFA assistance to learn more about FHA Energy Efficient Mortgages.

Fannie Mae also offers a conventional Energy Efficient Mortgage, and the Veteran’s Administration offers an Energy Efficient Mortgage for active military and veterans.

Owning a solar power system isn’t as risky as some leasing advocates may tell you. Solar panels and inverters come with extended warranties, and little maintenance is required. Many solar experts estimate that residential solar power systems have a lifespan of at least 30 years.

I recommend choosing a solar company that includes annual cleaning and inspection with your purchase.

Leasing Solar

Solar system leases are popular, and most offer $0 down. Solar companies often encourage homeowners to lease instead of buy. Here’s why.

Solar leases are highly profitable for solar companies. When you lease, the solar company receives the 30% federal tax incentive that year. Then, you pay about twice as much as the cash price, over the next 20 years. At the end of the 20-year lease period, depending on your contract, you will have several options. In many cases, the solar company can remove the system at no cost, you can buy the system for fair market value, or you can sign a new lease agreement.

Some leases have a flat monthly amount for 20 years. Other companies start you with a slightly lower monthly payment, then increase the payment each year by a percentage, such as 3%.

Selling a home with a leased solar power system can be difficult. The buyer’s lender needs to approve the lease contract. Many FHA, VA, and conventional borrowers aren’t able to qualify to take over the solar lease. The lease payment must be included in their lender’s debt-to-income ratio calculation.

Some sellers have had to pay off the lease in order to sell. If you decide to lease, be sure to check with the leasing company regarding their lease transfer policies. For more information, read my Selling with Solar article.

Buying vs. Leasing: Cost Comparison

Here are three examples of the cost of buying without financing, vs. the cost of leasing:

5 Kilowatt system. Purchase price after tax incentive is $3 per Watt, or $15,000. Lease price is $145 per month for 20 years, or $34,800.
6.5 Kilowatt system. Purchase price after tax incentive is $3 per Watt, or $19,500. Lease price is $180 per month for 20 years, or $43,200.
9.2 Kilowatt system. Purchase price after tax incentive is $3 per Watt, or $27,600. Lease price is $225 per month for 20 years, or $54,000.

Solar Power Basics: Will I Save Enough Energy to Justify the Price of Solar?

In the next chapter, What to Do Before You Buy a Solar Power System, I’ll review the SDG&E pricing structure, how to calculate your potential energy savings, and how to decide how much energy you want to produce, which will determine what size system you want. I will list four steps to take before you buy, that can save you thousands of dollars.

In August 2017, the California Center for Sustainable Energy released a new solar calculator – use it to calculate how going solar will affect your utility bills!