Solar Power – Frequently Asked Questions

How does solar power work?

What are the environmental benefits?

How does solar power connect to the electrical grid?

Does the Midwest get enough sunlight for solar power to make sense?

Does solar power make sense for my building?

How many solar panels are needed to provide power or hot water for an average home?

Where can I find a solar company?

What incentives are available?

Can I earn money from the power generated by a solar system on my home?

What are the economics of an average residential solar system?

How does solar power work?

The two most commonly used types of solar energy technology in the Midwest are photovoltaic (PV) panels and solar thermal collectors.  PV panels contain a semiconductor material (typically silicon-based) which converts sunlight into direct-current (DC) electricity.  An on-site inverter converts the DC power to 120-volt AC power, which can then be connected to a home or building’s power supply or directly to the electricity grid.  Solar thermal collectors absorb the sun’s thermal energy and use it to heat water or other fluids, which can be used for hot water or circulated through a home or building for space heating.

What are the environmental benefits?

Solar energy creates electricity and heat and avoids pollution from conventional coal plants and nuclear plants.  Using national average emission factors, every megawatt-hour of electricity generated through a solar PV panel avoids more than 1,300 lbs of carbon dioxide (CO₂), more than 5 lbs of sulfur dioxide (SO₂), and almost 2 lbs of nitrogen oxide (NO_x), and it also avoids producing radioactive nuclear wastes.

Solar energy production is highest on hot, sunny days when air conditioners are running and electricity demand peaks.  By providing energy during peak demand times, solar provides a clean alternative to ‘peaking plants,’ that are often the dirtiest and least efficient coal and oil plants.

How does solar power connect to the electrical grid?

The solar energy generated by PV panels is converted from DC to AC power by an on-site inverter.  In grid connected systems, the AC electric current can then be routed directly into the home or business or routed to the electric grid via a two-way meter.  In “net metered” systems, the meter runs forward when the home or business is using more power than is generated by the solar panels.  It runs backwards when the solar panels are generating more power than is being consumed on-site.  The system owner receives a credit from the utility for the value of the excess electricity sent to the grid.  In other words, the solar system owner is charged only for the  “net” electricity consumed.

Does my region get enough sunlight for solar power to make sense?

Solar energy can work just about anywhere.  Most of the United States, has a better solar resource – i.e., receives more solar radiation – than Germany, which is the world’s largest solar market.  Smart policies and proper system design are the two most important factors for determining whether a solar installation will make economic sense.

Moreover, solar energy is available when the power is needed most in the energy market – at peak demand times on hot summer days.

Does solar power make sense for my building?

The first question should always be whether your building is energy efficient.  Energy efficiency upgrades should always precede or accompany solar investments.

Next, do a solar spot check on your own.  Is your roof shaded by trees or other buildings?  If your roof is sloped, is there a south-facing slope?  If there is an uninterrupted southern exposure, your home or building may be ideal for solar PV and/or solar hot water.  Even if you have some shading, solar hot water may still work well because solar thermal collectors absorb diffuse, rather than direct, solar radiation.

If your building passes the spot check, then take your investigation to the next level by visiting the National Renewable Energy Laboratory’s In My Backyard Solar Mapping Tool at www.nrel.gov/eis/imby to determine your building’s potential system size and estimated production.  Visit www.dsireusa.org for an up-to-date, detailed description of incentives available by state, and browse a list of solar installers in your area at www.nabcep.org/installer-locator or www.findsolar.com.

How many solar panels are needed to provide power or hot water for an average home?

For a Midwest example, the average residential home in Commonwealth Edison’s service territory in the Chicago metropolitan area uses approximately 720 kWh of electricity per month.  A 3.5 KW PV system would offset more than half of the average household’s electricity consumption.  This size solar system would require about eighteen 200-Watt PV panels.  Looking at the same household’s hot water use, a family of four would use about 80 gallons of hot water every day, on average.  In the Midwest, a good rule of thumb is that 1 square foot of solar thermal collectors is needed for every gallon of hot water consumed per day.  So, supplying 100% of the daily hot water needs of an average family of four would require an 80 square foot system, or four typical 4 x 6-½ foot panels.

Where can I find a solar company?

There are searchable databases of solar PV and solar thermal installers that have been certified by the North American Board of Certified Energy Practitioners (NABCEP) at www.nabcep.org/installer-locator and also at www.findsolar.com.   NABCEP-certified installers have at least several years of experience installing solar systems and have successfully completed a series of certification exams.

What incentives are available?

In 2009, the American Recovery and Reinvestment Act authorized an extension of the residential and commercial investment tax credits (ITC) for renewable energy installations.  Taxpayers can claim a credit of 30% of the installed costs of renewable energy systems.  Through the end of 2010, businesses can elect to take the 30% ITC as a grant, payable by the U.S. Treasury Department.  Businesses can also take advantage of the Modified Accelerated Cost Recovery System (MACRS) provisions in the U.S. tax code which authorizes owners to depreciate solar electric and solar thermal systems on a five-year schedule.

Many states and utilities also offer incentives that can be taken in conjunction with federal incentives.  There is an up-to-date database of available incentives and solar-friendly policies, searchable by state, at www.dsireusa.org.

Can I earn money from the power generated by a solar system on my home?

Two policy mechanisms create income for solar system owners.

1. 1. Net metering generates income in the form of a credit for the value of the electricity that a customer-sited solar system sends to the electric grid.  The credit is applied to reduce and offset the customer’s electricity bill.

1. 2. Solar Renewable Energy Credits (SRECs) have different forms in different states, but most involve monetizing the value of the solar attribute of the electricity produced from a solar system.  Many states have adopted Renewable Portfolio Standards that require a portion of the state’s electricity mix to come from renewable energy sources.  Some states (including Illinois and Michigan) have further required that a certain percentage of the overall renewable energy purchases must come from solar energy.  This creates a value for solar power above and beyond the value of the kilowatts alone, and it can be monetized in the form of a payment stream to solar system owners.  Search for the programs that create income from SRECs in your state at www.dsireusa.org.

What are the economics of an average residential solar system?

The economics of residential solar vary significantly depending on solar policies and incentives available and different market conditions.  Module costs (hard costs) are typically only about half of the total installed costs.  These have been dropping significantly since 2000 due to a global supply glut and technological improvements.  Soft costs (system design and installation) vary from market to market, depending on the maturity level of the local solar industry.  The national average installed cost of small (10KW and below), customer-sited solar systems installed since the beginning of 2010 was $7.76 per watt (http://openpv.nrel.gov/). Advanced Energy Solutions offers an online tool to estimate the cost and financing for solar energy systems.

This article in the Chicago Tribune looks at one Illinois homeowner’s investment in solar power.

Here is a run-down of the economics of a typical 4KW residential solar system in Madison, Wisconsin that generates 4926 kWh of electricity per year.

Total Installed Cost @ $8.91 per Watt:  $35,640

Minus 30% Federal ITC:   $10,692

Net Cost: $24,948

Total Income:

Revenue 1:  Wisconsin Focus on Energy Credit @ $1/kWh, max 20% of system costs

Revenue 2:  Madison Gas & Electric Solar Buyback Program @ $0.25/kWh

The solar system pays back between years 13-14 (see 14-year income schedule below):