The Cost of Solar Power

Currently, electricity prices in the United States average between $.11 and $.12 per kWh (source: Electric Power Monthly (January 2010 Edition).

Therefore, in order for solar power to replace GHG emitting electricity sources such as coal, it will be necessary for the cost of solar powered electricity to be competitive with GHG emitting electricity sources.

While calculating the cost of solar power system can be complicated, generally it starts by establishing the system's labor and material costs, and estimating the amount of energy it produces, which depends largely on the amount of sun that shines on it.

Two up to date sources are available to help establish a back of the envelope cost of solar power.

The first source: The Installed Cost of Photovoltaics in the U.S. from 1998-2008, produced by researchers at the Lawrence Berkeley National Laboratory, estimates that in 2008, the average cost of a roof-top solar system was $7.5/Watt.

The second source: SolarBuzz, provides a variety of solar price calculations.

Because the Lawrence Berkeley estimates deal primarily with residential solar systems (90% of their data are roof-top solar systems with a generation capacity of less than 10 kW, most of those are crystalline rather than the next generation thin-film PV panels) it can be best compared with Solarbuzz's Solar I (Installed Home System) category.

Currently the Solarbuzz estimates place the cost of solar power at $.35 per kWh for systems in a sunny climate and $.77 cents kWh for systems in a cloudy climate.

It should also be noted that SolarBuzz estimates are based on an average cost of a solar system at the $10 per Watt Peak level.

Taking into consideration the most recent Lawrence Berkeley estimates of costs at the $7.50/Watt level, it sound reasonable (as a back of the envelop calculation) to reduce the SolarBuzz estimated by 25%, making the cost of solar power for the typical homeowner $.28 kWh in sunny areas and $.57 kWh in cloudy areas.

Even adopting those revised numbers, under the best circumstances (sunny climates), roof top residential solar systems still produce electricity at a bit over twice the cost of their GHG emitting counterparts ($.28 per kWh versus $.12 per kWh).

This back of the envelope calculation suggests that if solar power is to serve as a cost effective GHG reduction tool rather than a GHG stabilization tool (i.e., not contribute more GHG emission), the efficiency of modern PV systems (i.e., their ability to convert sunlight into energy) will need to double, and their costs of production will need to decrease even further.

(note: The analysis applies to distributive solar power. It does not address centralized solar power, which, all things being equal, is less expensive to produced because of economies of scale.)

© 2010. Patricia A. Michaels