In comparison to conventional hydrocarbon fuels such as coal or oil in generating electricity, the cost of solar energy is significantly higher. To compare energy cost, a common equivalent is required. Back in our previous post, Coal: Fueling the American Industrial Revolution to Today’s Electric, we developed a framework to measure energy costs by converting costs to kilowatt-hours (KWH).
In our example, a ton of coal on the average produces approximately 6,182 KWH of electric at a cost of about $36 per short ton (2,000 pounds). Under this measure coal cost less than$0.01 per KWH. In comparison, a barrel of oil at $70/barrel produces 1,700 KWH at a cost approximately $0.05 per KWH. Let’s provide some measures to understand energy costs.
Energy Units and Conversions KEEP
Energy Comparison
1 ton of coal = 6,182 KWH
1 barrel of oil = 1,699 KWH
1 cubic foot of gas = 0.3 KWH
Energy Costs
1 ton of coal costs $36 = $0.006 per KWH
1 barrel of oil costs $70 = $0.05 per KWH
1 cubic foot of gas $0.008 = $0.03 per KWH
In comparison to solar energy, the hydrocarbon fuel costs are significantly lower without rebates, tax benefits nor the cost of carbon emissions. A two–Kilowatt (KW) solar energy system costs about $45,000 and covers roughly half of a typical American household’s energy needs. At $45,000, a solar energy system equates to $9,000 a kilowatt. The $9,000 per KW for solar is not very helpful in comparing electric generation costs to other fuels like coal or gas. Since coal, oil, and gas can be measured on a cost per KWH, we should measure solar costs on a KWH basis.
Some of the considerations for a solar energy system include the 20-to-30 year lifespan of the system and the hours of available sunlight. The hours of available sunlight depends on latitude, climate, unblocked exposure to the sun, ability to tilt panels towards the sun, seasonality, and temperature. On the average, approximately 3.6 peak sunlight hours per day serves as a reasonable proxy to calculate the average annual output of electric from solar energy panels.
Solar Energy Costs
Average system costs = $95 per square foot
Average solar panel output = 10.6 watts per square foot
Average solar energy system costs = $8.95 per watt
In order to compare the solar energy costs to conventional hydrocarbon fuels, we must covert the $8.95 per into KWH. Let’s make two calculations to measure the total electric energy output over the lifespan of the solar energy system. The first adjustment is to convert solar direct-current (DC) power to alternating current (AC) power that can be used for household appliances. The conversion of DC to AC power results in an energy loss of 10 percent for a solar energy system. The second calculation is to approximate total electric output by multiplying the average peak hours of sunlight (about 3.63 hours per day) times 365 days times 20 years (the product lifespan).
For our 5-KW solar energy system costing $45,000, the conversion to KWH is as follows:
5 KW times 90% = 4.5 KW – (Conversion of DC to AC power)
4.5 KW times 3.63 hours = 16 KWH per Day
16 KWH x 365 = 5,962 KWH – (Average Annual Output)
5,962 KWH x 20 years = 119,246 KWH – (Total output over 20 year lifespan)
So a $45,000 5KW solar energy system produces about 119,246 KWH of electric over its lifespan meaning the average cost equals $0.38 per KWH. ($45,000 divided by 119,246 KWH)
Figure 1 Cost of Energy
The relatively high solar energy costs in comparison to conventional fuels should improve with utility rebates and government tax incentives. In addition, solar panel prices should continue to decline as volume production increases. Solar cell manufacturers employ similar production methods as semiconductor suppliers and benefit from economies of scale.
There are several components of a solar energy system. Solarbuzz provides some detailed information on solar industry pricing. Solarbuzz
The single largest cost is the solar panels themselves. The following figure provides an overview of the components of a solar energy system. Sharp Solar provides a very useful calculator for system costs and electric generation by geographical location along with utility rebates for your area. Sharp Solar Energy
Figure 2 Solar Energy Component Costs
We will explore the some of the advances in thin-film technologies, the declining costs of solar panels, and the improving solar conversion efficiencies that should continue to bring solar energy costs on par with hydrocarbon fuels. With the improving cost structure of solar and a better understanding of the cost of carbon emissions from hydrocarbon fuels, we may find a more level playing field in comparing energy costs.
10 responses so far ↓
1 Andolyn // Apr 29, 2011 at 8:18 pm
These costs for solar are old, you can buy a 2kW system for under $10000 not $45000 as mentioned here. That cost will continue to fall as the technology and volume of cells manufactured increases.
2 Osama Bin Laden // May 4, 2011 at 4:35 pm
cool bro.
3 Fred Henderson // May 11, 2011 at 10:02 pm
Thanks for the solar cost comparison information. However, I wonder though if you are not overestimating the performance of solar panels and batteries over time. I understand solar panel output decreases with weathering but I have not seen data on this.
But possibly more importantly, from personal experience I have found it difficult to keep deep cycle batteries (used on a small, streamlined RV), which are subject to frequent deep discharge and recharge over only a few weeks of travel a year to last more than a year or so.
My problems may be due to poor maintenance procedures during non-use storage periods (I know batteries degrade rapidly if not recharged quickly after discharge, but I have had problems manually staying with procedures over the long winter months. If you have invested a lot in batteries you might want to consider a backup house power based recharge system to maintain your batteries. I have never seen such for sale, but this should be in demand for the solar power community.
I hope all goes well with your system and you can report positive findings periodically. We definitely need viable energy alternatives.
Fred H.
4 yalocay // May 15, 2011 at 7:51 am
thanks guys this is exactly what i wanted
5 Roland Johnson // May 17, 2011 at 2:39 pm
You do not take into account depreciation of the power plants which are not needed in the case of solar. Also if you are taking into account DC/AC conversion losses for solar you should take into account transmission losses from power plants. Since solar is generally local these would not be incurred.
6 Matt stein // May 21, 2011 at 9:58 pm
Doing a school research project, the information on here helped so much, thank you!
7 Alan Dominique // May 24, 2011 at 3:36 pm
OK, let’s address some of the things this article leaves out. First, you supplied the customer cost of solar power but the ‘wholesale’ cost of fossil fuel power, why? The cost of fossil fuel generated electricity is very low, but it also can’t be done at home so the power must travel great distances where there are great losses and MASSIVE infrastructure costs. This article completely leaves that part out.
Second, your estimation of how much a solar system costs is way off, a 2 KW system would not be $45k for the average homeowner because your average homeowner would not buy the battery bank to go with it so take at least $10k off the price. I did see the link to another site to get the tax credits estimated, but that should have also been a note on the bar chart.
Third, your estimate of 3.63h of peak output power is correct, but you’re leaving out the non-peak output power generated every day. Outside those 3.63h solar panels still produce power as a factor of the Sun’s angle to them and what if any filter/covering is on the panels. I admit that I don’t know exactly what this figure is (though I would have found out if I was going to publish an article on it) but I know that my tiny 40 W solar panel array still produce a Watt or two AFTER the sun is below the horizon!
Finally, I see no mention of the fringe benefits. Solar power is produced at the point of demand, which means there would be less need for huge power lines all over the country and if the power grid goes down, like in natural disasters, solar panels can still provide at least emergency power to keep food frozen, run lights, radios, and fans. I don’t think every house should produce all it’s power locally, but reducing grid dependency just a little benefits the environment, the economy, the homeowners, and even the power companies (by reducing their liabilities when the grid fails).
In conclusion, without the tax incentives, solar power is still more expensive that fossil fuels. However, tax incentives can pay for as much as 80% (federal + state)of all the costs of buying and installing solar panels which makes it actually cheaper than the alternatives. Currently the average house does not have enough sunny roof space to power the entire house off of solar power, but the combination of cost savings and piece of mind from having emergency backup outweigh the drawbacks for me.
8 Doug Brice // May 28, 2011 at 10:23 pm
Solar Cost
I just found this site and I could not believe no one had commented on this. I am an Electrical and Electronic Engineer. I have worked on power generation programs at Bonneville Dam, McNairy Dam and others on the Snake River. It has given me insight into the generation of electric power. Energy in, to get energy out, is what it is all about.
Even with your abundant generosity of figures “Solar” looses out as not being cost effective. Your 20 years of service is far from accurate. Batteries and inverters are only good for four or five years. Basic maintenance of the system is ignored and panel damage is to be expected also.
Most of all, solar panels don’t do well out is the sun and rain. The power generation declines rather rapidly as the solar panels age. I truly believe the solar generated electricity will never prove to be cost effective if solar panels are used.
Realize that all electricity generated at our dams is truly solar powered. The sun evaporates the water, it then rains, the water collects in our rivers, and runs our turbines. Now there is a solar cycle of almost free energy.
9 HomemadeSolarPanels // Jun 6, 2011 at 9:32 am
homemadesolarpower…
I have bookmarked, Dugg, and I joined the RSS subscription. Thanks! ….
10 maxxx // Jun 8, 2011 at 3:25 pm
With all due respect I disagree with:
“high solar energy costs in comparison to conventional fuels should improve with utility rebates and government tax incentives”
Subsidies are nice for the manufacturers but they end up costing the consumer more in taxes than they save in costs. It’s just a shell game.
We all have noted the “renewable energy tragedy in Europe, Spain in particular with huge investments in solar panels were also a huge financial bust.
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