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A Guide to Solar Energy System Costs
Introduction
One of the first questions I am asked when talking about solar is ‘how much does it cost’? The answer, perhaps unsurprizingly, is ‘it depends’. Consider a similar example: buying a car. The average new vehicle price in Canada is around $33,000, but ranges from $12,000 to well over $150,000. Considering they all do basically the same job — getting you, your passengers, and your stuff from A to B — that variation is extreme. But we are all familiar with the many factors on which vehicle pricing depends like size, utility, efficiency, features, technology, options, warranty, dealer support, brand, and others.
A solar energy system is similar: there are many factors on which cost depends. This article will answer the questions:
- What makes up the cost of a solar installation?
- What drives the cost up or down?
- How are project costs managed and kept under control?
- What are typical system costs?
Components of cost
All projects consist of both fixed and variable costs. Fixed costs are generally the same regardless of your project details or scale; variable costs go up as your project scale and complexity goes up. Fixed costs are incurred before any installation even starts; the larger the system, the less impact fixed costs have on the final price.
Fixed Costs:
- Site visit
- Design
- Permits and fees
- Mobilization on site including safety setup, machine rentals, etc.
- Cleanup
- Administration and overhead
- Some equipment and materials
Variable Costs:
- Most equipment and materials
- Installation labour
Further, costs can be divided into ‘hard’ costs and ‘soft’ costs. Hard costs generally represent things that have a direct and tangible connection to the project; the are often fairly predictable or stable. Soft costs are intangible or indirect.
Hard Costs:
- Equipment and materials
Soft Costs:
- Site visit
- Design
- Administration and overhead
- Permits and fees
- Labour
- Taxes
- Constructor profit
- Sales acquisition costs
Most people think only of hard costs, but soft costs can make up over half of a total project price, depending on details!
Installed cost vs lifetime cost
Anyone who has owned an inkjet printer knows about purchase cost vs lifetime cost. You can buy a printer for practically nothing, but you pay later in expensive ink replacements. While a solar energy system doesn’t have consumables like printer ink, remember that choices in technology, system design, operations and maintenance, and contractor calibre *will* have a direct effect on the *total* system cost measured over its lifetime. Consider:
- Upgrade path: do you expect to expand or upgrade your system over time? Does the design accommodate this? If not, you may be in for a surprise down the road.
- Battery service life: If your system has batteries they will need to be replaced at some point. Service life depends on technology, quality, system design, and maintenance regime. Replacement cost includes the batteries themselves, but also the labour and disposal costs of the old ones.
- Preventative maintenance: periodic professional inspections will catch budding issues before they bloom into problems. Do you get checkups and cleanings at the dentist, or do you only go when you have a tooth ache?
- Insurance: you will be adding to the value of your home and should increase your home insurance accordingly. It’s a small cost, but often forgotten.
- Installation quality: The best way to minimize ongoing costs is to make sure your system is well designed and professionally installed. Like so many other things in life, ‘the devil is in the details’ and a skilled and experienced contractor knows how to handle the details that will result in a long lived and productive energy system.
Hard Costs: Equipment and Materials
Solar Panels
Solar panels (technically: solar modules) for permanent installation in residential and commercial applications are similar across high quality manufacturers and models. The differences among them are efficiency and size. Higher efficiency modules will produce more Watts from the same area and will, therefore, command a higher price. A 450W solar panel could be a high efficiency small module or a low efficiency large module. So when you’re comparing quotes be sure to compare both the number of solar panels and the power rating of the solar modules.
Solar panel racking
A roof mounted solar array will almost always be less expensive than a ground mounted array. The roof mounted array has structure to support it (the roof), whereas a ground mount must be built from ‘scratch’ to support the solar array. This extra structure and earth works adds cost.
Trackers — ground mounted racks that rotate the solar array to always be pointing at the sun — will increase system performance and add significantly to cost. We don’t believe the cost/benefit is worthwhile and strongly recommend against trackers; put the money into a larger fixed array instead.
Solar Inverter
There is a wide variety of inverter types, manufacturers, and configurations, each with its own set of advantages, disadvantages, and features. Pricing within a category will be fairly comparable; pricing across categories can vary significantly. Inverter types include:
| Application | Inverter Type | Examples |
| On-grid, green energy generation only | String Inverters | Fronius Galvo, Primo, and Symo SMA Sunny Boy, TriPower Solis |
| Micro-inverters | Enphase APS | |
| Optimizer System | SolarEdge | |
| Off grid energy | DC Coupled Hybrid Inverters | Sol-Ark |
| Battery- based Inverters | Outback Power, Magnum Dimensions, Schneider Conext XW or SW | |
| On grid, green energy generation, backup power | DC Coupled Hybrid Inverters | Generac PwrCell SolarEdge Home Hub Sol-Ark |
| AC Coupled Inverters | Tesla Powerwall Sonnen Batterie |
Batteries
If batteries are to be part of your system the battery technology is the main driver of cost. Beware though: the lowest cost battery may or may not have the lowest lifetime cost when you take into account efficiency, life expectancy, and replacement cost. In order of lower installed cost to higher installed cost:
- Flooded Lead Acid (FLA): The stalwart for off grid applications. Requires routine maintenance for optimum service life. Rolls/Surrette, Trojan, East Penn are all common names. There are many other brands as well.
- Sealed Lead Acid (SLA): No maintenance required, but short life and higher cost. Rolls/Surrette, Trojan, East Penn, and others.
- Lithium NMC (Lithium Nickel Manganese Cobalt Oxide): no maintenance, best for backup applications. This is the technology used in the Tesla Powerwall, Generac PwrCell, and SolarEdge Stor Edge.
- Lithium LFP (Lithium Iron Phosphate): longest service life, good for cycling (ie off grid), and safest Lithium technology. Used more in package systems like Sonnen Batterie, Enphase Ensemble, and also in stand alone batteries like Simpliphi, Fortress Power, and Rolls Lithium.
Within each type there are multiple variants and manufacturers with different advantages and features that will affect price.
Balance of System
This is all the wires, cable, fasteners, switches, breakers, fuses, electrical panels, etc. Balance of system costs are generally fixed and a small portion of the installation. For commercial scale systems connection costs including switch gear and transformers, can become high depending on the utility connection requirements.
Soft Costs
Design, permits and approvals
Someone has to design your system before it can be built. Some contractors use the same design for all installations, others will customize a system based on your unique site, objectives, and preferences. All systems require an electrical permit and roofs mounted solar arrays require a building permit. Grid-connected systems require a utility connection application and fee. Ground mounted systems may require other municipal approvals. All of these things take time and effort to process.
Utility connection fees
Connecting any generation system to the grid will require an ‘offer to connect’ from your Local Distribution Company (LDC) and will have a corresponding connection fee. This fee varies by project scale and LDC. Most residential connections cost around $800+HST; commercial connections cost more.
Installation labour
Factors affecting installation labour cost include:
- Contractor experience and qualifications;
- Staff experience and qualifications;
- Commitment to health and safety;
- Professionalism of staff;
- Attention to detail;
- Efficient work methods and job site management
Contractor overhead and profit
This cost is embedded in contractor pricing of both materials and labour.
Site factors
A wide variety of site factors will affect installed system cost including:
- Trenching or excavation
- Complex cable runs
- Roof steepness, height, material
- Roofing material and required details to make a water tight installation
- Accessibility of the site and equipment
- Required upgrades to electrical or structural infrastructure
- Travel costs
- And more
Other drivers of cost
Risk and complexity
Much of installation cost variability boils down to risk and complexity. If risk and complexity are high, you should expect a higher cost. For example: A low slope single storey roof is easier to work on than a steep 3rd storey roof. The high steep installation should be more expensive because it is more complex and requires more effort to manage the risk. Some contractors will have a standard price regardless of those details; we disagree with this model because it means homeowners with easy installations are subsidizing those with difficult installations and we don’t think that’s fair.
Serviceability
This refers to the ease with which a system can be maintained or repaired should the need arise. Poor serviceability is a cost that remains hidden until some point in the future when service is required. Here’s an example: micro-inverter systems and optimizer based systems include power conversion devices on the roof, under every solar module. There are unique and valuable benefits to choosing these technologies and they may be the best system design for your needs, but they add many complex devices (potential points of failure) under the solar modules. Service will require a crew on the roof and potentially disassembling part of the solar array to access the units. That service call will be more expensive than servicing an inverter mounted on an exterior wall of your house.
Technology
Technology marches on and the newest technology is more expensive than old technology. If you want the latest technology, if you want your system to be forward-looking and as future-proof as possible, you should expect to pay a small premium.
Market forces
Solar panels, inverters, and balance of system equipment are global commodities. Prices rise and fall owing to global supply and demand, currency exchange rates, trade tariffs, raw materials pricing, supply chain disruptions, and extreme weather events. Locally, competitive forces will affect pricing.
Optional costs
In contrast with vehicles or homes, once a basic design is set and primary equipment chosen solar energy systems have relatively few options from which to choose. However some examples are:
- Whole home energy metering can be added to directly show the balance between consumption, grid import, solar generation, and backup energy.
- Communication wiring choices: all inverters today have some kind of internet monitoring portal available, usually for free, requiring connection to your home network. WIFI connections are easy to setup, but a wired connection will always be more reliable. Is there an added cost to run network wiring to your inverter?
- Rodent meshing, to keep unwanted critters out from under your roof mounted solar array, is a strict requirement on system systems but optional on others. Highly recommended!
Budgeting guidelines
Wow! We’ve covered a lot and I’m glad you’re still with me.
You’re probably still asking: “So how much?” Here’s a rough guide to help you budget. All estimates are exclusive of tax and unique site condition.
- Residential roof mounted battery-less net metered solar: $20,000 to $40,000
- Same thing but ground mounted: Add $10,000 to $15,000
- Residential full time occupancy off grid assuming roof mounting and FLA batteries: $5000 to $8000 in system cost per kWh/day of winter consumption
- Many full time homes designed for off grid living consume 8 to 15 kWh/day and the corresponding energy system cost is $45,000 to $90,000
- Residential solar + storage for net metering and backup power: $45,000 to $90,000
- Residential seasonal occupancy off grid, roof mounted and FLA: $20,000 to $35,000
- Commercial battery-less net metering: Varies by scale and roof type, budget $1.85 to $2.50 per Watt of solar array installed plus engineering and connection fees.
- Commercial battery energy storage, any configuration: highly custom; you need to talk to a contractor or project developer.
Conclusion
The landscape for implementing solar energy projects is far more complex than that seen by a typical electrician, plumber, or furnace contractor. To navigate that landscape successfully you need to find a solar contractor with whom you can communicate well and have mutual respect. A good contractor will help you manage and understand cost by:
- Providing a clear and readable contract;
- Discussing openly and frankly the various factors covered in this article;
- Answering any questions you have; and
- Planning ahead to reduce or eliminate the chance of surprises during your project and after its completion.
I hope this has been a helpful discussion on solar energy system costs. You can find more details on many of the topics in this article elsewhere in our Knowledge Base.
