Which Are the Best Sites for Solar Panels?
Solar power systems have become much more affordable during the past two decades. As a result, photovoltaic technology has evolved from an experimental concept to one of the fastest-growing electricity sources. The best results are achieved when a site offers optimal conditions for solar panels.
When analyzing the feasibility of a solar power system, it is important to distinguish between the electricity output and the power bill savings:
- The electricity output is measured in kilowatt-hours (kWh), and it depends on the local sunshine, the area covered by solar panels, and how efficiently they can convert sunlight.
- Power bill savings depend on these same factors, but also the local electricity tariffs. An energy output of 100 kWh saves $25 if the local tariff is 25 cents/kWh, but savings are reduced to only $12 if the tariff is 12 cents/kWh.
There is a common misconception that solar panels are only effective in sunny locations. However, they are also a good investment in places with expensive electricity, even if the local sunshine is modest. Also consider that some governments and utility companies have incentive programs for solar power, reducing your initial investment.
How Sunshine and Electric Tariffs Affect Solar Panel Performance
Many factors influence the return on investment when going solar, but local sunshine and electricity prices tend to have the highest impact. NASA and other research organizations have compiled global meteorological data, including solar radiation rates.
In the solar industry, a common metric is the annual kilowatt-hour output per installed kilowatt of solar capacity. Since this value is calculated per kilowatt of solar panels, it applies regardless of the project size.
- For example, if you use 10 solar panels with a capacity of 300 watts each, you have a total capacity of 3,000 watts, or 3 kilowatts.
- If local sunshine allows an annual electricity production of 1,500 kilowatt-hours per kilowatt of capacity, the estimated output is 4,500 kWh.
Since sunshine varies from place to place, two identical solar power systems can have different energy outputs. If a 3-kW system is installed in a sunnier site that offers 1,800 kWh/kW, the production is increased to 5,400 kWh.
To estimate the annual savings achieved with solar power, the electricity output can be multiplied by the local electricity tariff. However, note that a higher energy output does not always mean higher savings in cash.
- If the homeowner getting 4,500 kWh from solar panels pays 21 cents/kWh, this system saves $945 per year.
- On the other hand, if the homeowner getting 5,400 kWh pays 15 cents/kWh, the savings are $810 per year.
This is a very simple example, but it demonstrates why local sunshine and electricity tariffs are both important for a solar power system. The cash savings achieved by solar panels are determined by both factors.
How Solar Incentives Improve Your Return on Investment
Some governments and utility companies offer incentives for homes and businesses that go solar. There are many types, but in general they improve the business case for solar panels. Some of the most common options are tax benefits, rebates, feed-in tariffs and renewable energy credits.
Governments often introduce tax benefits as a way to encourage the use of solar power. These normally take one of two forms, and solar panels become easier to purchase in both cases:
- Tax exemptions consist of removing a tax that would normally apply for solar technology.
- Tax credits consist of letting your deduct a portion of your solar investment from your normal tax burden.
Rebates are direct cash payments for going solar, and they may be offered through government programs or by power companies. Rebates are often calculated per kilowatt of solar capacity, and they reduce the upfront cost directly. However, keep in mind there may be minimum requirements in terms of quality and installation procedures.
A feed-in tariff is a payment for solar energy sent to the grid. If the local power company offers a favorable tariff, you can get extra income by selling surplus production from your solar panels.
Finally, renewable energy credits (REC) are earned based on how much clean energy you have produced. These programs are created by governments, and they normally give you one REC for every 1,000 kWh of clean energy production. These RECs can then be sold to organizations subject to clean energy regulations, and this income is added to your power bill savings.
Solar incentives change by location, since they are determined by governments and utility programs. Before installing solar panels, make sure you are not missing any local incentives. They can shorten the payback period of a solar power system, while increasing your return on investment.