The Cost Difference Between Solar Energy and Electricity

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The cost difference between solar energy and electricity from the grid has been falling rapidly over the past several years, and solar is now giving coal, gas and other energy sources a run for their money. Having your own solar setup is still a substantial investment. However, more businesses, even small ones, are turning to the power of the sun as a way to trim long-term costs.

TL;DR (Too Long; Didn't Read)

Depending on the state in which you operate, energy savings from a modest rooftop solar installation can range from $7,500 to over $30,000 over 20 years.

Solar Energy vs. Electrical Energy

Though it might not appear so at first blush, not much difference exists between solar energy and electrical energy — it’s all energy. The electricity you get at the wall outlet comes from several sources, including nuclear, solar and coal. Solar is simply a form of energy used to generate electricity. Electricity is a convenient way to consume the energy needed to run your business.

Falling Cost of Solar

Solar panels had their beginnings in the late 1950s. At that time, satellite makers needed a way to power electronics in orbit, far from electrical outlets. Early solar cells, though very expensive, proved to be a practical and effective power source. Improved manufacturing since those early years has greatly driven down the cost of solar cells, making them affordable for everyday energy needs.

Dollars per Kilowatt-Hour

The kilowatt-hour is a standard unit of energy that’s useful for comparing the cost of electricity from various sources. It is the amount of energy a one-kilowatt appliance, such as a small space heater, uses in one hour. On your electric bill, the utility company multiplies the kilowatt-hours you used for the month by the cost per kWh to get the total monthly amount.

For example, the rate might be 15 cents per kWh, and you used 1,000 kWh, giving a total of $150 worth of electricity. It varies depending on from where it comes (coal, nuclear or other source), maintenance and other factors, which add to the total cost per kWh.

The cost of a kilowatt-hour depends on the energy source and geographic area. According to data from the U.S. Department of Energy, the average cost of electricity in 2018 in the U.S. was 10.58 cents. Electricity from solar is currently about 10 cents per kWh and will likely continue to decline for years to come.

Cost of a Typical Solar Installation

The cost of buying and installing solar panels varies by state due to local construction costs, incentives and other factors. Currently, a relatively small solar installation runs roughly between $5,000 and $50,000 depending on how much electricity it produces.

Typical Energy Savings

The savings you realize from solar panels depends on several factors, including the cost of the system, local solar subsidies, how much sun your geographic area receives and how much you already spend on your electric bill.

After the sizable one-time purchase cost, solar energy greatly reduces the electricity you need from the utility. Average savings range from $7,500 to over $30,000 for a modest solar-power system over its 20-year useful life.

Don’t Cut the Cord

Even a sophisticated solar system is intended to supplement and not replace the electricity from the utility. In winter months and during prolonged cloudy periods, solar panels are less efficient. You need reliable power to keep your business up and running, and the utility provides that reliability. Solar panels reduce your need for the electric utility but in most cases doesn’t eliminate it entirely.

Passive Solar Heating

In colder climates, passive solar heating lowers heating costs by using sunlight to keep your building warm, an attractive option for small businesses that own their own building. This type of solar installation does not provide electricity. Rather, it is a set of architectural strategies to better manage the flow of sun-generated heat through a building.

Design features include the use of stone, concrete and tile to better hold daytime heat and spaces that allow efficient heat movement through convection and radiation.

References

About the Author

Chicago native John Papiewski has many years' experience in IT consulting, and has worked with businesses including finance, real estate, distribution and publishing. His articles have appeared in various outlets including azcentral.com and seattlepi.com. Please, no workplace calls/emails!

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