Solar Photovoltaics

Solar photovoltaic (PV) systems generate renewable energy by collecting light from the sun and converting it to usable electricity for our homes and commercial buildings.
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Solar photovoltaic (PV) panels generate electricity directly from sunlight via an electronic process that occurs naturally in certain types of material, called semiconductors.

The most commonly used semiconductor material in solar panels is crystalline silicon, however advances are being made in the use of other potentially more efficient and affordable materials, such as perovskites.  

Semiconductors within PV panels react to the electromagnetic radiation in visible light. When light hits the PV panels, molecules within the semiconductor materials are excited, freeing electrons which are induced to travel through an electric circuit. This generates electricity in the form of direct current (DC) which is then fed to an inverter which converts the DC power to alternating current (AC) which can be used in your home or building.

Residential and commercial customers who generate a surplus of electricity from solar power may be able to feed their electricity back to the grid and receive credit for the electricity they create. This is called net metering.

Growth of Solar Industry in the United States

According to the Solar Energy Industries Association (SEIA) the United States added 14,800 Gigawatts of capacity in 2016 and is on track to triple in size by 2022. There are more than 1,000,000 residential solar installations nationwide and utility scale solar energy is projected to grow 300% by 2022. Non-residential solar systems are expected to grow by 11% year over year.

How Much Does a Solar PV System Cost Per Watt?

Solar system cost is determined by the $ cost per watt ($/W). As you can see from this chart from the Solar Energy Industries Association (SEIA) and GTM Research below, the cost of solar per watt has fallen dramatically in recent years.

Photovoltaic Cost of Solar

When combined with the solar Investment Tax Credit (ITC), and other incentives, solar PV has become economically viable in much of the world.

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Additionally, there are many state and local tax incentives that help to lower the cost of solar PV installations. One Block Off the Grid released a great infographic showing how solar PV installation prices varied by state. The average price of a solar installation was $17,056. Many states were below $10,000, though - in Louisiana, it only costs $3,552 on average. The most expensive state for solar is South Dakota, which averaged $38,428.

The amount of money you can save every month also varies from state to state. This is because the number of days of sunshine per year and utility prices for electricity (per kWh) varies from state to state. The national average for energy savings is $84 per month by going solar, though Hawaii topped the charts with $270 per month. The smallest savings was seen in Kansas, at $35 per month.

Overall, a solar PV system in the U.S. could save $20,080 over 20 years, according to the study. Some will see savings of over $30,000. Therefore, considering the initial price of installation, the systems will pay for themselves in a range of 4-19 years.

Best Solar Payback and ROI by State

Calculate the simple payback on your solar PV system by dividing the cost of your solar PV system by the annual electricity savings you expect to receive. The smaller the number, the shorter the payback period, and greater opportunity for a return on investment (ROI). States in the U.S. with the shortest payback periods are as follows:

  • 1) Massachusetts = Payback of 4 years
  • 2. Hawaii = Payback of 5 years
  • 3) New Jersey = Payback of 7 years
  • 4) Maryland = Payback of 7 years
  • 5) Louisiana = Payback of 7 years
  • 6) New York = Payback of 8 years
  • 7) California = Payback of 9 years
  • 8) Ohio = Payback of 9 years
  • 9) Delaware = Payback of 9 years
  • 10) Arizona = Payback of 10 years

However, these rankings are not static. The payback period can change on a yearly or even monthly basis because of changes in utility prices for electricity, local incentives and the cost of solar in a particular state. To determine your own payback, solar payback calculators are available to determine the cost of solar energy where you are located:

Payback periods are variable and depend on your energy usage, your current utility costs, the cost of the system and how well suited the building is for solar power (which will affect the system’s efficiency and output).

For example, a building with electric heat would most likely have a much shorter payback period than a building with oil or gas heat, because the solar PV produces electricity. For someone with oil or gas heat, the solar energy would replace less of the building’s energy mix, which would means earning back the investment would take longer.

What are Net Metering States?

When electricity is sent back to the grid, in states that allow net metering, consumers may earn money from their solar photovoltaic systems by receiving checks from their local utility. Net metering is a billing mechanism that credits a home or business for the electricity they add to the grid, which further reduces their future electricity bills.


The growth of residential and commercial solar in the U.S. has caused utilities to their relationship with their customers. While net metering was once a benign consideration, utilities are now considering net metering to be a tricky issue. As a result, utilities are rethinking their business models to protect revenue streams and ensure profitability even as consumer demand for electricity falls.

Solar Tax Incentives

The Energy Investment Tax Credit, also called the Solar Investment Tax Credit, or "ITC", provides a 30% federal tax credit for residential (Section 25D) and commercial (Section 48) solar systems. If it is a residential solar system, the homeowner may claim the federal tax credit on his/her personal income taxes. If a business installs a solar system, the business claims the tax credit.

The ITC was extended by the Emergency Economic Stabilization Act (P.L. 110-343) for eight years back in 2008 and then extended again with the Omnibus Consolidated Appropriations Act (P.L. 114-113) until 2023. The ITC provides dollar for dollar tax credits for eligible solar systems that begin construction on or before December 31, 2023.

According to the Department of Energy's Database of State Incentives for Renewables and Efficiency (DSIRE) website, the following solar systems are eligible for the ITC:

  • Solar PV systems: The credit is equal to 30% of expenditures, with no maximum credit. Eligible solar energy property includes equipment that uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat.
  • Hybrid solar lighting systems: Hybrid lighting systems use solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight, are eligible.

The value of the solar investment tax credit is 30% through 2019, but declines gradually thereafter in the years approaching 2023.

  • 12/31/16-12/31/2019 = 30%
  • 1/1/2020-12/31/2020 = 26%
  • 1/1/2021-12/31/2021 = 22%
  • 1/1/2022- Future Years = 10%

For a list of non-solar green building technologies that may be eligible for the ITC read this article on 5 green building tax incentives.

Choosing a Solar Contractor

Any solar installer should offer a free consultation where they will evaluate your home or commercial building's solar orientation and geographic location, electricity usage, potential problems with shading, amount of annual sunlight, financing options and tax incentives that may be available. Solar contractors should be able to quickly provide you with an estimated cost and the predicted payback for your system.

When choosing a solar contractor consider the following:

  • Number of installations in your area
  • Type of installations (commercial or residential)
  • Industry certifications: NABCEP, ETA and RISE
  • Financing options
  • The look of systems they have installed
  • Reputation 

For example, the North American Board of Certified Energy Practitioners (NABCEP) offers specific certification for PV installers, PV technical sales and solar heating installers. The Electronics Technicians Association (ETA) provides training and certification for PV Installers. ETA offer three levels of certification: Apprentice, Specialist, and Technician. Roof Integrated Solar Energy (RISE) also offers a Certified Solar Roofing Professional (CSRP) credential for rooftop solar energy installation and maintenance.

Solar PV and LEED

Solar panels can help earn points toward green building certification. The Leadership in Energy and Environmental Design (LEED) green building rating system offers specific credits that award points to building projects that install on-site renewable energy. According to the LEED for New Construction (NC) rating system, they could help to earn the following credits:

• Energy and Atmosphere (EA) Credit 2: On-Site Renewable Energy (1-7 points):
This credit awards for on-site renewable energy. Points are awarded based on the percentage of the building’s energy costs that the solar power replaces.

• Sustainable Sites (SS) Credit 7.1: Heat Island Effect – Nonroof (1 point):
This credit awards projects for reducing heat island effect by providing shading for the site’s hardscape. If the PV panels are installed on the ground, they could help to earn this credit.

• Sustainable Sites (SS) Credit 7.1: Heat Island Effect – Roof (1 point):
This credit awards projects for reducing heat island effect by covering the roof with reflective coatings or objects. If the PV panels are installed on the roof, they could help to earn this credit, because they absorb the sunlight and prevent it from warming the building via the roof.


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