A Guide to Solar Energy System Costs

Last modified on September 1, 2020

Introduction

One of the first questions I am asked when talking about solar is ‘how much does it cost’?  The answer, perhaps unexpectedly, 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 CostsVariable Costs
Site visit
Design
Permits and fees
Mobilization on site including safety setup, machine rentals, etc.
Cleanup
Administration and overhead
Some equipment and materials
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 CostsSoft Costs
Equipment and materialsSite 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 solar energy system doesn’t generally 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.  Things to consider include:

  • 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 surprize 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 issues before they bloom into major problems.  This is a whole other discussion, but think of it this way: do you get periodic checkups and cleanings at the dentist, or do you only go when you have a major problem?
  • 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 surest 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, the correct term is solar ‘modules’) built for permanent installation in residential and commercial applications by high quality manufacturers are very similar across manufacturers and models.  The main 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 330W 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 already has structure to support it (ie the roof), whereas a ground mount must be built from ‘scratch’ to support the solar array.  This extra structure adds cost.

Trackers — ground mounted racks that rotate the solar array to always be pointing at the sun — will add significantly to the cost.  Back when solar modules were way more expensive trackers were popular to maximize system performance but they add a lot of complexity (ie maintenance costs) and, with lower solar module pricing, we 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:

ApplicationInverter TypeExamples
On-grid, green energy generation onlyString InvertersFronius Galvo, Primo, and Symo
SMA Sunny Boy, TriPower
Schneider Conext CL
Micro-invertersEnphase
APS
Optimizer SystemSolarEdge
On and/or off grid, green energy generation, backup powerDC Coupled Hybrid InvertersSOl-Ark
Outback Power Skybox
Battery based invertersOutback Power, Magnum Dimensions, Schneider Conext XW or SW
On grid, green energy generation, backupDC Coupled invertersGenerac PwrCell
SolarEdge StorEdge
AC Coupled invertersTesla Powerwall
Sonnen Batterie
Enphase Ensemble

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 in Sonnen Batterie, Enphase Ensemble, and 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.  Any roof mounted system will also require a building permit.  Any grid-connected system will require a connection application and probably a connection 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 much more.

Installation labour

Factors that will affect 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

Ultimately 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 much 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 some of those details.  We disagree with this model because it means homeowners with easy installations are subsidizing those wtih 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 up on the roof, often under each and 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 now there are several dozen complex devices (potential points of failure) located under the solar panels.  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 much more expensive than servicing an inverter mounted on an exterior wall of your house.

Technology

Technology marches on continuously and new technology is often 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 over the alternative.

Market forces

Solar panels, inverters, and balance of system equipment are global commodities. Pricing rises and falls based on global supply and demand as well as factors like trade tariffs, raw materials pricing, and extreme weather events.  Locally, competitive forces will affect pricing.  In the years 2016 through 2018 the supply of solar contractors in Ontario exceeding the demand. This pushed pricing lower.  Most of the contractors have left the market, but pricing remains at those levels.

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:

  • Additional metering can be added to monitor whole home energy consumption and directly show the balance between consumption, grid import, solar generation, and backup energy.
  • Communication wiring: all inverters today have some kind of internet monitoring portal available, usually for free.  They require connection to your home network.  WIFI connections easy because they are wireless, 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!

Cost guidelines

Wow!  we’ve covered a lot.  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:  $18,000 to $35,000
  • Same thing but ground mounted: Add $5000 to $10000
  • Residential full time occupancy off grid assuming roof mounting and FLA batteries: $5000 in system cost per kWh/day of winter consumption
    • Many full time homes designed for off grid living consume 8 to 10 kWh/day and the corresponding energy system cost is $40,000 to $80,000
  • Residential solar + storage for net metering and backup power: $30,000 to $60,000
  • Residential seasonal occupancy off grid, roof mounted and FLA: $18,000 to $25,000
  • Commercial battery-less net metering: Varies by scale and roof type, budget $1.75 to $2.00 per Watt of solar array installed.
  • 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 surprizes 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.