A step-in introduction to the cost of home solar system

How much does it cost to build a solar power station on your roof or yard? Is your home suitable for building a home solar system? Theoretically speaking, as long as you have independent property rights or usufruct rights (mainly refers to authorized rental or contracting) roofs, carports, balconies, courtyards, idle non-cultivated land, and barren hills, you can apply to build a home solar power station.

This article mainly introduces and explains the cost of home solar system from the perspective of the unit price of the project (that is, the total price of each watt of photovoltaic cells after installation).

1. What items are included in cost of home solar system?

In the construction period, cost of home solar system generally includes components, inverters, brackets, construction, transmission and distribution wires, auxiliary materials, etc. The proportion of each part is as below:

After the solar power station is completed and put into operation, it is necessary to establish a complete operation and maintenance management system, equip relevant operation and maintenance personnel, or outsource the operation and maintenance work to third-party companies or individuals.

Since the labor and material costs in each region are different, this article mainly takes China as an example to calculate the cost of home solar system roughly. Usually the annual operation and maintenance cost is about 0.04 RMB/W. If you have certain electrical knowledge, you can take in charge the daily operation and maintenance of the power station, so that this cost of home solar system can also be saved.

If your solar power station uses a rented site, the site rent is another major expense during the operation of a solar power system. Site rent can be paid in two ways. One is to adopt an energy management contract with the site owner and provide a discount on electricity prices. This method is more suitable for companies with relatively high electricity consumption. Owners of large venues can generally get a 20% to 10% discount on the electricity price of the power supply company.

Another payment method is to pay rent based on the occupied area at a fixed price within 25 years. The rent also varies depending on the irradiation resources and subsidy policies in various regions. It usually accounts for about 6% of the average annual income of the power station.

Photovoltaic modules and inverters are the core equipment of home solar power system. The service life of photovoltaic modules is 25 years. The power attenuation of the modules within 25 years shall not exceed 20%. During the 25-year operation cycle of the home solar power system, only normal cleaning and maintenance are required.

The warranty period of the top 10 solar inverters is generally 5 years, and the service life is usually about 10 years. As the service life increases, the electronic components in the inverter gradually age and the conversion efficiency decreases. After reaching the service life, the entire inverter needs to be replaced. So pick a high quality inverter, for example, 2000w pure sine wave inverter or 3000w inverter, and you won’t have to worry about the use for over 10 years.

As technology advances, the price of inverters gradually decreases. It is assumed that the price of the inverter during replacement is 80% of the price during the construction period. Other auxiliary materials involved in solar power systems account for a small proportion and will not be analyzed here.

The main taxes related to solar power generation include value-added tax, income tax, and surcharge. Different regions have corresponding VAT refund policies, which should be calculated according to local regulations.

2. Materials and prices for home solar system

Let's take a 10kw distributed solar power station in 2017 as an example to look at the cost analysis of a typical distributed solar power generation project.

It can be seen from the above table that in 2017, the unit price of photovoltaic modules was about 3.1 RMB per watt, (3.1÷5.4)×100%=57.40%. The cost of photovoltaic modules accounted for nearly 60% of the total cost of home solar system.

Since the installed capacity of a home solar power system is generally relatively small, it can only be converted into alternating current through an inverter and then directly connected to the grid. Please refer to the table below for specific grid connection voltage:

Therefore, the cost of high-voltage system equipment such as step-up transformers, reactive power compensation equipment, and high-voltage cabinets can also be subtracted from the cost of grid-connected distributed photovoltaic power stations. The unit price of the project is 4.92 RMB per watt, (3.1÷4.92)×100%=63%. The photovoltaic components accounted the cost of home solar system for more than 60% of the total cost at that time.

Because large-scale projects have a certain scale, can produce marginal cost effects, and have strong bargaining power over raw material suppliers, the overall cost of home solar power system projects will increase. It is reported that the cost of home solar system projects at that time should generally fluctuate within 6 RMB per watt.

With the passage of time and technological advancement, the solar photovoltaic power generation market is constantly changing, especially the price of core component photovoltaic modules has dropped significantly. In the fourth quarter of 2020, the cost price of photovoltaic modules reached a new low of 1.66 RMB per watt.

According to the analysis of professional institutions at the time, there is still room for a 30% to 50% decline in the installation cost and price of photovoltaic modules before 2030. That is to say, the installation cost price of photovoltaic modules is expected to reach 0.99 RMB to 0.83 RMB per watt by then.

Due to its small scale, cost of home solar system projects can save the high-voltage power transmission and distribution equipment and can be directly integrated into the residential power grid, which means that the costs of some of the items in the above table can be saved. Therefore, the installation quotation of most photovoltaic project installations is around 3.5 RMB per watt.

Calculated based on the project unit price of 3.57 RMB per watt, if the installation cost of photovoltaic modules is 1.66 RMB, the cost of core component photovoltaic modules accounts for about 46.49% of the total cost of home solar system. Compared with 2017, the proportion of photovoltaic modules in the total cost of home solar system has dropped close to 20%. The unit price of photovoltaic modules alone dropped from 3.1 RMB per watt in 2017 to 1.66 RMB per watt, a decrease of 53.54%.

3. Changes in photovoltaic module material prices

Entering 2021, due to the persistence of COVID-19 and changes in the general environment, especially the implementation of concepts and supporting policies such as energy conservation, emission reduction, and carbon neutrality, there was a certain impact on the photovoltaic industry in the short term. Photovoltaic modules and other materials prices have also increased to varying degrees.

Since most household distributed photovoltaic power generation projects use their own roofs or yards, there is less rental cost for construction land. Home distributed grid-connected photovoltaic projects do not strictly require electrochemical energy storage systems, so the cost of energy storage systems can be saved.

Similarly, direct connection to the grid does not require high-voltage power transmission and distribution equipment, and can also save a fortune. For fixed type, the cost of the core component photovoltaic module accounts for about (1.79÷3.85)×100%=46.49% of the total cost of home solar system.

It is recommended to use fixed component installation methods for household distributed photovoltaic power generation projects. Because the fixed photovoltaic module installation method has a simple structure, low maintenance costs, high reliability, and is not easily damaged. At the same time, it can also maximize the use of limited space to install a larger number of photovoltaic modules.

According to the above table, we can see that the unit price of fixed photovoltaic projects is 3.85-0.24-0.2-0.12=3.05 RMB per watt, accounting for approximately (1.79÷3.05)×100%=58.68% of the total cost of home solar system. Because large projects have the advantages of bargaining. The unit price of fixed installation projects for household distributed photovoltaic power generation projects will increase slightly. ​

In the third quarter of 2021, the price of photovoltaic modules increased from 1.66 RMB per watt in 2020 to 1.79 RMB per watt, with an increase of (1.79-1.66) ÷ 1.66 × 100% = 7.83%. Although the price of core component photovoltaic modules has increased, the current overall project unit price on the market has basically remained within 3.5 RMB per watt. Many companies have also begun to increase prices, raising the project unit price to 3.8 RMB per watt.

According to the latest news from PV InfoLink, the current major manufacturers are basically stable. The price of 166 single-glass modules newly signed is about 2.03-2.1 RMB per watt, the price of 182 single-glass modules is about 2.05-2.13 RMB per watt, and the price of 210 single-glass modules is about 2.08-2.1 RMB per watt. Early orders are still being executed, and prices below RMB 1.95-2 per watt are also being delivered. The market price gap is still large.

In addition, some smaller manufacturers have slightly lowered their new order price quotations recently, with the gap between big manufacturers being approximately RMB 0.02-0.06 per watt. It is predicted that supply will be tight before the end of the year, and the delivery cycle will take at least half a month.

Due to the pressure of continuous rising prices of raw materials, many photovoltaic engineering installation companies have raised their project unit price quotations to more than 4 RMB per watt. The price of photovoltaic modules is calculated based on 2.13 RMB per watt, which is an increase of 28.31% compared to 2022's lowest price of 1.66 RMB per watt. The total unit price of the project has increased from 2022's lowest price of 3.5 RMB per watt to 4 RMB per watt, and the increase has also reached 14.28%.

Of course, this price increase is mainly affected by the sharp increase in the price of upstream raw materials. It is believed that as the prices of upstream raw materials fall, the prices of photovoltaic modules and supporting materials will gradually fall.

Since the prices of various raw materials for photovoltaic power generation projects fluctuate in real time, we should leave more space when making project budgets to avoid being forced to stop work or shelve the project due to insufficient funds during the project construction process. Likewise, investment is risky, and you should not blindly pursue scale without considering actual affordability.

4. Other tips for home solar system

If you are in the northern hemisphere, it is best to construct a home solar power system project in late autumn or early winter. Because the lighting time in the northern hemisphere is long in summer and short in winter, choosing to construct in late autumn or early winter can not only avoid frost time, but also construct in seasons with short lighting time, so that electricity can be generated in seasons with long lighting time.

Of course, everything must be determined according to the actual situation, and you shall not just use a single indicator as a reference for project implementation time. If you want to start a home solar power system project, try to choose a local construction team or company with good reputation and experience.

If it is a small power station for self-use within 10kW, it can be installed by yourself under the guidance of professionals. For safety, it is best to ask a professional electrician to help you with the final solar panel wiring and connections to the loads at the power end.

If you want to do a grid-connected photovoltaic power generation project, you must strictly follow the requirements of the State Grid for installation, design and construction. Raw materials and equipment such as photovoltaic modules must also be qualified products from brand merchants. Otherwise, you will continue to have troubles when applying for network access in the future, and you may even suffer big losses.

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