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How has falling solar panel cost improved the payback period for solar panel installation in Orange County in 2018?

Orange County, California, registers more than 280 sunny days a year, so you probably want to know whether solar panels are worth it in the third-largest county in California. Specifically, you want to know how much electricity savings you will realize over time, so you can judge how quickly you can recoup the cost of installing a solar panel system. The shorter the payback period, the better and the higher return on investment (ROI).

What kind of payback can I expect from residential solar installations in Orange County?

To determine a typical payback period and investment return in Orange County, you need to consider both the costs of installing solar panels in the area and also the revenue the system would earn.

A solar installation company will do the legwork to figure out the costs for panels, permits, inspections, and whatever else the locale and the utility-in this case, Anaheim Utilities, San Diego Gas & Electric, or Southern California Edison-require. You can get an idea in the accompanying figure-or you can use the costs and savings calculator to get a tailored estimate for your address.

The ROI you get from the system is a function of the amount of power it produces annually and the money you would have paid to the utility to purchase the equivalent amount of power.

If you live in, say, Santa Ana, the county seat, the sun shines three out of every four days. The calculation of the area's weather conditions and climate makes for a high rate of solar radiation (direct sunlight) and insolation (a function of atmospheric cover, angle toward the sunlight, etc.). On average, a 1-kW PV system on a Santa Ana home could generate approximately 1418 kWh a year. (Keep in mind most people install systems well over 1-kW in size-more on that later.)

The financial incentives available for residential solar energy systems are critical. The most important of these is the 30 percent Federal solar investment tax credit, which has boosted residential solar in many states. In California, the 2016 Net Energy Metering (NEM 2.0) rule allows residential and commercial customers with less than 1 MW of installed solar capacity to get credits on their bill on a 1:1 basis for electricity they generate. So, for those 1418 kWh a year the Santa Ana home generated, NEM 2.0 would offer credits equal to the cost of 1418 kWh of electricity (or around $266 a year based on an 18.7 cents per kWh charge) less non-bypassable charges (which are around 2.4 cents per kwh)

What is the installation and payback for Solar in Orange County?

Let's take a close look at an estimate for a home with a typical monthly bill of $70. To offset 100 percent of the energy used in that house, a solar system would need a capacity 2.82 kW, which would be estimated to produce about 4,000 kWh per year. The net cost for the system (after the 30-percent Federal tax credit) would be $7,876, which could be recouped after 7 years and 11 months, assuming the system was paid for in cash. Financing could add up to 10 percent of the gross cost but could increase your investment return because you are contributing little or no capital in this instance.

You can run your own numbers for your house based on your usage via our solar estimate tool. Solar panels are warrantied to last approximately 20 to 25 years, so if your payback period is less than eight years, that's a great result.

The U.S. Energy Information Administration in November 2017 showed California households paying 18.77 cents a kilowatt-hour, on average. Indeed, Southern California Edison and San Diego Gas & Electric have some of the highest rates in the nation. And while the average monthly bill in Orange County is around $70, a heavy residential user might see a bill of $265.

The average monthly electricity bill for California quoted by the EIA includes all households (meaning it includes apartments). The average monthly bill for a single family home is more like $120 per month and quite a few people in 2018 now have bills over $300 per month.

How much can I expect to pay for a solar installation?

According to Solar-Estimate city-by-city breakdown of solar PV and utility bill costs the average cost of solar panel installation in Orange County is $3.63 per watt (somewhat more than the California state average of $3.18 per watt), before the Federal tax credit, net metering, and other incentives. Since the average system size in the U.S. is 6 kW, that means the average price of a solar system in Orange County is $21,780.

Not included in that example are other financing incentives you might be able to use. For example, the California Solar Initiative has funds for both single- and multi-family affordable housing for customers of Southern California Edison and San Diego Gas & Electric. Rebates can be as high as $10,000. Also, if you're installing solar as part of a renovation, Orange County has a property assessed clean energy program - the Home Energy Renovation Opportunity (HERO) Financing Program, a loan that becomes part of property taxes and is transferable.

The state and its utilities lead the nation in offering rebates and incentives based on residential solar installation. In Santa Ana, for example, Southern California Edison offers more than a dozen other incentives and rebates (including the ones above) having to do with property tax exclusions, new solar homes, and energy efficiency. In the southern part of the Orange County, San Diego Gas & Electric offers a similar menu. The other benefit of using a solar finance/installation company, as opposed to filling out the paperwork yourself, is that the company can help you navigate all of the different incentives, depending on your power provider.

Where can I find details about my home's solar economics?

To see where your home fits in, you can use a new residential solar information resource that Solar-Estimate has developed. It's an online compilation of utility energy costs in major cities and metro areas across the country. To zoom in on the likely cost of a solar installation in (for example) Santa Ana, you can use the local guide to solar installation companies and residential solar cost calculator.