Building a solar system is a substantial financial commitment. It has both fixed and variable costs. That’s why many people choose to start out with a small system and build on as they can afford to do so. The federal government offers modest tax credits for energy-efficient home improvements, including solar power, and many states also offer tax credits or other incentives, which can reduce your costs significantly. Even so, payback periods on solar power systems are long and extremely variable.Before you install a photovoltaic system, or any alternative energy system, make your home as energy-efficient as you can (link). Every dollar you spend on increasing your home’s energy efficiency will save you between three and five dollars on the cost of your solar power system.

A solar power system requires the following expenses:

• PV Modules (solar panels)
• Rooftop PV Module Mounts
• Inverter
• Labor
• Battery Bank (optional for on-grid systems)

Building an off-grid system has the biggest costs, because you will need to build enough panels to supply all of your energy needs, and you will also need a battery bank to store energy. How many panels you need and the size of your battery bank depend on how much power you use. Since you won’t have a back-up source, your solar system will need to be capable of providing as much power as you use in your most energy-intensive months. (Your battery will be indispensable for providing power at night or in cloudy weather, but it cannot serve as a long-term storage solution in months when your energy needs are greater than normal.)

This pdf file is a thorough introduction to estimating the costs of your solar power system. It includes a calculation sheet and provides estimates for 5 different cities in America at various uses of solar power.

http://www.homepower.com/files/beginner/SolarElectricSystemCosts.pdf

Home Power Magazine