It’s not sunny enough for solar panels in Chicago.
Have you ever seen the winters in Illinois?
They may work in California, but solar panels in Illinois don’t work.
It’s too cloudy for solar panels in Chicago.
I hear these kinds of statements all the time from potential customers or people who have learned that I’m in the solar energy business. But these statements suggest a misunderstanding of the economics of solar.
I used to be a management consultant in the energy industry. I advised CEOs and CFOs of major energy companies, including electric utilities. I am here to tell you that solar panels actually do work just fine—in fact, more than fine—in Illinois. They also work great in Massachusetts, New York, and New Jersey, all very large solar markets not known for abundant sunshine.
When I was a consultant, I used to tell my clients that for any given state, there are three (main) factors that determine whether residential solar is competitive with utility energy on a strictly economic basis:
How sunny is it?
Of course this is the first thing most people think about. Solar panels in Illinois don’t get as much sunlight as those in Arizona or most of California. Illinois is not a particularly sunny place. But, it is also not particularly un-sunny, either. It’s just average.
Also, because of “net metering”, you can benefit all year from sunny summer months. Extra energy your solar panels produce during spring and summer can be stored on the grid for darker winter months.
Further, the amount of sunshine is only one factor that determines the economics of solar.
How much does the equipment cost?
The cost effectiveness of solar could be thought of as a simple equation like this:
As it turns out, the price of solar equipment has plummeted in the past several years. It’s amazing, really. As you can see in the graph below, the cost of commodity solar panels is now less than one-twelfth what it was just ten years ago. This is one reason so many people are bullish about the future of renewable energy.
What is the value of incentives?
Finally, the actual cost of equipment can be reduced if there are incentive payments. For many years, the federal government has offered an incentive in the form of a 30% tax credit for solar installations. This reduces the cost of solar by 30%. (This wasn’t affected by the 2018 tax legislation.)
Solar panels in Illinois also now receive a state-based incentive. The amount of the incentive is based on the amount of (renewable) energy the panels will produce, but for most people it ends up being worth about another 30% of the cost of a system. This incentive is paid in cash by ComEd (not by the State of Illinois).
Therefore, the net cost of a solar system for Illinois homeowners is only about 40% of the gross cost.
The bottom line for solar panels in Illinois
When we project the economics of solar panels in Illinois, we take all of the above into account. We also take into account that snow will cover the panels a small percentage of the time, that tree pollen and dust will coat the panels in May (but quickly wash off in the rain), that trees and other buildings may provide some shade, and that not all roofs face due south.
The bottom line is that, as of 2018, solar panels are often cheapest way to purchase energy for a home in the greater Chicago area.
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