How efficiency makes solar affordable

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By Reid Smith

October 27, 2010

When solar energy companies think about how to reduce the cost of their product, typically a lot of time and money goes toward increasing the efficiency of solar panels and their manufacturing process. Reducing the production cost decreases the final cost the consumer will have to pay.

However, few solar companies start by making the building more energy-efficient, even though this effort can significantly drop consumer costs. Energy efficiency lowers the demand for energy in a building. If a building needs less energy, it requires fewer solar panels, which drives down the cost of the installation for the building owner.

But you may be wondering, how significant are the energy savings in a building after energy efficiency upgrades?

Buildings are large energy consumers, accounting for 40 percent of US energy consumption, according to the US Department of Energy. Homes make up 22 percent.

Not only are buildings big energy users, but they are also big energy wasters.  In fact, 40% of the energy we use in buildings is wasted due to poor insulation and air leaks.

So the first thing to do is improve the building envelope. After that, it’s important to consider how solar energy will be used in the building and what kind of installation is most efficient. People tend toward solar photovoltaic panels because PV has become the image of solar energy, said Rick Reed, president of Solaray Corporation, at the Solar Power International conference in Los Angeles earlier this month.

But solar PV is typically only about 20 percent efficient, whereas solar thermal is about 90 percent efficient. “Many people are heating their water from solar PV instead of using solar hot water systems,” he said. “This doesn’t make any sense.”

Solar thermal systems use much simpler, reliable technology and are much cheaper to install than PV systems. Still, they are largely an after-thought in the US.

For consumers, the cost of solar thermal and energy efficiency upgrades are typically much less than solar PV installations.  However, most consumers interested in upgrading their homes to solar do not realize how much energy their houses could save before installing solar PV. And historically their solar installers have not told them either. Why would a solar PV installer want to promote energy efficiency if it would translate to selling fewer panels?

Thankfully, that’s changing, partly because new financing options focus on reducing the overall cost of solar for the consumer, rather than on simply selling them solar panels. As a result, more solar companies are beginning to move into the energy efficiency business. SolarCity is one example of a company that now combines energy efficiency services with solar installation.

This has huge implications. Retrofitting 40 percent of the residential and commercial building stock in the US would create over 625,000 full-time jobs over a decade, spark $500 billion in new investments, and generate as much as $64 billion a year in cost savings for ratepayers, according to a September report by The Center for American Progress.

So if you have been scared away by daunting up-front costs of solar, now may be the perfect time to get a home energy audit and begin discussing solar financing options available in your area. You may be surprised what you find.

To read the full report by The Center for American Progress, Efficiency Works: Creating Good Jobs and New Markets Through Energy Efficiency, go to

Reid Smith is the editor of Energy Efficiency Markets.

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  1. I agree with you that solar energy can reduce the cost of power consumption because solar power is basically heat from the sun, has been harnessed by humans since very vintage times utilising a variety of ever-evolving technologies. So that why I believe that solar emission, along with lesser solar-powered assets for example breeze and signal power is the most accessible renewable power on earth.

  2. We should all be looking at the environment and what we can do to help the situation. It’s great that you are promoting solar energy and its be benefits.
    Keep up the good work

  3. Great article, Reid. Your article really struck me with the utter simplicity of it all: if we touch up on our energy efficiency, we make any renewable energy improvements that we make as a nation go that much farther. As I’ve been arguing on my own blog, a cohesive approach is what is needed to tackle the overall goal of reducing our national carbon footprint. Personally, my chosen “savior” as it were is solar (I think it’s the easiest to implement on a utility-grade scale), but energy efficiency may really be the unsung hero of the environmental movement. I found your article really interesting so I linked to it on my blog. Kudos. Great post.

  4. our world needs us to invest and have respectful energy efficiency budgets .
    these kind of blogs help achive this goal.
    all the best

  5. Solar energy is continuing to grow at a rapid rate, however the people who took up the schemes where the government buy back the power a few years ago will be reaping the rewards, but nowadays the return on the power is so low, more people are not buying solar panels for investments.

    • We provide a range of renewable energy sources, including solar PV and thermal. The basics of solar are easy, however i really don’t think that the general public actually know how much they can save on their bills but also reduce their carbon use. Posts like these are great, so thanks for sharing.

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  8. Nice article. I have bookmarked your site for further reading when I have time.

  9. could be time for me to now look into having solar panels

  10. Nice article, improving energy efficiency is so important.