How Efficiency Makes Solar Affordable


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

Article by Christopher Wold, Editor of the Energy Efficiency Markets newsletter

photo: kqedquest


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  1. I appreciate your insights. In the mid ’80s, I worked with a builder who decided to include solar energy as a standard feature in all of his homes. He ended up building seventy homes in Jacksonville, NC, about twelve homes in Rome, GA, and five or six in Chapel Hill. Each house has passive and active solar systems. The passive solar system provides space heating during the day and the active solar system provides space heating and hot water in the evening or whenever the passive was spent. Some of these homes had solar fractions as high as 80%!

    During this time, solar thermal systems were becoming accepted in the housing market as standard equipment. The market was maturing with proven technology. Unfortunately, the federal government pulled the rug out from under us by repealing the solar tax credits. Most of the marketplace collapsed as a result.

    Europe was going through some energy problems of its own but continued to push for energy conservation and solar energy. To my understanding, Germany has mandated solar hot water systems on all new construction. Europe is now way ahead of the US in the adoption of solar therm systems and is selling their equipment to us.

    Dr. Ben

  2. Very true, and the potential savings are enormous. Amory Lovins of Rocky Mountain Institute has been particularly front-and-center on this–his group just participated in a massive retrofit of the Empire State Building that will save the building owners *four million dollars a year.* Think of the savings if we did this kind of deep retrofit on hundreds or thousands or buildings! BTW, the profile of Lovins and his work in my latest book Guerrilla Marketing Goes Green: Winning Strategies to Improve Your Profits and Your Planet (John Wiley & Sons, 2010, co-authored with Jay Conrad Levinson) is posted online at – I strongly recommend reading it.

  3. If solar were less expensive than other forms of energy, it would displace them.

    It isn’t now and it is worth considering how solar could become less expensive than fossil fuels. The cost of solar is largely the capital investment it takes. That in turn is due largely to the large amount of manufactured material needed to collect a kW, low efficiency of conversion, the poor capacity factor (night, clouds) and the cost and losses of storing energy.

    StratoSolar (not my idea) is a proposed way to cut down on amount of materials, eliminate the effects of clouds, greatly reduce the cost of storage and reduce losses.

    The idea is simple, collect solar energy with a lightweight buoyant structure above the clouds in the stratosphere. At 20 km (66,000 feet) the winds are light and the air pressure low which reduced the forces on the structure. They would be enormous, perhaps 2 km in diameter.

    The concentrated light goes to the ground through a hollow slightly pressurized light pipe that tapers down to 30 meters about half way to the ground. Light pipe efficiency depends on the reflectance. A reflectance of 0.999 seems possible, which translates into 93% of the energy reaching the ground.

    At the ground, the light is used to heat air to about 1400 deg C. Half the heat during the day would be stored in cheap hot bricks, a 150 year old technology used to heat air for blast furnaces. That allows 50-60% efficient combined cycle turbines to run through the night. Since the collectors are above the clouds, the energy entering the system is predictable and the heat storage system does not need to be designed for an uncertain length of cloudy weather.

    If the rough initial analysis holds up, the amount and cost of materials should be reduced over other CSP systems by more than ten times. This could produce electric power for as little as 1.5 cents per kWh, low enough to make synthetic, carbon neutral transport fuels to displace oil.

    There are many design challenges, particularly how the light pipe will cope with high winds. But they seem solvable.

    More if anyone is interested.

    Keith Henson

    hkeithhenson at gmail dot com

  4. Solar water heating is a great, inexpensive, proven technology. So is weatherization and insulation. There are other easy things to do including low-flow showerheads, programmable thermostats, gray water heat exchangers and more that all provide a better bang for your buck than PV.

  5. Solar PV concentrators are one of the big opportunities for residential green energy. Apart from being more economical as they use low cost fresnel mirrors instead of 96% less silicon, they also produce hot water for residential use – as a by product of cooling-, while increasing efficiency.

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