Financing Solar

How much does solar cost?

System size, cost of energy, and leveraged IRR are all important variables in solar cost. 

The importance of scale in solar PV installations

As the size of a solar PV installation increases, the associated costs are lowered. 


Large House
(pitched roof, asphalt)
Small office
10,000 sqft, flat roof
Medium shop
22,000 sqft, flat roof
Larger facility
35,000 sqft, flat roof
Box store/Warehouse
50,000s sqft, flat roof
System size12.0kW (30 panels)75kW (180 panels)200kW (500 panels)350kW (875 panels)600kW (1620 panels)
Installed $/W$3.00/Watt$2.20/Watt$1.75/Watt$1.70/Watt$1.60/Watt
System Cost$36,000$165,000$350,000 $595,000$960.000
Annual Production13,000 kWh80,000 kWh225,000 kWh395,000 kWh680,000 kWh
Investment Horizon25 years25 years25 years25 years25 years
Payback23.0 years13.1 years10.1 years9.7 years9.1 years
Unleveraged IRR0.80%6.50%9.70%10.10%10.90%
Leveraged IRR after taxn/a34.50%48.20%50.10%53.40%

These figures are representative of high performance sites, pricing as of November 2020 and subject to change.

Solar Carports

Parking lot spaces (vehicles)8 parking spaces
20 parking spaces
60 parking spaces
100 parking spaces
200 parking spaces
400 parking spaces
System size38kW96kW288kW480kW9601,920kW
Installed $/W$3.50$3.10$2.80$2.65$2.55$2.50
System cost$134,400$297,600$806,400$1,272,000 $2,448,000$4,800,000
Annual Production 46,080 kWh 115,200 kWh 345,600 kWh 576,000 kWh 1,152,000 kWh 2,304,000 kWh
Investment Horizon40 years40 years40 years40 years40 years40 years
LCOE $0.113 $0.092 $0.079 $0.075 $0.071 $0.070
Payback 18.5 years 16.1 years 14.5 years 13.8 years 13.3 13.0 years
Unleveraged IRR5.40%6.50%7.40%7.90%8.20%8.40%
Leveraged IRR after tax15.40%22.90%28.30%31.00%32.90%33.80%

These figures are representative of high performance sites, pricing as of November 2020 and subject to change.

Electricity Rates and Inflation

Historical Pricing & Looking Forward: Solar Cost

Over the past 10 years, electricity prices have risen by an average of 7% per year. The Ontario Long Term Energy Plan, prepared by the IESO, calls for an average increase of 4% per year for the next 10 years.

Historical Electricity Pricing $/kWh

Diagram showing the low levelled cost of solar energy compared to power from the electrical grid. Historical data from 2006 to 2020 is projected forward to 2030.

Buying vs Renting Electricity

Paying an electricity bill month after month is like “renting” your electricity from the utility, and continues to increase in cost. When you purchase a solar PV system, you become your own utility and “lock in” your  electricity costs at a fixed rate for the next 20-40 years. 

Yearly Expenditures - Buy vs Rent

Yearly cashflow diagram showing the savings in energy costs versus buying power from the grid over 30 years.

Buying solar


  • Lower cost of electricity over life of system
  • You own an asset that lasts 25-40+ years
  • Yields a rate of return on your investment
  • Reduces your environmental impact in a visible way, shows sustainability values
  • Could provide some energy resiliency (ex. during blackouts) if battery storage is utilized


  • Perhaps have site-specific production limitations
  • Risk of system performance


"Renting" from grid


  • No investment required



  • Risk of ongoing increases in cost of energy provided by utility
  • A significant portion of money spent on provincial grid electricity leaves the community (supply is outside of local region)
  • No choice in selecting only clean, renewable energy, sources
  • Never achieve self sufficiency


Glossary of terms and concepts - solar cost

Leverage: Borrowing a portion of the project costs. In these scenarios, borrowing 75% of costs, at 4.5% interest, amortizing over 25 years

Debt to Equity: The amount borrowed compared to invested capital 

  • 75% borrowed, 25% invested = 3:1 debt to equity 
Debt Service Coverage Ratio: DSCR, the ration of earnings/cashflow to debt payments. Banks look for a minimum of 1.2 or higher.

Security: What a bank can hold as collateral for a loan.

  • Mortgage security on the building
  • Can now take solar assets as collateral

Accelerated Depreciation: Businesses typically “write off” or amortize equipment over the lifespan.

  • Solar projects currently quality for 100% write off against income in year 1 
  • With a general income tax rate of 26.5%, a 25% investment gets all of the cash back in year 1.


Internal Rate of Return: Financial calculation assumes all free cash flow can be reinvested at a similar rate.

Payback: The number of years before the initial cash investment is fully recouped

Operating expenses: includes all operating costs (insurance, monitoring, maintenance).

Levelized cost of energy (LCOE): Takes all capital and operating expenses for the project and divides it by the kWhs produced by the system throughout its evaluation