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The cost of gasoline and of fossil fuels in general is rising. Most people are aware of this. At the same time, the cost of solar panels by any realistic measure is falling. That's even more true for homeowners who make their own solar panels and install their rooftop solar system themselves, but across the board improved technology combines with economies of scale to reduce the price for solar power.

Solar Energy Cost Per KWH

One very good way to measure the cost of any type of energy production, including solar power, is in terms of cost per kilowatt-hour (KWH). Cost per watt may be more useful for some purposes, such as pricing solar panels, but using cost per KWH allows comparing the output of a power plant over its life to the cost of constructing, maintaining, and operating the plant.

Ideally, the cost per KWH should incorporate the cost of manufacturing and installing the plant, maintaining it, fuel and other operating costs, cost of decommissioning, and environmental impact costs. It's often very difficult to obtain good information about that last factor, which would add substantial costs to some forms of energy production such as coal-fired power plants.

Be that as it may, the cost of solar power remained relatively high as of 2011 at 10 to 15 cents per KWH. This compares to 4-6 cents per KWH for wind, 4.8-5.5 cents for coal, 4-4.4 cents for natural gas, and 11-15 cents for nuclear power.

As mentioned above, the cost of coal power and, to a lesser extent, for natural gas and nuclear should be increased to reflect environmental costs, but it's hard to estimate exactly how much change this should involve.

We are on the brink of a revolution in solar energy cost, however, that could drop the cost per KWH under 5 cents by 2020. This would make solar energy clearly cheaper than fossil fuels, especially as the cost of fossil fuels is expected to go on rising, and as environmental concerns are expected to become more urgent.

Solar energy is already cheaper per KWH than nuclear power, which along with wind is the chief competing "non-greenhouse" form of energy production.

Solar Energy Cost Per Watt

Perhaps of more importance for those considering solar power for the home, although less so for measuring its commercial potential, is cost per watt. That's because a home uses electricity measured in kilowatt-hours over time, but in wattage at any given moment.

Continued below....

Solar Energy Cost

Also, the output of solar panels is measured in watts rather than in KWH. For that reason, a homeowner needs to estimate the generating capacity in watts of the solar system needed or desired, and use the cost per watt not only for the panels themselves but for installation as well, along with other material components of the system, to arrive at a cost for the system as a whole.

A milestone was reached in 2010 when the solar panel cost dropped to $1 per watt. This is still not enough to make solar power price-competitive with conventional electricity -- unless the homeowner is prepared to install the system himself. Making one's own solar panels drops it even further.

First Solar Inc. estimates that the cost of solar panels needs to drop to about 60 cents per watt before a commercially-installed home solar system can be cost-competitive. As with commercial production of solar power, we are facing a cost revolution in cost per watt by 2020.

Even today, though, it is perfectly possible to build and install a home solar system that will produce most or all of the electricity needed in the home for a cost that will be repaid in savings on electricity bills within a few years.

The revolution in cost will make this feasible even for those who don't want to do their own installations or are unable to do so.