Cost per kilowatt versus cost per kilowatt-hour

What is the difference between a kW and a kWh?

A kilowatt measures power, the rate at which energy is produced or used at a moment. A kilowatt-hour measures energy, the amount produced or used over time. A 6 kW solar array running flat out for an hour makes 6 kWh. Your electricity bill is in kWh, and a system is sold in kW, so the two need a bridge.

That bridge is the system's yearly yield: how many kWh each kW of panels produces in a year at your location. It depends on sunshine, roof direction, tilt, shading and equipment losses, and your installer's model should state it with its assumptions. See how to read a solar production estimate and peak sun hours in Canada.

How do you calculate the cost per kW?

Divide the installed price by system size in kW, or by watts for price per watt. The result is a handy way to compare quotes of different sizes, though it ignores equipment quality and what the price includes. Our guides on solar price per watt and solar panel cost in Canada cover how to read it. Current Canadian prices change with the market and region, so use real quotes rather than a figure from an article.

How do you calculate the cost per kWh?

Here is a worked example with placeholder numbers. They show the method, not today's prices. Assume a 6 kW system that costs 12,000 dollars installed, produces 1,200 kWh per kW each year, loses about half a percent of output each year to ageing, and lasts 25 years.

1. Year one output: 6 kW times 1,200 kWh equals 7,200 kWh.
2. With 0.5% annual loss, the 25-year total is roughly 170,000 kWh.
3. Divide 12,000 dollars by 170,000 kWh. That gives about 7 cents per kWh.

Now compare that with the all-in rate on your bill, including delivery and other charges where they vary with use. If the solar figure is lower, the system produces cheaper power than you buy. If it is higher, it does not, before any incentive. Add an allowance for an inverter replacement, which often falls within a long system life, and for any maintenance. Ageing is discussed in solar panel lifespan and degradation.

What else belongs in the comparison?

• Self-consumed versus exported power. Exports may be credited at a different rate than the power you avoid buying. Check your utility's terms.
• Incentives and financing. Interest on a loan raises the real cost; a grant lowers it. Programmes change, so verify them with the Government of Canada energy-efficiency pages, your province and your utility.
• Future electricity rates. Rates may rise or fall, which affects the value of every kWh you make.
• Timing. Panels make most power in summer afternoons, when your own use may be low.

For a full payback view, see solar panel payback period, and for whether it adds up for you, are solar panels worth it in Canada.

Why do solar heat costs use the same idea?

The same method applies to solar heat. At Drake Landing, the cost of building 800 collectors, 144 boreholes and a district loop is spread over the heat delivered to 52 homes over the life of the system. That is why long life and high utilization matter for any solar system. The performance results page shows what was delivered, and the solar hot water cost guide applies the idea at household scale.

Quick answers