There are three types of solar panel systems: grid-tied (on-grid), off-grid, and hybrid solar systems.

Each type of system has a unique setup that affects what equipment is used, the complexity of installation, and, most crucially, your potential costs and savings.

What would be the best in your situation? Let’s take a closer look at the benefits and downsides of grid-tied, off-grid and hybrid solar systems.

Grid-tied solar systems

Grid-tied, on-grid, utility-interactive, grid intertie, and grid backfeeding are all terms used to describe the same concept – a solar system that is connected to the utility power grid.

DC electricity generated by the solar panels is sent to the inverter, which converts the power into AC electricity. This electricity is first used to service the home loads, while all surplus energy is exported to the grid in return for electric bill credits.

Benefits of grid-tied systems

A grid connection will allow you to save more money with solar panels through net metering, lower equipment and installation costs, and better efficiency rates.

1. Save more money with net metering

Your solar panels will often generate more electricity than what you are capable of consuming. With net metering, homeowners can put this excess electricity onto the utility grid instead of storing it themselves with batteries.

Many utility companies are committed to buying electricity from homeowners at the same rate as they sell it themselves. As a homeowner, you can use these payments from your utility to cancel out your electricity usage charges - by up to 100%.

Net metering plays an important role in how solar power is incentivized. Without it, residential solar systems would be much less feasible from a financial point of view.

Learn more: How does net metering work

2. Lower upfront costs and ease of installation

Grid-tied solar systems are the only type of solar system that don’t require a battery to function. This makes grid-tied systems cheaper and simpler to install, and also means there is less maintenance required.  

3. You can use the utility grid as a virtual battery

The electric power grid is in many ways also a battery, without the need for maintenance or replacements, and with much better efficiency rates.

According to EIA data, national, annual electricity transmission and distribution losses average about 7% of the electricity that is transmitted in the United States. Lead-acid batteries, which are commonly used with solar panels, are only 80-90% efficient at storing energy, and their performance degrades with time. In other words, more electricity (and more money) goes to waste with conventional battery systems.

Additional perks of being grid-tied include access to backup power from the utility grid, in case your solar system stops generating electricity for one reason or another. At the same time, you help to mitigate the utility company`s peak load. As a result, the efficiency of our electrical system as a whole goes up.

Equipment for grid-tied solar systems

There are a few key differences between the equipment needed for grid-tied, off-grid and hybrid solar systems. Standard grid-tied solar systems rely on the following components:

• Grid-tie inverter (GTI) or microinverters
• Power meter

Grid-tie inverter (GTI)

What is the job of a solar inverter? They regulate the voltage and current received from your solar panels. Direct current (DC) from your solar panels is converted into alternating current (AC), which is the type of current that is utilized by the majority of electrical appliances.

In addition to this, grid-tie inverters, also known as grid-interactive or synchronous inverters, synchronize the phase and frequency of the current to fit the utility grid (nominally 60Hz). The output voltage is also adjusted slightly higher than the grid voltage in order for excess electricity to flow outwards to the grid.

Microinverters

Microinverters go on the back of each solar panel, as opposed to one central inverter that typically takes on the entire solar array.

There has recently been a lot of debate on whether microinverters are better than central (string) inverters.

Microinverters are certainly more expensive, but in many cases yield higher efficiency rates. Microinverters are particularly useful if you have shading issues on your roof.

Power meter

Most homeowners will need to replace their current power meter with one that is compatible with net metering. This device, often called a net meter or a two-way meter, is capable of measuring power going in both directions, from the grid to your house and vice versa.

You should consult with your local utility company and see what net metering options you have. In some places, the utility company issues a power meter for free and pays full price for the electricity you generate; however, this is not always the case.

Off-grid solar systems

An off-grid solar system (off-the-grid, standalone) is the obvious alternative to one that is grid-tied. 

For homeowners that have access to the grid, off-grid solar systems are usually out of question. Here’s why. To ensure access to electricity at all times, off-grid solar systems require high-capacity battery storage and a backup generator. On top of this, a battery bank typically needs to be replaced after 10 years. Batteries are complicated, expensive, and decrease overall system efficiency.

Off-grid systems require large amounts of energy storage as there is no option to import power from the electric grid. As such, they are typically designed using lead-acid batteries, which are a much cheaper alternative to newer (and more efficient) lithium-based solar batteries.

Benefits of off-grid solar systems

1. Can be installed where there is no access to the utility grid

Off-grid solar systems can be cheaper than extending power lines in certain remote areas.

Consider off-grid if you’re more than 100 yards from the grid. The costs of overhead transmission lines range from $174,000 per mile (for rural construction) to $11,000,000 per mile (for urban construction).

2. Become energy self-sufficient

Living off the grid and being self-sufficient feels good. For some people, this feeling is worth more than saving money. 

Energy self-sufficiency is also a form of security. Power failures on the utility grid do not affect off-grid solar systems.

On the flip side, batteries can only store a certain amount of energy, and during cloudy times, being connected to the grid is actually where the security is. You should install a backup generator to be prepared for these kinds of situations.

Equipment for off-grid solar systems

Typical off-grid solar systems require the following extra components:

• Solar charge controller
• Battery bank
• DC disconnect (additional)
• Off-grid inverter
• Backup generator (optional)

Solar charge controller

Solar charge controllers are also known as charge regulators, or just battery regulators. The last term is probably the best to describe what this device actually does: solar battery chargers limit the rate of current being delivered to the battery bank, and protect the batteries from overcharging.

Good charge controllers are crucial for keeping the batteries healthy, which ensures the lifetime of a battery bank is maximized. If you have a battery-based inverter, chances are that the charge controller is integrated.

Battery bank

Without a battery bank (or a generator), it’ll be lights out by sunset. A battery bank is essentially a group of batteries wired together.

DC disconnect switch

AC and DC safety disconnects are required for all solar systems. 

For off-grid solar systems, one additional DC disconnect is installed between the battery bank and the off-grid inverter. It is used to switch off the current flowing between these components. This is important for maintenance, troubleshooting and protection against electrical fires.

Off-grid inverter

There’s no need for an inverter if you`re only setting up solar panels for your boat, your RV, or something else that runs on DC current. You will need an inverter to convert DC to AC for all other electrical appliances.

Off-grid inverters do not have to match phase with the utility sine wave as opposed to grid-tie inverters. Electrical current flows from the solar panels through the solar charge controller and the bank battery bank, before it is finally converted into AC by the off-grid inverter.

Backup generator

It takes a lot of money and big batteries to prepare for several consecutive days without the sun shining (or access to the grid). This is where backup generators come in.

In most cases, installing a backup generator that runs on diesel is a better choice than investing in an oversized battery bank that seldom gets to operate at its full potential. Generators can run on propane, petroleum, gasoline, and many other fuel types.

Backup generators typically output AC, which can be sent through the inverter for direct use, or it can be converted into DC for battery storage.

Hybrid solar systems

Hybrid solar systems combine the best of grid-tied and off-grid solar systems. These systems can either be described as off-grid solar with utility backup power, or grid-tied solar with extra battery storage.

If you own a grid-tied solar system and drive a vehicle that runs on electricity, you already kind of have a hybrid setup. The electrical vehicle is really just a battery with wheels.