The term "solar energy" casually refers to electromagnetic radiation emitted by the Sun. It can be captured and converted to other usable forms of energy. We have various techniques to harness this nearly limitless resource and use it for our needs.


Most guides say that Sun's irradiance can be used for two things: to heat objects and to produce electricity. In reality, it can also convert into chemical energy. In the nature, through photosynthesis, plants utilize sunlight to grow and reproduce. Similarly, with the right equipment which implements sort of "artificial photosynthesis", light can drive the reactions resulting in energy stored in chemical bonds of "solar fuel". However this process is still in R&D stage and is not quite suitable for residential applications. By the way, some articles claim that sunlight is the source for all forms of renewable energy on our planet. This is incorrect because it neglects such forms of energy as gravitation and geothermal. The main solar uses in today's homes are pool and hot water heating as well as generating electricity with photovoltaic panels. In general, heating an object from sunlight may require little more than placing it in the sun and creating a means through which the heat will remain in it. Swimming pools can be heated by covering them with special covers that trap the heat in the water. Generating solar electricity is more complex. It can be done in several different ways. Solar cells, also known as photovoltaic (PV) devices, directly convert the electromagnetic radiation into electricity in the form of DC voltage. These cells can be combined into panels, which in turn can be connected into arrays. Solar electricity is used to feed various electric loads from small calculators to large power plants.
Since the PV cells produce DC voltage, you need to use DC-AC inverters to feed all the conventional equipment requiring AC power (see a diagram of solar generator). Concentrating solar power plants also create electricity using sunlight. However in these plants, there is an intermediate energy carrier: special thermal collectors use the heat from the sun to warm a fluid and create steam. The steam then powers the prime mover of an electric generator, which makes electricity via electromagnetic induction.


Like all forms of power conversion, sunlight as a fuel has its advantages and disadvantages. The primary benefit of solar energy is its renewability. The sun shines somewhere in the globe every day. Unlike fossil fuels, it will never be used up. Even on cloudy days, some of the radiated energy seeps through the clouds to the surface below, providing enough power to feed, for example, hand-held electronics. The operation of solar powered systems produces no pollution. There are various federal, state and utility-sponsored rebates and credits for qualified grid-connected systems.


Solar energy system cost Using sunlight for water heating can be quite efficient and cost effective. Using sunlight for electricity however, has two primary drawbacks.
First, it is not constant. You do not know from one day to the next how much energy your solar panels will be able to generate. This is a problem especially in areas where overcast days outnumber sunny days. Of course, you can store excess energy in batteries, but this will require a grossly oversized system. Because of this, it is not practical to use sunlight as the prime power source unless your power demand is very low. If you are off grid you may need to supplement solar-powered system by other systems, such as a wind turbine and/or a diesel-fueled electric generator. Otherwise, you have to significantly oversize the surface area of the PV array and batteries to collect and store the excess energy to be used for days when sun does not shine. Therefore, if you have a limited space, you may not be able to fully benefit much from this renewable resource.

Secondly, while sunlight of course is free, the equipment needed to capture and convert it to electricity is quite expensive both for homeowners and for utilities. Likewise, while solar generators are pollution free, some pollution are nevertheless produced in the process of their manufacturing, transportation and installation.
In 2015 an average net cost of a PV system installation was about $4,000 per kilowatt- see the cost distribution in dollars/watt by states. The so-called levelized cost of electricity produced on new photovoltaic power plants is about $0.16 per kW-hour. This value is still much higher than the cost of electricity generation from coal and natural gas. As the result, in 2015 less than 0.1% of total US energy consumption came from photoelectric systems. However, in applications where an electric grid is not available, like in space for instance, sunlight can be a very cost-effective source of renewable energy.

References and additional information:
The installed cost of photovoltaics in the U.S. 2015.
US Dept. of Energy Annual energy outlook 2015.