true cost of solar panels

Today, we review the True Cost Of Solar Panels and the solar panel installation cost breakdown. The solar energy sector has grown 68% over the last decade, thanks to hefty government subsidies paid for by tax dollars. Here’s the cloudy truth about solar energy

Americans have seen some interesting changes in the Oval Office to say the least, but one thing that has not changed much is our consumption of renewable energy. Solar and wind energy made up 47% of new electric capacity last year, and the renewables sector has grown steadily since the mid-2000s.

True Cost Of Solar Panels

Part of the reasoning behind this is cost. Installation costs for solar infrastructure have fallen 70% since 2006. Many homeowners have also done away with their electricity bill, thanks to net metering. But while the technology has become more accessible to homeowners and enterprises alike, there is a hidden cost to solar energy that lies in hefty government subsidies.

The True Cost of Solar Energy | Power Electronics

The Most Efficient Solar Panel

Solar panel technology has advanced considerably in the last decade. Solar panels are divided into three main technologies: monocrystalline, polycrystalline, and thin-film. Each type of panel utilizes different technology to harness the sun’s rays and has a different range of applications.

Monocrystalline (mono) panels are the most efficient solar panel in terms of power output relative to panel size. These panels have the highest efficiency rating on the market at 15-22%, and therefore require the least amount of space. Mono panels also have the longest lifespan (25 years or more), due to the high-purity silicon used during manufacturing. Mono panels have the highest upfront costs of all solar technologies.

Polycrystalline (poly) solar panels are manufactured using several silicon crystals, and typically carry an efficiency rating of 13-17%. Poly panels require more space to match the power output of mono panels due to a lower silicon purity. However, manufacturing poly panels is a much simpler process, making the technology less expensive. Poly panels also have a lifespan of about 25 years, and over time may prove to be the most cost-effective.

Thin film (TF) is a newer technology made possible by depositing a photovoltaic material onto a surface. The photovoltaic materials used are not as energy-efficient as crystallin silicon, but still get an energy efficiency rating of 7-13%. TF panels require much more space to produce a commercially significant wattage, limiting the potential for residential installations. TF panels also lack the durability of mono or poly panels. Still, TP panels are much cheaper to produce than mono or poly panels, and can even be made flexible, offering solar options in situations previously thought impractical.

solar panels for home cost

The ROI

Calculating ROI depends on several factors, such as the plot available for infrastructure, location, and amount of solar radiation per year. If roof space is limited, mono panels could offer consumers the most output. If a location is large enough to accommodate poly panels, this type of infrastructure could produce the same output as the mono panels, at a savings of 10 to 20%.

The cost of solar panels is calculated using dollars per watt. In 2018, the average installation cost for homeowners was between $2.87 and $3.85 per watt. Before tax credits, the gross cost of solar panels averages to $16,800. Assuming 5 kilowatts (kW) per household, solar panels cost from $10,045 to $13,475 after tax credits are applied.

Solar incentives and rebates also provide an opportunity for households to take advantage of solar energy. For example, the Solar Investment Tax Credit (ITC) allows homeowners to receive a 30% tax credit for the purchase and installation of solar panels through 2019.

The long-term value of a solar installation will largely depend on how it is financed. Buying the system upfront yields the best ROI, but even a $0-down solar loan could provide saving of $10,000 or more. Solar leases or power purchase agreements (PPAs) offer much lower savings—between 10 and 30% of the average household’s electric bill.

On average, a solar panel system pays for itself within eight years. If a consumer purchased mono or poly panels with a 25-year life span, consumers could yield 17 years of cost savings on electric expenses.

A solar savings study was conducted in Southern California using a 1,500-sq.-ft., two-bedroom house with a monthly utility cost of $152 for 9,125 kWh. The best offers predicted if the household leased the solar panels, it could save $5,810 over 20 years. But if the solar panel installation was bought outright, the household could save up to $22,287 over 20 years. Even if the solar panels were loaned, the household could still save $18,561 over 20 years.

Net metering is another way solar panels can add value to a household. Net metering allows households using solar power to sell excess power back to the grid. Residential customers can therefore offset electricity usage during times when solar panels are not capturing energy. Net meeting regulations, however, differ from area to area throughout the U.S.

Homeowners looking to purchase solar panels in the near future should be aware of a new 30% tariff now affecting imported solar panels. Residential installation costs are only expected to increase by approximately 3%, as most of the cost is due to labor. Utility scale installations could see costs increase as much as 10%.

The Effect on the Environment

Though solar energy can provide cost savings for homeowners, no energy infrastructure is without its impact on the environment. Solar energy is no different. Large-scale solar farms may influence land degradation and habitat loss. Utility-scale solar facilities require large plots, and could interfere with wilderness areas, mineral production, military uses, and protected natural environments. And unlike wind farms, solar facilities have trouble sharing the land for agricultural uses.

Some utility solar systems use steam plants to generate electricity and use water for cooling. Because solar farms are often very dry climates, any increase in water demand may threaten local resources. Chemicals used at the solar facilities—including dust suppressants, dielectric fluids, and herbicides—could also end up contaminating the groundwater. Additionally, if solar farms are near protected wilderness areas, the waste produced at these facilities could result in large-scale pollution.

Lastly, the effects of using TF solar panels are only beginning to be investigated. The technology is developed using several toxic substances, including gallium arsenide, copper-indium-gallium-diselenide, and cadmium-telluride. If these solar panels are damaged or disposed of improperly, it could pose a serious health risk for anyone near the dump site. TF panels also often contain cadmium, an identified carcinogen.

The Truth Behind Solar Subsidies

The cost of solar infrastructure and installations has fallen largely due to government subsidies. In fact, some say solar energy could not survive at all without massive government subsidies. In terms of production, solar energy has received ten times the subsidies all other forms of energy. Subsidies for solar directly affect the production of electricity, directly affecting cost and pricing. Between 2010 and 2016, subsidies for solar energy ranged from 10¢ to 88¢ per kWh, while subsidies for coal, natural gas, and nuclear were from 0.05¢ to 0.2¢.

These subsidies incentivize solar panels, but end up increasing the cost of the electricity they generate. This cost is transferred directly to the ratepayers via utility bills. Moreover, customers involved in net metering are often paid inflated prices for excess power produced. Ratepayers end up funding the production of already heavily subsidized solar installations, a phenomenon which actually makes the adoption of renewable energy costlier.

The Real Racket

Though experts have warned against continuing to subsidize renewable energy, the subsidies persist. Worse yet, 80% of solar panel infrastructure in 2017 was imported from Asia-based manufacturers, meaning these funds aren’t even supporting American companies. Taxpayer-funded subsidies are funding foreign, specifically Asian, manufacturing. The new 30% tariff on foreign solar energy services, however, may offer a temporary solution.

What are the pros and cons of DIY solar panels? 

Before we jump into the 11 steps for a DIY solar panel installation, I think it’s worth going over the pros and cons. 

After all, a DIY solar is a big and costly commitment. It’s best to figure out whether or not DIY solar is right for you before you’re too heavily invested in the process!

pros and cons of diy solar systems

Pro: Cost savings 

At the risk of stating the obvious, the biggest reason people opt for a DIY solar panel installation is to save money on the upfront installation cost. 

Solar panel systems have dropped in price — by over 70% in the last decade alone — but they still represent a significant financial investment for most homeowners. 

Right now, the average cost of solar panel installation by a professional solar company is around $3.00 per watt. For a typical 5 kW (5,000 watt) solar panel system, that works out to $15,000.

On the other hand, you should be able to buy a 5 kW DIY solar panel kit for under $2.00 per watt. Assuming you perform all of the work by yourself (i.e. no contractors for any of the tasks), the total cost of the 5 kW DIY solar project would cost no more than $10,000.

That works out to a potential savings of over $5,000 by choosing DIY over a professional solar installation. 

Of course, the exact cost difference between the two is affected by many variables. Factors that can affect costs include system size, your location, your choice of brands, your roof layout, your state and local incentives, and more. And you’d also want to take into account 26% solar tax credit would apply for both a professional installation and a DIY job, reducing the cost and thus the price differential between the two methods of going solar. 

That said, there is without question a substantial price difference between buying a DIY solar panel kit, and hiring a solar company to complete the installation for you. 

Pro: DIY satisfaction

If you’re someone who really enjoys a big and challenging DIY project, then a solar installation might be what you’re looking for. 

You will have to draw on many different skill sets, such as the ability to negotiate municipal processes, financial planning, proficiency with power tools, electrical work, and even tax accounting.  

And there are many stages to the solar installation — researching, planning, shopping, permitting, installation, electric wiring, and monitoring. 

This is a project that will keep you busy for a while. 

Con: It’s a lot of time and effort 

I know, in the point immediately above this one I framed the challenging nature of a solar installation as a positive. Yes, it can be rewarding — but only if you’re actively seeking a difficult and time-consuming DIY challenge. 

If, however, your idea of a DIY project doesn’t expand far beyond assembling some Scandinavian flatpack furniture, then you might want to steer clear of taking on solar. It is a very time-consuming project. From conception to commissioning, a DIY solar installation for a home usually takes between one to four months.

Con: Risk of roof damage or leaks 

This is perhaps the biggest financial risk when it comes to a DIY solar installation.

Unless you have a flat roof, your solar installation will involve drilling a large number of holes into your roof. Drilling into the wrong spot on the roof can cause structural damage, while incorrect sealing and flashing can cause a roof leakage and/or mold issues. 

Another factor to keep in mind is that a DIY solar installation is likely to void the warranty of your roof, so you’ll have to foot the bill for any repairs that may be needed. 

Con: Physical danger 

Heights and high voltage electricity. If you’re doing a DIY solar installation from start to finish, there’s no avoiding these two risks.

A man falls off a roof in cartoonish fashion

Falls are a hazard in DIY solar panel installation. Image source: Twitter

And the physical risks can continue after the installation. If your panels aren’t performing as they should, you may need to get back on the roof to troubleshoot the issue. 

Worst of all, if you haven’t connected the wiring properly, your rooftop system could catch fire!

Con: Inability to claim some incentives 

Many states offer incentives and rebates that dramatically reduce the cost of going solar. 

Some incentives, however, are only available when the installation is completed by a certified solar company.

Con: No support for faults or warranty claims 

You are on your own if there is ever a fault with the equipment. 

Of course, you can still contact the manufacturer directly, but it can be difficult to prove a warranty claim. Furthermore, if you perform an improper installation, you can actually void the warranty. 

The 11 steps for DIY solar panels

Let’s now dive into the 11 steps needed to take your DIY solar panel project from conception to completion. 

1. Decide on your goals 

If you haven’t already, you first need to decide what your goal is for going solar. 

The goal you’re shooting for will determine the best system type for you, how complex the installation will be, and how much the project will cost.

Homeowners usually choose between the following goals.

  • Financial savings
  • Backup power
  • Energy self sufficiency (independence from the electrical grid)

We strongly recommend that you decide on your goal right at the outset. There is an almost infinite number of options and permutations when it comes to DIY solar, so you need to be clear on what decisions you make, and why.

2. Choose the right solar system type 

The next decision is to choose the right solar power system type to match your goal.  

There are three main types of solar installations:

  • Grid-tied solar panel system
  • Hybrid solar panel system (aka grid-tied with battery storage)
  • Off-grid solar system 

All of these system types have many features in common: they all involve solar panels, inverters, mounts, and wiring. There are, however, some crucial differences, and they can impact the project’s cost and complexity. Here’s a brief summary of each. 

Grid-tied solar panel system 

A grid-tied solar panel system is a solar setup that is connected to the grid and uses it as a battery through net metering. Grid-tied solar panel systems are usually smaller than the other types and have the lowest upfront cost. 

Best for: Maximum financial savings

Pros: Lowest cost, simple design and installation

Cons: The system will shut off during a grid outage. Your system will need to pass inspection before it can be connected to the grid. 

This video shows how a grid-tied solar system works for a typical home: https://www.youtube.com/embed/A5Wb61nEoZc?rel=0

Hybrid solar panel system (aka grid-tied with battery storage) 

A hybrid solar panel system is also connected to the grid; the key difference here is the inclusion of a battery storage solution. 

As with a regular grid-tied system, a hybrid solar system can import and export power from the grid as needed. But a hybrid solar system can use the battery system for two additional uses: for backup power during a grid failure, and to take advantage of Time of Use (TOU) arbitrage

However, solar batteries — the most famous example of which is the Tesla Powerwall — are still an expensive option, so adding one to a solar system nearly always lowers the return on investment for the homeowner. In other words, the increased cost of adding a battery typically does not lead to an equivalent increase in savings. 

Best for: Backup power

Pros: Emergency power supply during grid outages

Cons: Requires a battery backup solution, and unfortunately batteries are still expensive to buy. Your system will also need to pass inspection before it can be connected to the grid.

Off-grid system

As the name suggests, an off-grid solar system operates independently of the grid. 

Since there’s no grid to fall back on, the solar system needs to be very large so that it can meet the home’s power needs 24/7, 365 days a year — even during winter and/or long stretches of overcast weather. 

To achieve this, off-grid solar systems require a large number of solar panels as well as a large  battery bank.  

Best for: Energy self sufficiency

Pros: Zero reliance on the electricity grid and no interaction with the utility company, and no inspections. 

Cons: Very expensive, and lots of space required for the large number of solar panels and accompanying battery storage. 

3. Check solar rules and regulations  

There is a wide range of rules governing solar installations. They can vary greatly between states, and even between local jurisdictions. 

You will usually need a building permit and a utility permit before you start your installation. This usually involves an on-site inspection by either a structural engineer or a licensed electrician. You will need to pass another round of inspections before your system can be activated and connected to the grid. 

Some states don’t allow a solar system to be connected to the grid unless the installation was performed by a licensed contractor. If this is the case where you live, you won’t be able to install a DIY grid-tied or hybrid solar system. 

It is important to know these rules beforehand so you can judge if a DIY solar panel installation is possible where you live; and if it is possible, if it’s still a worthwhile option to pursue. 

4. Design a system 

This is one of the most complicated parts of the DIY solar panel process. You want your system to take into account all of the following factors:

  • Your energy usage
  • Climate and the number of sun hours you’ll see each month
  • Solar panel orientation
  • Solar panel angle
  • Natural efficiency drop
  • Conversion losses
  • Shading 
  • Expandability
  • Battery size and charging (for hybrid and off-grid systems)

The PVWatts Calculator from the National Renewable Energy Laboratory is a well-known tool that takes into account the above points to show you total system output over each month of the year. 

We also recommend you try out our solar panel calculator. It builds on the data provided by PVWatts to recommend a system size for your specific home, and even shows you which section of your roof you should use for maximum exposure to sunlight. 

Calculate the system size you need to offset 100% of your electric usage

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If you’re adding batteries for a hybrid or off-grid system, you’ll need to take care to size your battery correctly. If your battery is too small, you may run out of backup power just when you need it. On the flip side, if your battery is too big, you’ll wind up spending too much, and might quickly diminish battery capacity by failing to charge it sufficiently. 

For more information about batteries, check out this handy guide on battery sizing. 

As part of your system design, you’ll want to create an electrical diagram. This will be useful as a blueprint when it’s time to install your panels; it will also be required when you’re applying for permits.

5. Do the math 

By this point, you should have a clear idea of what kind of system you want, as well as what’s allowed (and what isn’t) under the rules and regulations governing solar in your area. 

Now you’ll want to move on to specifics and work the numbers, i.e. your estimated costs and savings.

Man in formal attire works on desk with laptop and calculator

Make a solar costs and savings projection covering the guaranteed life of your panels (typically 25 years). Image source: Freepik

Based on your system design, you should be able to search online and find the costs for the equipment you require. The simplest way to do this is to look for a complete, all-in-one DIY solar kit that matches your needs. 

Next, you want to work out your utility bill savings. Using the system size you worked out in your design in Step #4, it’s relatively easy to calculate the annual output of your system. Based on that, you can figure out and total up avoided utility costs. When projecting ahead, be sure to account for inflation in utility costs. 

Some homeowners may be constrained by limited roof space; in that case, they should calculate the maximum number of solar panels that can fit on their roof, and then figure out costs and savings from there.

Now, with the cost and savings figure in hand, you can calculate what the return on your DIY solar panel project will be, and if it’s worth going ahead with from a financial perspective. 

6. Stop and reevaluate

Assuming you’ve already completed Steps 1-4, you should have a clear idea about whether a DIY solar panel installation is feasible or not. Specifically, this is what you should know by now:  

  • If a DIY solar panel system is allowed where you live
  • The permitting and approval process
  • The solar panel system size you want, and whether you have the space for it
  • The estimated cost of the installation
  • The electricity bills savings you will receive
  • If the financial equation is right for you
  • All of the risks associated with a DIY solar panel installation (refer to the ‘Cons’ section earlier on this blog) 

If you’re still unclear on any of the points, step back and continue your research. 

If you do have all this information, then I recommend you pause and reevaluate. 

Is solar right for you? And if it is, here are the three options you can choose to make it a reality. 

DIY solar panel installation 

You’ve done your research and are clear on what DIY solar installation entails. You’re confident in your ability to perform all the necessary tasks yourself, and have a plan to avoid or mitigate all the risks. Congratulations, you’re ready to get started and get your hands dirty. 

Outsource part of the installation 

You may decide that you’re better off outsourcing part of the installation. This is often a good idea if there’s a specific section that you don’t feel comfortable with. For instance, many solar DIY-ers decide to hire an external contractor to perform the electrical installation.

Get a professional solar company to perform the entire installation 

While this is the most expensive in terms of cost, it’s the cheapest option when it comes to time, effort and peace of mind. The solar company will design the system for you, source all materials, and deal with all permitting requirements. Furthermore, if there are any issues with panels or workmanship down the line, they will be there to handle them for you. 

I encourage you to check out this option. To do so, simply use our solar panel calculator to request no-obligation quotes from licensed solar installers in your area.

See live solar prices in your area and request obligation-free quotes

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If you’re still not sure which is the best way forward, here is a solar decision matrix to help you out. 

 Financial costsTime costsRoof leakage riskPermitting requirementsEasePersonal safety
DIY solar install++ –
Outsource part of the installation+++++
Professional solar install++++++++++

7. Start permitting process

You’re ready to get your hands dirty and install some solar panels! But wait — remember the rules and regulations you researched back at Step #3? 

If you haven’t already, list out all permit processes required by the state, your utility, and your authority having jurisdiction (AHJ). 

There’s a good chance that you’re going to have to apply for a building and utility permit before you start any work. This will often involve an inspection by either an electrician or a structural engineer, or both. 

It’s important to follow all the steps required to ensure that your installation is code-compliant and legal. 

8. Choose supplier and buy equipment 

Here’s is a brief list of all the equipment you’ll need for you solar setup:

  • Solar panels
  • Solar inverter
  • Mounting and racking equipment
  • Wiring and general electrical supplies
  • Battery system (for hybrid and off-grid system)
  • Charge controller (required for some battery systems) 

Ideally, you’ll find a complete DIY solar panel kit that includes everything you need for your solar installation. That’ll save you time that you would otherwise spend searching for individual components and then figuring out whether each part can work together.  

When you’re comparing kits, we encourage you to check product reviews on SolarReviews to make sure that you’re buying from reputable brands that homeowners are happy with. 

When it comes to picking a supplier, you want to choose one that offers great warranty and after-sales support. I would prioritize both these factors over price — unless you’ve performed a solar installation before, you’re going to have to talk to the vendor many times during the installation, and maybe even after.

9. Install the solar panel system

At this point, you should have successfully applied for all necessary permits and approvals, and accepted delivery of your solar equipment. It’s now time to install the panels!

The actual specifics of the installation will depend on what system type and equipment you’ve decided upon. 

The process I’m describing below is for a grid-tied system that uses microinverters for the DC to AC power conversion. 

Task 1: Install solar panel racking and mounting 

Use a chalk line to measure and mark out exactly where on your roof the racking system will be installed. 

Next, look for solid bits of the roof to drill into for the installation of lag bolts. You should consider using a stud finder with AC current detection to ensure you’re not drilling through a power line. 

Caulk the holes and install flashing to create a waterproof seal before you screw the lag bolts in. Once the lag bolts are all ready, you can install L-feet and then lock the rails on to them.

Task 2: Connect microinverters 

Onto the microinverters. These are little boxes that will modulate the output of each panel. You’ll connect them to the rails using the provided bolts. Each box will have a positive and negative wire coming out of it, which you will connect together to form a series connection for each array. 

Close up of a microinverter connected to a rail atop a shingled roof

Microinverters attached to a rail. Later, each solar panel will be connected to one before it is mounted. Image source: Enphase

Task 3: Connect grounding wire

Connect copper wire of an appropriate gauge across the rails as grounding. This is an important safety precaution and will help dissipate any anomalies caused by a lightning strike or a fault.

Task 4: Install roof junction box 

You’ll need to drill a hole in the roof to install a junction box. If you have more than one solar array, you will run the trunk cable from each into the junction box. This will allow you to channel the power from the solar panels to your house. 

Task 5: Install the solar panels

It’s now time to haul the panels onto the roof. Each module is about 65 inches by 39 inches, which can be an awkward size for one person to handle on their own. Consider getting someone to assist you with this part, especially if your roof is steep. I also strongly recommend that you use a harness while you’re up there. 

It’s now time to attach the solar panels to the mounting rail. Before laying them down flat, first get the wiring in order. Each solar panel will have a negative and positive DC wire attached. You don’t want the wires to touch the roof, so you clip or zip-tie them to the panel. You can then connect the wires into the microinverters you’ve already attached to the railings. 

Next, insert the provided mid-clamps into the railing to hold the solar panel in place from each side. For the solar panels that lie on each end of the rail, use end-clamps to keep them in place and present a more aesthetically pleasing look. 

Task 6: Home run connection

With the solar panels ready, it’s time to connect them to the house. For this you will need to install:

  • A conduit
  • An external junction box
  • An emergency disconnect box

The conduit will carry the wires from the roof junction box down to the external junction box. 

The junction box will in turn connect to an emergency disconnect. This is a safety feature that allows you to quickly shut off your solar panel system, and is a required feature in many jurisdictions.

From the emergency disconnect, the wires are passed through to the home’s main electrical panel. The external junction box and emergency disconnect box should be weatherproof and installed in an area that is easily accessible and allows easy connection to the home’s main electrical panel.

Your solar panel system is now ready, but unfortunately there’s still a couple of more hoops to jump before you can actually switch it on. 

10. Final inspection and interconnection with the grid

Once your installation is complete, you’ll have to schedule an inspection with the local AHJ. The inspector will come out and inspect your system to ensure that it’s compliant with local ordinances, and that the design matches those laid out in your plans. 

The system will also need to pass an electrical inspection to ensure that it is code-compliant. 

Once the inspection is done, you will need to apply for interconnection with the grid. The utility will either install a second meter, or replace your existing one with a bi-directional (or net) meter. The bi-directional meter can record your home’s power exports the grid so that you can receive credits on your power bill.  

11. Switch on your system

Assuming your system has now met all state, local and utility requirements, you can now commission it. 

These days, most inverters offer solar monitoring app that allow you to check your system performance online from wherever you are. Use this to make sure that your solar system is performing as expected. 

It was hard work, but you can now benefit from a solar panel system that produces clean energy, lowers your electricity bill, and improves the value of your home. Congratulations! 

DIY or not, solar power is highly rewarding

If you’ve read through this very lengthy blog post, kudos – you are definitely serious about going solar! You are now on a journey that I’m sure you’ll find highly rewarding. 

Here are some of the best things about having solar panels: 

  • The satisfaction of receiving a much lower utility bill – and thinking of all the things you can do with the money you’ll be saving over the years
  • Monitoring your solar panel production and usage from day to day
  • Pride in producing clean energy and doing your part in combating climate change

If you have a lot of time on your hands and the skills to pull it off, you can achieve all these benefits at the minimum possible cost. 

However, if you’ve read through this guide and feel that a DIY solar installation is just too much work, then fret not: you can still get all the benefits by getting a professional solar company to do the work for you.

Either way, we encourage you to check out our solar calculator. It will recommend a system for you that offers 100% offset of your utility bills, and can show you what the panels will actually look like on your roof. 

Best of luck on your solar journey!

The Final Word

Solar energy can provide consumers with significant savings on electricity. If adequate measures are taken to minimize its effects on the environment, the technology could prove to be a strong alternative to fossil fuels and wind power.

The subsidies given to solar energy, however, are unsustainable. It has caused the cost of solar energy to artificially rise, and has driven business to foreign manufacturers to save on cost in the short-term. We must begin thinking about the long-term consequences of our actions to ensure a foundation for a sustainable, planet-friendly energy sector that healthily supports both our national and the global economies.

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