This paper deals with the problem of optimal size of grid-connected photovoltaic (PV) system for residential application. It is assumed the PV system can input or output liberally the electricity to the utility electricity grid. A simple linear programming model is developed. The objective is to minimize the annual energy cost of a given customer, including PV investment cost, maintenance cost, utility electricity cost, subtracting the revenue from selling the excess electricity. The model reports the optimal PV capacity that customers adopt with their electricity requirements. Using this model, an investigation is conducted of economically optimal PV investment under several conditions for a typical residential building. Additionally, the sensitivity of levelized cost and simple payback period to various economic and technical circumstances has been analyzed. (C) 2008 Elsevier Ltd. All rights reserved.