Paying for It
The industry continually rolls out new financing mechanisms to bring
more solar energy online. For instance, this spring SolarCity launched
SolarLease, a PV system-leasing program for homeowners.
Favorable incentives can reduce the cost of
solar energy by half or more.
Solar Financing Resources
Solar system cost estimates, links to solar professionals,
Database of State Incentives for Renewables and
Comprehensive information on state, local, utility
and federal incentives.
PV Watts: rredc.nrel.gov/solar/codes_algs/PVWATTS
Estimates electrical energy produced by a grid-connected
photovoltaic (PV) system as tailored to your geographic
the average household, a PV system would need to be 5 kilowatts,
depending on the solar resource. Assuming $9 per watt, the pre
incentive cost would be approximately $45,000. But an energy-efficient household can use half that amount of electricity and do well
with a 2.5-k W system costing approximately $22,500.
This price might seem out of reach. No doubt about it, small-scale
solar energy today is more expensive than dirty conventional power.
However, recognizing the public benefits of solar power, many states
offer incentives that reduce the upfront cost of installing solar. Favorable incentives can reduce the cost of solar energy by half or more.
Start by Assessing State Incentives
States offer solar incentives in any combination of rebates, state
tax credits, tax exemptions and renewable energy certificate payments. (Renewable energy certificates, also known as “green tags” or
“green credits,” allow the environmental value of the renewable generation to be quantified and traded as a commodity-like product. See
sidebar “What About RECs?”) The biggest incentives generally exist
in states having renewable portfolio standards (RPS) requiring electric
utilities to develop or purchase renewable power including solar energy. To support the RPS goals, these states created laws that incentivize
solar power. Incentives typically come from the utility, although in
a few cases the state agency provides them.
The incentive may be in the form of an upfront payment or a fixed
price per kilowatt-hour for, say, five years. Rebates are calculated on
a per-watt basis. For example, California offers a rebate of $1.90
per watt (down from $4 per watt years ago), Connecticut offers $5.00
per watt and Colorado has a $4.50-per-watt rebate. It is worth noting
that the price per watt can refer to watts DC, watts AC or may be
a performance-based incentive. As a rule of thumb, the AC rating of
your solar panels is calculated as 77 percent of the DC rating. Performance-based incentives take into account the total PV system, including inverters, shading and panels, and are awarded based on the
A few states award incentives based on actual PV production for
small systems. Washington state offers a production incentive that
ranges from 12 to 54 cents per kilowatt-hour. These incentives come
annually from the utility company with a maximum payment of
$2,000 per year and $25,000 total.
Most state solar incentives originate from one of two progressive