paying for your solar electric system
Find rebates and tax credits to finance it.
By Claudia Eyzaguirre
The cost of an energy system depends mainly on its size — that is, on the
number of watts of power it can produce. There are economies of scale,
so that a very large system may cost less per watt, installed, than a very small
system. The size of your roof or lot, or your budget, may dictate the maximum
size of your system. The average residential system now costs about $8 to
$10 per watt, installed (wind systems may cost less). A small, energy-efficient
house may be able to offset all its electricity load with a 2.5-kilowatt system,
and at $9 per watt that system should cost about $22,500. The trick is to find
local incentives and rebates to drive that cost down. Between state, federal
and utility company incentives, in some parts of the country you can cut your
cost in half.
State incentives: Every state offers a different set of incentives, and these
often change from year to year. Find out what’s available in your area by
checking the Database of State Incentives for Renewables and Efficiency
( dsireusa.org). Your state may offer a combination of rebates, state tax credits,
tax exemptions and renewable energy certificate (REC) payments (see the box
on RECs on this page). If your state has a renewable energy portfolio standard
(RPS), requiring utilities to generate power from renewable sources, your utility
company probably offers incentives under a state mandate.
Rebates are calculated on a per-watt basis — that is, you get paid for every
watt of power capacity you install. Many states offer rebates on a sliding scale,
with payments falling off over time. This is meant to encourage early adoption
of the technology. Make sure you understand how much you can expect
to earn based on the time frame in which your system will go live. Rebates
can run anywhere from $1 per watt to $5 per watt — that is, from about 10
percent to half the cost of the installed system. You should also determine if
the rebate applies to the DC output of the modules or to the AC output of the
inverter. AC wattage is typically 77 percent of DC wattage. Your state may
base rebates either on projected output of the planned system or on actual
measured output of the finished system. A few states pay incentives based on
the number of kilowatt-hours produced over a year.
Federal and state tax credits: State personal tax credits range from 10 per-
cent (Utah) to 50 percent (Oregon). Credits may apply to equipment costs or to
the total installed cost of the system (that would include labor and engineering
charges). There also may be a cap on state payments. There may be a property
tax exemption, which means that the value of the system isn’t counted toward
your property assessment.
The federal solar investment tax credit equals 30 percent of the system cost,
up to $2,000 for a residential system; a commercial entity can take 30 percent
with no cap. The credit is scheduled to expire Dec. 31 but may be renewed by
the time you read this.
Utility bills: If your state has good net-metering rules, generating your own
If your state offers no incentives, you can still earn income by
selling REcs (also called green tags). In 2007, a typical 2. 5 k W
rooftop system could earn about $140 per year in green tag
sales. REc pricing is volatile, and may rise steadily in the future
if a national cap is set on carbon emissions. In 2008, utilities
traded REcs for $20 to $30 per megawatt-hour. check current
REc pricing and find a broker or purchaser through the links at
power reduces your monthly electricity bill. States have different rules about how
your production is “banked” and rebated — you may get credit every month
or in the form of an annual credit. Credit may vary from month-to-month or
even hour-to-hour in high-demand periods. Check with your utility company to
determine how your rates will be affected.
Financing innovations: Even with rebates and incentives, you may need a
loan to cover the upfront costs of a new PV system. Many banks now write
home-improvement loans on power systems. A traditional way to finance a
system is via a home equity loan or mortgage refinance. In recent years it’s be-
come common for an installation contractor to partner with a financial service,
in much the way auto dealers can arrange car loans.
The city of Berkeley, Calif., and Boulder County, Colo., have developed pro-
grams to pay the up-front costs of a residential system and bill the homeowner
with a special assessment on the property tax bill over 20 to 30 years. Many
more cities, counties and utility districts will adopt similar financing packages.
One advantage is that the “loan” stays with the home and is automatically
assumed (with the property tax bill) by any new owner.
Other governments — San Francisco and the states of New York and Colo-
rado, for instance — are considering making low-cost loans to consumers that
would function like subsidized student loans.
Finally, look into power purchase agreements. A number of companies around
the country will now build a solar array on your roof at no up-front cost to
you. The company finances and owns the system and sells you electricity at a
fixed rate over 20 years. An alternate arrangement is to lease a PV system as
you might lease a car, with monthly payments and an option to buy after an
specified contract period. r
Claudia Eyzaguirre is a solar policy advocate at the Vote Solar Initiative (votesolar.
org), a nonprofit organization with the mission of stopping global warming and
increasing energy independence. This article is condensed from a longer article
in the July/August issue of SOLAR TODAY. Find the full article, “Paying For It,” at