You’ve decided to give solar panels a try and enjoy the independence that comes from generating your own power. However, this also means you have to pay for the equipment that makes it happen. You may have to pay as you go for the electricity through a lease or power purchase agreement. Most consumers are not accustomed to purchasing 20 to 30 years of energy all at once.
It’s becoming easier for ordinary people to start managing their own electricity use and production. This isn’t known by much of the public, even though digital meters are being installed in homes and solar modules may be popping up on some rooftops in their community.
There are more options than ever when paying for a new solar electric system. Paying cash is the most cost-effective way to generate your own power from the sun. This can generate a long-term electricity price less than what the utility would charge. Of course, it depends on your location, the sun exposure, the cost of solar in your area and the availability of incentives.
Before you invest, it’s a wise idea to obtain solar price quotes from a minimum of three qualified installers before making a commitment. Each installation is unique, therefore the cost of installing solar on houses can vary depending on roof types and other conditions.
In late 2010, several areas around the country reported typical systems of $5 to $7 per DC watt of nameplate installed production capacity for the easiest installations. “Nameplate” is the sum of the modules’ rated capacities: 20 modules rated for 195 watts each eqyals 3,900 watts, or 3.9 kilowatts. At $6 per watt, a system would run $23,400, but keep in mind that incentives like rebates and tax credits, can drastically reduce the cost.
To discover what utility, state or local incentives are available, consumers can visit our directory of solar rebates State Incentives for Renewables and Efficiency. A 30 percent federal tax credit for the cost of a solar PV system is available to those with federal tax liabilities. This is scheduled to remain in effect through 2016.
Solar equipment leases and solar power purchase agreements are the two fastest-growing ways of obtaining solar energy. A power purchase agreement is similar to a lease, but states the consumer is agreeing to buy electricity at a set price for a specified period. The effect may be similar with many lease offerings, which may guarantee the system will produce a certain amount of electricity during the lease term.
The cost per kilowatt-hour is a significant figure that will help make it easier to know what you’ll be paying, no matter what method you choose.
If using cash, this number can be identified with a reasonable amount of accuracy, by dividing the total price to be paid over a period of years by the number of kilowatt-hours of electricity a system can be predicted to produce.
You can try this solar calculator that can be used to estimate long-term production. The solar calculators utilize a variety of databases, but results should all be similar. However, some consumers may find one simpler to use than another. User directions are given to account for such things as an array’s tilt, orientation and the losses that occur between a system’s standard DC-rated production capacity and its actual AC power production.
Cost and payback estimates from solar calculators may not necessarily be up to date. This is because prices and incentives are much more unpredictable than the average annual sunshine levels.
Inverters are used to convert the DC output of a solar array into AC. Don’t forget to take into account the potential future cost of a new inverter. Most inverters carry warranties of 5 to 15 years, compared to other power production warranties of 20 to 25 years for solar modules.
There are many options to finance solar PV. The following are the most common:
Home equity loan or line of credit
Cash-out mortgage refinancing
Loans from banks, credit unions, utility programs, solar companies or other organizations
Utility on-bill financing
Power purchase agreements
Group acquisitions of solar PV systems are becoming increasingly common as a way of cutting prices through economies of scale. These groups can be formed by nonprofit organizations of by for-profit companies, and may allow customers to use varying financing methods.
Property Assessed Clean Energy financing, known as PACE, was a rapidly-growing way of paying for solar until complaints from federal mortgage regulators put most of these programs on hold in the spring of 2010. With PACE, buyers who installed solar were able to pay the money back through increased property-tax assessments. If an owner moved, the solar PV system remained with the property and the new owner was responsible for the tax payments.
The Federal Department of Housing and Urban Development is planning to launch a new pilot loan program for solar PV and other home energy improvements known as PowerSaver.
Solar leases and power purchase agreements have been growing in popularity and are now rather common. Often, they require no down payment. At times, customers may be able to provide an upfront payment in exchange for a reduced electricity rate. It depends on each situation, but leases and power purchase agreements can offer instant as well as long-term savings compared with a utility’s electricity price.
In certain cases, the initial solar electricity price per kilowatt-hour may be higher than the customer is currently paying, but it can be locked in for a long time. Also, the company is responsible for any repairs, insurance and maintenance with a lease or power purchase agreement. Power purchase agreements are often used by commercial, governmental, utility companies and homeowners.
Although not as common, utility on-bill financing may be available in some locations. With this, a solar PV system is financed by the utility and the cost is repaid through periodic billing. The increase in a bill that results from financing can be easily counteracted by substantially lower usage of the utility’s electricity.
The initial costs of a new solar PV system can be intimidating. Consumers are often unsure whether they can trust power production warranties that last 20 years or more since the technology is so new.
Take the time to investigate solar and measure the cost with using utility-supplied electricity and you may be pleasantly surprised. There is a big reason many utility customers switch to solar – it saves them money.
Not only does solar save money, it allows customers to generate clean electricity directly from the sun and help the planet.