Kiplinger Today

Home Remodeling & Maintenance

Slash Your Utility Bills: Power Up on Your Own

If Uncle Sam ran an infomercial plugging its new energy programs for homeowners, it might sound something like this: For a limited time only, get federal aid for home improvements that can help you reduce your tax and energy bills! Through 2010 you can cut your tax bill by 30% of the cost of certain projects, up to $1,500! And through 2016 you can get a credit for 30% of the cost -- with no limit -- of geothermal heat pumps, solar panels, solar water heaters, small wind-energy systems and fuel cells!

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And that’s no hype. Washington is serious about energy efficiency, and will pay up to $1,500 for home improvements, such as windows and doors, certain insulation projects, roofs and high-efficiency water heaters (for more information, visit

The government has also slated $300 million for rebates on the purchase of Energy Star-qualified appliances (see for details). The money should be available late this year or early next.

With the federal government chipping in 30% of the cost, generating power at home makes economic sense for many Americans. In addition to the federal tax credit, 44 states offer renewable-energy tax incentives, ranging from property- and sales-tax discounts to income-tax credits. Rebates are available in 42 states from a variety of sources, including utility companies (see for incentives in your state).

Lower prices combined with government incentives mean that a home power system should pay for itself -- but in most cases it’s a long-term proposition. One thing you can count on, though: Energy prices from your local utility will only go up, so your home power system will look like a smarter decision as time goes by.


Solar electric. Most homes can be fitted with solar panels; all you need is enough space and not too much shade. And as material costs go down, solar power systems (also called photovoltaic, or PV, systems) are getting cheaper. As a result of the recession there’s an oversupply of panels right now, so prices for PV panels have dropped 20% to 30% from a year ago, says Brad Collins, executive director of the American Solar Energy Society.

Again, the variables are key. For an idea of what a solar electric system might cost you, try the calculator at A local solar-power contractor can help fine-tune the calculations (you can find contractors by zip code at the same site).

In rough terms, here’s how the numbers break down: The average home’s electrical needs can be met by a 4-kilowatt solar power system. Figure the price, including installation, at $8,000 per kilowatt, so the total comes to $32,000. State tax incentives range from 15% in North Dakota and Massachusetts to 50% in Louisiana, with 25% the most common. Knocking that much off a $32,000 system brings the cost down to $24,000. The federal government’s 30% “discount” drops the total to $16,800. According to Collins, the break-even point ranges from 15 to 25 years.

The power from such a system can be “banked.” Forty-two states and the District of Columbia have net-metering agreements: If your system is tied to the power grid, the utility has to credit you the retail rate (the rate customers pay) for the power you contribute to the grid. If you feed more power in than you take out in a given month, you store up credits for future use.

Solar hot water. A solar hot-water setup is relatively inexpensive and has a quick payback.

How it works: Collector boxes (usually placed on your roof) trap solar heat and preheat cold water. On a sunny day, even in the winter, the fluid in the collectors can reach 150 degrees Fahrenheit. The heated water then flows either to your existing hot-water tank or to a special tank.


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