Solar Finally Pays Off

Dan Mullin's electric meter is turning backward, and it gives him immense satisfaction. On a sunny day in his Washington, D.C., neighborhood, the solar panels perched on his roof catch enough rays to power his home and sell electricity back to the utility. A solar-powered fountain burbles in his garden, near the tubes for his solar-powered hot-water heater. "There is no easier way to make money than to sit out here and enjoy the sunshine," he says.

Promoting a cleaner environment and knowing that the power he generates travels back through the electric grid to his neighbors adds to Mullin's satisfaction. You might expect such altruism from someone who works for the Boy Scouts of America -- he's an executive in the Learning for Life division -- but the bottom line is, solar energy saves him money. Mullin has cut his electricity bill by two-thirds, and when those savings cover the $10,000 up-front cost for his system in ten or 12 years, his solar electricity will be free.

Depending on where you live, solar-power systems (also called photovoltaic, or PV, systems) could pay off for you, too. Says Noah Kaye, of the Solar Energy Industries Association: "Surveys show that most Americans would be very interested in having a solar system, but most don't realize solar can power a house economically."

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Another thing most people don't realize is that the economics of solar do not depend solely on how many hours the sun shines where you live. The real key to making a PV system pay off is whether your state offers a hefty financial incentive (more than half the U.S. population is covered by such subsidies). Fat subsidies are why New Jersey -- not a Sunbelt state -- has the second-largest number of home PV systems in the U.S., after California. At the moment, 17 states offer rebates, according to the North Carolina Solar Center (you can check the Solar Center's database at www.dsireusa.org to see what incentives are available in your state).

Sunshine economics

A few big variables dictate whether a home PV system makes economic sense. But in rough terms, here's how the numbers break down in states with the best incentives: The average solar-power system is 4 kilowatts. (Think of kilowatts as the size of the system. The power it generates depends on size, efficiency and sunlight.) Figure the price, including installation, is $10,000 per kilowatt, so the total comes to $40,000. Through various rebates, credits and tax breaks, some states pay half that cost. The federal government will also chip in 30% of the cost, up to $2,000. Taken together, those subsidies drop the total to $18,000. Manufacturers say that solar panels will last 25 to 30 years, and they guarantee them for 20 years. Assuming a 20-year life span, that averages out to a cost of $75 per month.

Assuming those generous state subsidies, you'll get your initial investment back in ten to 15 years, including financing costs. The environmental benefit: 3 fewer tons of carbon dioxide generated every year.

Second to state subsidies in computing home solar economics are utility rates, followed by the hours of daily sunshine. How much do rates trump sunshine? Consider that a Boston PV system saves about the same amount as one in Albuquerque, even though New Mexico's sunny skies generate 25% more power, says Kaye.

Selling power back to a utility cuts costs as well. Forty-two states and the District of Columbia have laws that require utilities to buy power from individuals. With such so-called net-metering arrangements, a utility must credit you at the retail rate -- the rate you pay for power -- when you send electricity to the grid. In effect, net metering makes utilities into power banks. If you feed more power in than you take out in a given month, you store up credits for future use.

You can even get cash from the utility. Some states require utilities to pay once a year for any excess power your system generates, although at the wholesale rate. So, for example, you may buy power at 9 cents per kilowatt-hour but sell it for only 2 cents per kilowatt-hour.

Other states let you become your own power broker in addition to net metering. In New Jersey, for example, utilities must invest in solar power, and the state has created a market for privately generated solar electricity. A certificate is issued for every 1,000 kilowatt-hours generated, and utilities buy them for between $150 and $265 each.

Of course, solar-power systems vary somewhat in quality and cost, and the panels vary dramatically in appearance. Fat solar panels with visible rows of circles are still an option. Svelte, monolithic panels in blue or black are on the market, although you'll pay a slight premium (up to 10%) for them. For each kilowatt of power you want to generate, figure you'll need 80 square feet of panel. "Thin film" panels, which are barely thicker than the shingles they cover, are unobtrusive, but you'll need twice the square footage to generate the same amount of energy as traditional solar cells.

But not everyone wants unobtrusive panels. Tony Clifford, president of Maryland-based Standard Solar, says that although most of his clients prefer sleek and subtle panels laid flat on a roof, some don't mind making a statement with circle-laden panels propped up to catch the sun at the perfect angle. "Beauty is in the eye of the beholder," he says.

Future benefits

Aside from saving on his utility bill and banking good environmental karma, D.C. resident Dan Mullin says he enjoys another benefit of his PV system: insurance against rising energy prices. That's a big incentive driving PV sales, say installers. And keeping a lid on rising energy costs is also a major motivator for states to subsidize commercial, retail and home PV systems.

Count on more states to start or increase subsidy programs. By fostering home solar systems, states decentralize power production. That reduces the cost of expensive grids needed to transport power. Also, clean, renewable power saves environmental costs by limiting fossil-fuel use.

Solar-power experts are quick to point out that traditional power is subsidized, too. Of the $12 billion the federal government spent on energy subsidies last year, $10 billion went to traditional energy sources. Says Joe Schwartz, executive editor of Home Power magazine: "We don't live in a free market. Sure, incentives drive the market, but incentives for renewable energy are simply evening out the market."

As the price of generating conventional power has risen, the costs associated with solar power have fallen dramatically. Solar panels now cost 80% less than they did in the early 1980s, and system prices may drop 5% per year for at least the next few years. The crossover point -- when falling PV-system prices pass rising energy prices so that solar pays off without subsidies -- is less than a decade away, say experts.

For now, though, cutting the up-front investment is the challenge. Maryland, which imports 25% of its power from other states, recently passed a law requiring utilities to buy solar power from private suppliers. Malcolm Woolf, director of the Maryland Energy Administration, foresees an energy-credits market evolving in which utilities enter multiyear contracts with suppliers -- even homeowners.

Of course, solar power isn't all about economics. Standard Solar's Clifford points to some clients in the rolling hills of Virginia's hunt country. Virginia has no state incentives, but these families have invested in expensive solar-power systems anyway. "It's like buying a Toyota Prius," says Clifford. "There's a certain set of the population who will pay a substantial sum to do the right thing."

Small scale solar

Not quite ready to add solar panels to your roof but still want to catch some rays? You have other alternatives to make the sun pay you.

Solar water-heating systems. Dark-panel collector boxes, from 40 to 80 square feet, trap solar heat and preheat cold water. The heated water then flows either to your existing hot-water tank or to a special tank. Such a system in cloudy Seattle will provide less than 50% of the energy needed to heat hot water for a typical household. But in sunny Phoenix, the yield is 80%. System prices range from $2,000 to $8,000. Figure a six- to ten-year payback period on a $4,000 system. (The federal government will pick up 30% of the bill, up to $2,000.)

Solar-powered attic fans. Lowering your attic's temperature on a hot summer day can dramatically reduce the load on your air conditioner. A solar-powered fan costs about $500 installed and can pay for itself in as few as two to three summers.

Solar tool kit

There's an abundance of resources to help you add solar power to your home. Here's what you need to get started.

A simple, soup-to-nuts primer on PV systems: www.nrel.gov

The money your state provides to help cover system costs, plus other payments and incentives: www.dsireusa.org

Get federal tax credits of up to $2,000 for installing a qualified PV energy system or solar water heater this year or next: www.energytaxincentives.org

A calculator to figure out your costs and savings from a PV system: www.clean-power.com/