Cost of Home Solar Energy

What is the real cost of home solar energy to the homeowner?

Radiation from the Sun is free of charge, but harnessing the Sun as a useful energy source costs money. The upfront investment in residential solar power is substantial. However, the investment in solar water heating usually only requires a modest investment. The maintenance cost for both types of systems is minimal and their life span is 15 to 20 years.

The Gross cost of a Residential Solar Power Generator

With good market research the gross cost is $5-$7 per 1 watt of production capacity. A typical US home needs a 3,000 Watts production capacity system. This is comparable to the price of a typical new family car. A homeowner that wants to invest in a clean power generator can receive help financially in their quest to achieve this goal.

Energy Tax Credits

The IRS, as well as most of the 50 states recognize the added value to the nation that can be accrued through investment in residential solar energy. Combined Energy Tax Credits start with a 30% threshold (the unlimited tax credit granted by the federal authorities) and up to 15% on top in certain states, e.g. a State of California citizen can get 45%. Even with these generous tax credits, there is still a substantial financial gap for many households. In many cases, it can be difficult to bridge this gap. There are a few existing financial instruments that can provide the missing cash, namely solar loans and solar lease arrangements.

Solar Loans

Energy Loans are long term, 10 to 30 years, similar in nature to a mortgage loan. After the initial investment, the appreciation of the home will be higher. The finance institution will compare the new loan (or the refinancing program) with the value of the house in the market. Some of them will appreciate the house based on recent “similar house sales” in the neighborhood (this might be an issue for off grid homes because there might not be a “similar home” in the neighborhood). The rules for long term loans have become tougher after the financial debacle of 2009. With all this in mind, many people manage to get their energy financing approved. (It should be a lot easier for a new home.)
When you run the cash flow calculations and your ability to pay back the new loan, remember that you can use the saving on energy bills to pay back the monthly payments of the loan. The said 3,000 Watts system can generate 540 kW-Hours every month. Those 540 kW-Hours you won’t need to pay for once the solar generator is up and running.

Solar Lease

Solar Lease Arrangements are similar in concept to car lease plans. There are different business models, but the main idea is the same. The lease company is the owner of the system, you get a turn-key system with a guaranteed performance and you pay for the electricity that was consumed a fixed price, the price that was in place when you signed the contract. This is a tremendous advantage, because electricity prices are on the rise, a 5% annual increase was seen over the last decade

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