Hello, Sunshine! Is Solar Power for You?

A breakdown of how it works, what you'll pay and the money you'll save in the long run.

Fifteen years ago, Tehri Parker bought a house in Amherst, Wis., that was two miles from the local power grid. Faced with paying either $5,000 to connect to the grid or more up front to go solar, she and her husband opted for the latter. “It gave us that push to live a more environmentally friendly lifestyle,” says Parker.

To save money, the couple bought all of the equipment used and installed everything but the wiring themselves. All told, it set them back about $12,000, but the one-kilowatt Photovoltaic system—with a backup propane generator for cloudier months—supplies all the electricity they need to power their 2,000-square-foot house. The couple hasn’t paid an electric bill since, and the solar panel system has paid for itself.

But it’s not just industrious couples like the Parkers—or people living off the grid—who have moved from utility-provided power to solar electric. Rising energy costs and trends toward greener lifestyles have led a growing number of people to go solar in recent years. If you’re considering making the switch, here are some factors to consider:

Location, Location, Location

Obviously, a consistently sunny climate is ideal, but a solar system works even in rainy states. “Places like Seattle or Maine are very good for solar, even though they don’t have days upon days of sun,” says Brad Collins, executive director of the American Solar Energy Society (ASES). For solar panels to work at maximum efficiency, however, they need southern exposure and minimal shade.

On a bright day, a one-square-foot photovoltaic panel will generate 10 watts of power, so you’ll need 100 to 200 square feet of space for a one-kilowatt system. Typically, solar panels are mounted on a roof, but if the location and orientation of your house or garage is less than perfect, pole-mounted solar panels placed in the yard offer another (portable) option.

What You’ll Pay

The up-front price is daunting: The average cost is $15,000 to $20,000. “It was really the expense that was scary to us,” recalls Carly Wansing, a 30-year-old architect from Nashville, Tenn., who went solar in 2007. She and her husband saved money by buying functional but blemished panels (readily available on sites such as eBay) and doing much of the installation themselves. They paid about $11,000 for their system after tax credits and rebates.

What You Can Get Back

The federal government offers a tax credit that shaves 30 percent off the cost of installing a solar electric or solar thermal system. Most states, some cities and some local utility companies also offer financial incentives for people who want to go solar. The local utility company buys the extra power that the Wansings produce, for example, for 18 cents per kilowatt hour (at this rate, they estimate the system will pay for itself in about 10 to 15 years). Check the Database of State Incentives for Renewables & Efficiency to see what benefits are offered near you.

Solar panels are guaranteed for 25 years—about the same lifespan as a roof, and it might last longer than that—so a solar system should be viewed as a long-term investment that will pay off over time. But even if you move before the system has paid for itself in savings, you should still be able to get your money back. According to the American Association of Appraisers, installing solar power adds to the value of a house and helps it sell faster.

The Option to Lease

Solar leasing is a fairly new concept, but it’s starting to catch on, thanks in part to partnerships between The Home Depot and solar-financing companies such as SunRun and SolarCity. The companies own the solar systems, which they install and maintain at no cost to the homeowner. In exchange for providing the roof space needed to generate solar energy (which the companies can sell to conventional utilities), homeowners receive green electricity for a fixed low monthly rate for the length of the lease.

“I’m paying $39 a month for a 20-year term no matter what happens—and from all indicators, electricity is only going to go up,” says Neshama Abraham of ASES, who recently signed a SunRun lease in Colorado.

While SunRun and SolarCity are currently available in only a handful of states, both companies plan to expand.

Start Small with a Solar Thermal System

If you’re not ready to go fully solar, there are smaller and cheaper ways to harness the power of the sun. Installing a solar thermal system to heat water, for instance, costs about $1,000 to $1,500 and should pay for itself in less than two years.

The downside is that unless you live somewhere with year-round sunshine, a solar thermal system will meet only about 70 percent of your hot water needs (an insulated 50-gallon water tank will stay hot for only three days if there’s no sun).

A solar thermal system, however, is particularly well suited for heating pools and hot tubs. A solar pool heater costs around $3,000 to $4,000 installed, but you should make that money back in energy savings in roughly two to seven years. With an expected lifespan of about 20 years, it will also outlast traditional gas and pump systems.

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