The Price of Going Green

One of the main deterrents to switching over to alternative energy for most people is the cost. No matter how you slice it, putting an alternative energy source on your home is pretty expensive, but it definately has it’s payoffs. So the question is, how to get by that initial cost.

How Much Do I Need.

This is a question that has many variables. To answer this question, you need to know a few things, so grab your power bill:

1 How much power do you use in a month
2 What Percentage of your electricity do you want covered by this system
3 How many peak sun hours do you get in a day (check the map below)

Grid-Tie System Cost
System Size (in watts per hour)	Monthly Output Capability (based on 5 hours of direct / insolated sunshine per day)	Approximate Cost, BEFORE subtracting $2,000 Federal Tax Credit or state rebates or local financial incentives.
680-1500	100-200 kWh	$4,475-$9,500
1500-2800	210-390 kWh	$9,500-$15,500
2800-3100	390-510 kWh	$15,500-$17,500
3100-4500	510-660 kWh	$17,500-$25,000
4500-5000	630-850 kWh	$25,000-$27,000
5000+	850+ kWh	$27,000+
These figures are based on complete solar power systems . Prices do not include freight, tax, installation, or auxiliary battery back-up systems.
These are approximate prices and are subject to change, but should be a good ‘ballpark’ price to give you an idea.

Once you figure out the approximate size, and then the averaged price, now you need to check the incentives you have available here.

It is important to note that making your home energy efficient before you purchase a solar system will greatly reduce your requirements for a solar power unit.

So let’s say for this example, I live in Austin Texas. I have an average home that pulls in 888kwh a month power use, the national average. I’ll need a system that is just under 6000 watts (5920 to be exact). A good ‘ballpark’ figure for a home pulling down 888kwh per month is $30,000. However, there is also going to be the added costs of installation, and probably shipping. So let’s call it $35,000.

Here are the incentives applied to that price.

Residential Energy Conservation Subsidy Exclusion (Personal) - Everything is non taxable.
Residential Solar and Fuel Cell Tax Credit (federal) - $2000
Austin Energy - Solar PV Rebate Program (4.50/watt) - $27,000

$35,000 - Installed price
$27,000 - Austin Energy Solar PV Rebate Program
$ 2,000 - Residential Solar and Fuel Cell Tax Credit
$6,000 - Remaining ‘out of pocket’ costs.

This will be a grid-tied system without storage batteries. You will still be connected to the utility power but it will be more for a ‘backup’ than primary usage. In an area like Austin where there is a solid 5 hours of peak sun, and because of net meetering, there will be a credit applied to the power bill for all the power that your home produces during the day over what you use. That power is sold back to the utility company and they give you a credit. So at night, when the solar panels aren’t producing any power, and you are back on the utility power, you are running on a ‘credit’ from that power generated during the day. In reality, grid tied, non battery systems in an area with 5 or so peak hours of sun a day, usually have approximately 9 months where they have no power bill. The remaining 3 is usually a very much reduced power bill. The addition of a battery bank will easily make a power bill disappear for this home in this location.

Paying for the out of pocket costs-

There are many ways to finance what is left for you to pay on the installation of a PV system.
1. Austin Energy - Residential Energy Efficiency Loan Program. This gives low interest loans that most everyone will be eligible. They loan is for 10 years, and starts at 5.00% for anyone with a credit rating above 639. If your credit is below 639 it will be 7.00%. If you have decent credit, you’ve got a $52 dollar payment to make for 10 years.

In the State of Texas, the average price of electricity is 9.16 cents per watt so the average power bill is approximately $82. So far you have traded an $82 dollar payment for a $52 dollar payment, saving yourself $30 a month.

EEMs - Energy Efficient Mortgages

Fannie Mae
Freddie Mac
FHA/VA Loans
All of these lenders provide Energy Efficient mortgages and refinance options that will usually equal out to similar savings as the Austin program. (and if you look closely, the VA also provides a grant that has been known to cover all out of pocket costs so you can get the whole system for zero cost to you.

Other Benefits

By greatly reducing, almost removing your power bill, you now raise your income to debt ratio. That means if you want to refi your home you will be eligible for more of a loan, better interest rates, and having a higher income to debt ratio also positively affects your credit ‘picture’.
The overall payback can’t be completely accurately reflected to future unknowns like rise in oil prices. The average solar power system lasts about 25 years, if you figure power bills saved for the life of that system, the average return is 2.2 to 3.5 times as much as they cost, or a 220% - 350% return on investment.

So in this example of an average home in Austin Texas, if you decide to go solar for your home, and you’re in a good area for it, you could initially reduce your monthly outgoing bills by about $30 as well as make a change to your home that will most likely be equal to 3 times the original purchase price of $30,000., reduced your impact on the environment, and made you the envy of your neighbors (maybe).

There are many other incentives that are available, this example is a very basic and easy to understand version. Each state has got its own incentives and programs available to you to pay for alternative energy.