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 How Much Solar Power Can I Afford? 
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Post How Much Solar Power Can I Afford?
by: Kriss Bergethon

With a new U.S. president and a new outlook on renewable energy, many people are looking at solar energy as an option for powering their home. Many people are attracted to the energy savings and good feelings of solar, also called photovoltaic or PV energy. In this article we will discuss the financial aspects of designing a system for your home.

The Power Bill

Before you determine what size system you want, you should take a look to see how much you're using (we also suggest you conduct a full energy audit to reduce energy waste in your home). To get started, take a look at your utility bill. You will notice it tells you variety of things, the most important being how many kilowatt-hours (kw-hrs) you used last month. It may also tell you how much you used in the last 12 months, how much you used a year ago, and how much you used this year to date. It should also tell you how much you are paying per kw-hr, it is usually in the range of $.08-$.12/kw-hr. This information will be used later in our calculation.

The Power Company

Next, make a call to the power company for some information. Ask if they offer any rebates or incentives for grid-tied PV power systems installed in their service area. This means that the system will be tied into their grid and they will buy any excess power your system generates. In some areas of the country, the utility will pay for half of your equipment and installation. Some utilities and municipalities also have financing options to help homeowners. The website can help you find out more about incentives in your area.

The Tax Man

The federal government has a 30% tax credit for residential solar power systems. This credit has no cap. For example, lets say you were calculating your taxes for one year and you determined that you paid $10,000 in taxes for the year from your paycheck. If you bought a $15,000 PV system and took the 30% credit, .3 x $15,000 = $4,500. You would receive a refund check for $4,500 from the IRS, on top of any other refunds you may have coming. You could receive up to the $10,000 you paid in taxes for your solar power system, meaning you would pay no tax and have cheap, clean energy. And many states have state tax incentives as well. Check out for more information on tax incentives.

Solar Power Example Calculation

Here's an example budget calculation for a typical home. Lets say you look at your power bill and you are using 500 kw-hrs per month, or about 6000 kw-hrs per year, and your power costs $.10/kw-hr. Now we have to make an assumption about the size of the system. We'll start with a simple 2000 watt PV system to get started. At approximately $10/Watt installed, this system would cost about $20,000 without incentives. However you determine that your utility has a $3/watt rebate. So, $3/watt x 2000 watts = $6000. Then you have the federal tax incentive of 30%, .3 x $20,000 = $6,000. So you are actually paying $20,000 - $6,000 -$6,000 = $8,000 for your system.

Using the solar calculator tools on sites like or, you determine that a 2000 watt system, based on where you live and how you install the system, will generate 5,000 kw-hrs per year. At $.10/kw-hr, you are saving 5,000 kw-hrs/yr x $.10/kw-hr = $500 per year by generating power with the PV array. If you divide $8,000 by the $500 savings, you can see that your system will pay for itself after 16 years. This is good because most systems will last at least 30 years.

About The Author
Kriss Bergethon is a writer and solar expert from Colorado.

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Fri Feb 05, 2010 7:39 am
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