Spending: what you need to know about going solar
1. A bright idea gets cheaper. Since 2007, the cost to buy a solar power system has fallen by about 50 percent, to an average upfront cost of $4,590 per kilowatt, says the Solar Energy Industries Association (SEIA). (A typical home system ranges from 3 kW to 7 kW.) The higher the electric rate you currently pay, the more sunshine your location receives, and the greater the financial incentives that are available to you, the better your return on solar will be, says Jonathan Bass, vice-president of communications with SolarCity, the largest system installer in the U.S.
2. Get out your tape measure. For each kilowatt of capacity, you'll need 100 square feet of space that faces south and is mostly unshaded. Panels may be mounted on a flat or sloped roof or in your yard. In addition to the panels, you'll need an inverter -- which converts direct current to alternating current -- a tie-in to the grid and, in many cases, a monitoring system that tells the installer how much power you're producing.
3. Uncle Sam wants to help. Through 2016, you can take advantage of a federal tax credit that lets you write off up to 30 percent of the cost of buying and installing a solar system. You may trim your cost further with incentives, such as rebates or sales- or property-tax exemptions, from your state, municipality or electric utility. (Visit http://www.dsireusa.org/solar to find loan programs and incentives where you live.)
4. Don't buy; rent. Let an installer pay for a system, then you pay the installer for the electricity that your system produces each month. With a solar lease, you'll pay a fixed monthly amount that smoothes out seasonal variations. With a power purchase agreement (PPA), available in 22 states and the District of Columbia, your bill may vary. For example, with a lease you might pay $50 a month year-round; with a PPA, you might pay $20 to $30 a month in winter and $70 to $80 in summer. The installer maintains, repairs and insures the system.
5. You're still on the grid. Unless you live in a remote area, your system is tied into the local utility. If it produces more electricity than you use, the excess is fed into the grid; in 43 states and the District of Columbia, so-called net metering -- using a special meter that runs forward and backward -- will give you credit.
6. Find an installer. The largest multistate installers include SolarCity, Vivint Solar, Verengo, REC Solar and Real Goods Solar. Or you can look for smaller, independent installers on the SEIA Web site (http://www.seia.org). Get at least three comparable bids.
(Patricia Mertz Esswein is an associate editor at Kiplinger's Personal Finance magazine. Send your questions and comments to firstname.lastname@example.org. And for more on this and similar money topics, visit Kiplinger.com.)
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