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Financial Aspects of Solar Panels

It’s difficult to gauge the cost of purchasing and installing solar panels because the exact price will depend on several factors. The type of solar panel system that you buy, the manufacturer, the amount of power that you want to generate, the cost of installation, and amount of rebates and incentives that you can get back from the state and Federal government all will play a role in how much your solar energy system ends up costing.

However there are some general guidelines when it comes to solar energy cost that might give you at least a rough estimate of how much it would cost you to install solar panels in your home. Industry experts say that generally a single, small, mid-grade PV solar pane that will produce about 75 watts of energy cost about $900 installed. From that cost they can estimate that the cost per watt for solar energy is about $12 per watt. One Kilowatt, the average measurement of electrical power, is 1000 watts so one Kilowatt of solar power will cost approximately $12,000.

So what does that mean to the average homeowner? Well, if you run an extremely energy efficient home you can run your home with a two Kilowatt solar energy system. A two Kilowatt solar array would cost approximately $20,000 or about $10 per watt. Most modern homes, especially homes where there is a family, need about 5 Kilowatts of power. With discounts and rebates it’s possible to get a decent 5 Kilowatt solar energy system for about $40,000 installed, which averages out to a cost of $6-$8 per watt.

There are lots of factors that affect the price of a new solar energy system so until you get a custom assessment of your home and the cost of putting solar panes in you home there’s no reason to panic.
You also might not decide to use solar energy for all your energy needs but just some of the energy that you use everyday which will make the price of solar panels much more affordable because you won’t need as many of them.

Don’t forget about the rebates, incentives and grants that you can get from the Federal and state governments for installing clean, green, environmentally friendly solar energy in your home. Since there is a big push in the government right now to help consumers and homeowners embrace more green technology you can significantly reduce the cost of buying and installing a solar energy system using government money.

Grants, Rebates, and Other Financial Incentive Programs
Most of the countries in the world offer incentives or rebates to their citizens to install and use solar energy. Japan was one of the first countries to start this in the early 1970’s, about the same time as the oil embargo. Adding up all the different types of aid that homeowners in Japan get to use solar energy the cost of using solar energy in Japan is discounted by about 70% from the retail cost.

The US hasn’t always offered great incentives to homeowners to use solar energy but that is quickly changing. The list of incentives that are offered changes frequently so make sure that you stay updated on what incentives are still being offered before you buy your solar energy system.

Federal Financial Incentives for Using Solar Energy
Here are some of the programs offered by Federal governments plus some federally sponsored private programs that provide financial incentives for people to install solar energy systems in their buildings. Check with your government offices for more information or additional programs.

Residential Energy Conservation Subsidy Exclusion
This is a tax rebate that allows homeowners that have installed an alternative energy source like solar energy to claim a tax credit on their yearly taxes for the amount of money that they would have spent using traditional grid electricity.

Energy Efficient Mortgage
This Federal loan program allows homeowners to borrow the full cost of installing alternative energy systems to a new home or an already existing home and guarantees the loan. So if you don’t have great credit or you wouldn’t qualify for a loan through another lender you can still apply for the Federal Energy Efficient Mortgage loan and be approved since the government guarantees the loan. The Energy Efficient Mortgage is different than the Energy Star Mortgage.

Energy Star Mortgage
An Energy Star Mortgage is not guaranteed by the Federal government and is a private mortgage processed for the sole purpose of adding new energy efficient systems to a new or pre-existing home. Some Energy Star lenders allow homeowners that have older homes to borrow up to 5% of the home’s value in order to pay for a new energy efficient solar energy system. Other lenders will only loan enough for the exact cost of the solar energy system.
Because Energy Star mortgages are not guaranteed by the Federal government if you don’t have good credit you might not have an easy time getting a loan if you don’t have an existing home you can borrow against. There are about 49 lenders that work with the government to provide Energy Star mortgages specifically to help homeowners absorb the cost of installing solar energy systems so if you don’t have great credit don’t assume you can’t get an Energy Star mortgage, you might just have to go through several lenders until you find one that will work with you.

Residential Energy Efficiency Tax Credit
This Federal tax credit gives you a rebate on 100% of the cost of buying solar hot water heaters or solar heating systems or will give a tax credit of 10% of the cost of all home improvements that you make to increase energy efficiency like installing solar heating in your home.

Residential Solar and Fuel Cell Tax Credit
This tax credit gives you up to $2000 back on the cost of a new solar fuel cell system or solar water heating system. But, in order to be eligible for this tax credit at least half of the power in your home needs to come from solar energy. So if you install a small solar energy system of one or two solar panels so that you can get some of the energy for your home from solar energy but you don’t get 100% of your energy from solar energy you still qualify for this tax credit.

State Financial Incentives to Install Solar Energy Systems
Every state offers different financial incentives and rebates to homeowners that are thinking about installing a solar energy system. Currently California and Nevada offer the most incentives for homeowners to use solar energy although Colorado, Florida, Indiana, and Oregon also offer a large number of incentives and rebates for their homeowners. California has more than 30 different incentive programs but those are mostly centered in particular cities and are given out at the city level, not at the state level.

All 50 states offer some type of financial incentives to use solar energy or green energy although the amounts vary. Most states offer some type of home loan or mortgage that are specifically for solar energy panels or energy upgrades or to install a new solar energy system or a new solar shingle roof in a new home that is just being built.

Of course when you are reading this the situation may have changed so you will need to check the current situation in your area. To find out more about what financial rebates or incentives are available where you live use the Database of State Incentives for Renewables and Energy. DSIRE has been working since 1995 to be an accurate clearinghouse of information about green energy initiatives and financial incentives for every state. They can also tell you who to contact in your state if you have special circumstances or need help. You can visit DSIRE online at and search through the database for financial programs related to solar energy that are available in your state.

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