Thinking about reducing your carbon footprint by going solar?


Besides helping the environment, installing solar panels can dramatically reduce your electric bills.


Solar panel installers say the panels can cut monthly electric bills by 50 to 90%. The Department of Energy confirms that a solar electric system can meet "nearly all the needs" of an energy-efficient home.


A two-kilowatt system could cost $16,000 to $20,000 including installation, or $8 to $10 per watt, according to the Department of Energy. Cheaper PV systems are available, but they only slightly cut electricity costs. At the high end, a five-kilowatt system that completely meets the energy needs of many conventional homes can cost $30,000 to $40,000 or $6 to $8 per watt, installed.

What's more, the cost of solar panels has fallen substantially in recent years, due to improving technology and low-cost imports. According to Clean Edge, a renewable energy research firm, solar costs for the panels themselves have dropped from $7.50 per watt to $2.50 since 2000.


In addition, photovoltaic, or PV, panels will protect you from rate increases in the future, which run at 4% or more a year, since the sun will never charge more for its power. That means 10 or 20 years from now the cost of electricity may have doubled, but you'll be getting your power for free or for very little.


Solar panels also increase the value of homes, so homeowners should get their investment back when they sell their homes. A Berkley Lab study of California homes found that homes with photovoltaic panels sold for a premium over homes without the panels.


How much you can save depends on how much sunshine you get, the solar system you install, the cost of electricity in your area, and how much electricity you use, all factors that vary widely.


If your utility has net metering, you'll be credited for excess energy the PV system creates during the day. In effect, your meter will run backwards. That means your electric bill could potentially be zero. In some areas, utilities may pay homeowners for excess energy.


Tax Credit Where Credit Is Due


Homeowners can currently obtain a federal tax credit for 30% of installation costs.

Many states also offer rebates and tax credits. Eligibility criteria, incentives, and installer equipment requirements vary widely. For listings of state, local, utility, and federal incentives, visit the National Database of State Incentives for Renewable Energy (DSIRE). The Department of Energy also has a nifty online tool for finding state incentives for solar energy, as well as other alternative energy source

How Much Can You Save?

After getting quotes from installers and calculating the state and federal tax savings, use your past year's electric bills to estimate your savings.

Divide the installation costs after tax incentives by 25 years to find the system's annual cost, and compare the annual cost to last year's electric bill to estimate your savings. If you borrow money to pay for your solar system, take into account the interest you'll pay, too.