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Weak economy makes solar panels more affordable to homeowners

Price cuts by manufacturers, tax credits, California incentives and innovative financing ease the cost of going solar.

August 02, 2009|Marla Dickerson

If you're searching for a bright spot in a dismal economic climate, look no farther than your roof. The downturn is helping to make solar panels more affordable.

Manufacturers are cutting prices to move inventory. Uncle Sam is helping too. As part of the economic stimulus package, the federal government this year boosted tax credits to homeowners who switch to solar power. Together with state incentives, those subsidies could slash the cost of some systems in California by 50% or more. Some homeowners are banding together into buying groups for even bigger savings.

If you don't have a lot of extra cash lying around, innovative financing can help you spread your payments out as long as 20 years. Or you can take advantage of leasing deals to get panels on your home for little or no money down.

June was a record month for state rebate applications by California homeowners. Some of them are opting for the steady returns that come from lowering their energy bills rather than betting on volatile stocks or real estate.

So shake off the recession gloom and let the sun shine in. Here's how to go solar without going broke.

The basics

A well-designed solar-power system can reduce your annual electricity expense to zero over the 25- to 30-year life of the panels. Spending $20,000 or more on a system today amounts to pre-paying your power bill for the next three decades.

Is that a smart decision?

If your aim is to help the planet, the answer is a resounding yes.

If you're looking to save money, it depends.

Not all homes are good candidates. Generally, the higher your current electric bill and the sunnier your roof, the more solar makes sense. Still, payback can easily take a decade or more. You'll need to crunch some numbers.

Reputable solar installers will be glad to help you figure the payback period, lifetime savings and rate of return, free of charge. If you want a ballpark estimate without the sales pressure, check out the calculators section on the state's Go Solar California website. A particularly good one is the state's own Clean Power Estimator.

Once you've made the decision to go solar, your final cost will depend on four main factors.

* System size -- Solar modules typically are priced by the DC or direct current watt. A typical-size system in Southern California ranges between 4 kilowatts (4,000 watts) and 5 kilowatts (5,000 watts).

* Panel prices -- They're falling. That's a good thing.

* California rebate -- The state subsidy is declining. That's not such a good thing.

* Federal Investment Tax Credit -- A once-modest incentive just turned into a really big deal this year.

Let's take a closer look at those last three.

A buyer's market

Demand for solar-power systems in much of the world has slowed along with the global economy. Meanwhile, solar-cell factories planned when the market was booming are coming on line. The result: too many panels and too few buyers. To move them, companies are cutting module prices.

In the U.S., wholesale prices for top-quality modules made of crystalline silicon have fallen by 50% over the last year to around $2.40 a watt, according to Nathaniel Bullard, solar analyst with New Energy Finance in Alexandria, Va.

"It's really a precipitous drop," Bullard said. "The mood in the industry is grim."

Panels typically account for less than half of the final "retail" price most consumers pay for solar. Unless you're a do-it-yourselfer, you'll need to hire a professional installer whose add-ons will include labor, permits, taxes and an inverter to convert the direct current electricity generated by the solar array into alternating current suitable for appliances.

Retail prices haven't fallen in lock step with panels, but there's no question that they're coming down fast. Some residential systems that were retailing for $9 a watt to $10 a watt installed before the recession can now be had for about $7.50 a watt. Homeowners who join together to buy in volume are snagging complete systems for a little more than $6 a watt. Big commercial buyers are paying even less.

And that's before factoring in government subsidies.

"Jobs are very competitive, and that's translating into lower prices," said Ron Kenedi, vice president of Sharp Solar Energy Solutions Group, the U.S. solar arm of Sharp Corp. "This is the perfect time to buy solar."

If that sounds like sales hype, here's something to consider: Analysts are predicting further declines in panel prices, so waiting could save you some money.

Or it could end up costing you a bundle.

That's because another major incentive -- the California subsidy -- becomes less valuable the longer you wait.

Great state rebate

The California Solar Initiative provides rebates to owners who install solar panels on existing homes. The 10-year, $3-billion program, which launched in 2007, is funded by the state's utility ratepayers.

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