Early last year Solange and Michael Whitehead made the decision to put solar panels on the roof of their Phoenix-area home. The couple, who have three children, say the move has cut their peak electric bills in the summer from around $400 a month to $210 a month.

“We’d do it even if we weren’t saving money,” says 49-year-old Solange, who ran an environmental nonprofit before becoming a real estate agent. “For us, it’s mostly about helping the environment.”

As the fallout from nuclear disaster in Japan continues and oil prices remain stuck in the triple digits, the appeal of an energy source that’s reliable, doesn’t leak poison and isn’t whipsawed by day traders becomes more apparent. But with changing financial incentives and a growing number of options, deciding whether or not to “go solar” also involves some serious number crunching.
A few years ago, it was standard to spend $40,000 or more to buy a residential solar system. While buying is still Solar signatureexpensive, Federal and state tax incentives, along with utility rebates, bring prices down considerably. And now, buying a system outright is no longer necessary.

An increasingly popular choice is to lease the panels and related equipment from a solar installation firm, as the Whiteheads do. You can go “a la carte” with mini-panels just for heating water. Or, if you don’t want panels or are a renter, a growing number of utilities let you draw some of your electricity from renewable resources such as solar or wind for a modest monthly surcharge.

The bad news is that with more and more customers moving to solar, many utilities have lowered incentive rebates over the last year to avoid running out of money for the programs. That affects both buyers and leasing companies, who pass their higher costs along to their customers. Other, less obvious costs might include removing the panels for a roof repair or clearing trees to provide unobstructed sunlight.

There is also the issue of how solar panels might affect a home’s value. Whitehead says that many of her clients “would be happy to buy a house with solar because it lowers their electrical costs.” But she also admits that a neighbor has complained about the appearance of her panels, even though they are in the back of her home and difficult to see from the street.

To see if solar makes financial sense for my house, I first check the website for Arizona Power Service, the electric company that services my area. A calculator estimates that a system that would supply half of my annual usage costs $35,440. But that number is reduced by a 30% federal tax credit of $10,630, an APS rebate of $10,310 and a state tax credit of $1,000. Total incentives of $21,940 would drop the cost to $13,500 and produce annual savings of $1,190 a year, and it would take 11.4 years for the system to pay for itself.

Even after rebates and tax credits, the initial outlay is too high for my budget, and I’m not sure if I’m going to be in my house another 11 years anyway. So I decide to check out a leasing option by contacting SolarCity, the installer the Whiteheads used.

The solar energy consultant who comes to my house explains that there is no cost to install the panels and, because it’s a lease, the firm will handle any repairs, insurance and maintenance. It’s a 20-year lease, so if I sell the house before then the new homeowner would be responsible for the remaining term.

He reviews several different financing scenarios. If I put no money down, my average monthly bill will drop from $213 to $175, with my panels generating 60% of my home’s electricity. If I can come up with an initial payment of $7,825 my average monthly payments will drop to $100. After taking into account future utility rate increases the payback period, or the time it takes for savings to at least equal the initial payment, would be roughly six years for the latter option.
It sounds like a pretty good deal, and I’ll save money in the long run, but I still have some reservations about making such a long-term commitment. And because my home’s southern exposure is in the front the panels would have to face the street. I know at least one or two neighbors will have a hard time with that.

On the other hand, my monthly electric bill, along with my home’s carbon footprint, will drop. Over the next 20 years, my solar panels would save the carbon dioxide equivalent of driving a car 724,601 miles.

Lastly, I check out my utility’s green rate option. For an extra $5 to $7 a month, I can get half my electricity from a renewable resource. If I don’t like the option for some reason, I can drop it in a year. While it pains me to pay extra for something the utility should be doing anyway, and I won’t save money as I would with a lease, it could be a fairly commitment-free solution for the time being.