Installing solar panels is a top way to make a home more energy efficient and environmentally friendly, but setup and up-front costs can make the move unaffordable to many homeowners.
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To make the change less cost prohibitive, states and companies are increasingly offering new financing arrangements.
According to the Solar Energy Industries Association, the U.S. residential solar market grew nearly 62% last year and isn’t expected to slow in 2013. The face of the solar panel owner has evolved: it’s no longer just early adopters or super-conscious environmentalists. Young homeowners and families are looking to install panel to help combat high energy prices.
“The price of energy continues to go up every year and is a big part of monthly budgets,” says Joe Bono, chief executive of home solar panel installer Solar Universe. “It’s crossing the pain threshold and a solar system is an easy way to go.”
He says homeowners can typically save 10% to 20% of their electric bill using solar power, although the exact savings will depend on how much electricity is consumed, the efficiency of the panels and current electricity costs.
In the past, homeowners would have to front the entire cost and buy the solar panels and then rely on government tax credits and state incentives to help make the price tag more palatable. But the cost of solar panels has fallen sharply since the end of 2010, making them more affordable.
According to Rhone Resch, the president and chief executive of the Solar Energy Industries Association, the prices of solar panels decreased 60% last year. “We’ve been on a cost decline over the last four or five years”
New lease agreements that are available in some states have also increased the demand for solar panels. Under these deals, a homeowner doesn’t have to pay any money upfront and essentially leases the equipment for 20 years. The homeowner isn’t on tap for the costs of any repairs and maintenance of the panels, but is locked into a long term agreement.
A 20-year agreement is a long time, but an owner can lock in their monthly rate to eliminate any price hikes that are common with utility companies.
According to Resch the typical escalation rate on solar energy is 1% per year compared to the 5% to 7% increase electric companies pass on to customers each year.
At Solar Universe, Bono says about 90% of its customers are using some form of leasing or financing to help pay for the solar panels. Some customers use home equity loans or a traditional loan to cover costs, but he says the bulk of customers are opting for the leasing model. “You don’t have to change your lifestyle. You put this on the roof and your electric bill is cut. It’s a real sense of empowerment,” says Bono.
Solar panels can be erected on pretty much every roof across the country, according to Resch, but they will be more efficient on roofs that face the south or south east and ones that don’t have any obstructions that would prevent the sunlight from reaching the panels. “If there’s a lot of shading it’s not going to work,” says Resch. “But if you can grow tomatoes in your backyard you can put solar panels on your roof.”
Currently only 12 states allow homeowners to enter into lease agreements for solar energy but the industry is lobbying hard to change that. If you live in a state that doesn’t allow leasing you can take advantage of federal and state credits that will lower the upfront cost. Under the federal tax credit solar systems that are installed from Jan. 1 2009 to Dec. 31 2016 can get a tax credit of 30% of the cost. State incentives will further reduce the cost of the system. “The U.S. has some of the best solar resources than any developed country,” says Resch. “There’s 60% more sunlight than what Germany receives each year and Germany is the largest market for solar energy in the world.”