Friday, April 17, 2009

Understand the Cost of Installing Solar Energy System

Solar energy is abundant and it is free. Unfortunately, we need expensive tools to harness this energy. If you plan to install a solar energy system at your home, then it is better if you understand how much it would cost. In this case, there are three things that you should know.

Firstly, the cost will normally depend on the energy that your household needs. If you need a large amount of energy, then you will need more solar panels, which will lead to higher cost. Fortunately, solar energy technology has developed considerably over the years and the cost has become cheaper nowadays.

Secondly, several countries have offered a rebate for their citizens who decide to switch to use alternative forms of energy. This is good news since the government will cover a portion of the total cost of the system.

Thirdly, some governments also provide tax credits when you use the solar energy system. In the United States, the amount of tax rebate is different from state to state, but it ranges from $1,000 to $2,000.

All of these factors affect the overall cost of your system installation. A photovoltaic system normally cost around $8,000 to $10,000 per 1kW. The amount is equal to $8 to $10 per Watt. In general, an average 3-bedroom American household needs energy around 1.5kW to 3kW. Based on this amount, the cost of installation will be around $14,000 to $30,000 before rebates and tax credits.

As mentioned before, the rebate is different from state to state. For this calculation, we use an average California household that needs 1.5kW system. It means that the system can get as much as $4,200 rebate. The number comes from 1.5kW=1500 watts times $2.80 per watt, which translates to $4,200. Based on the calculation, if your household requires 3kW system, you can get rebate as much as $8,400.

In the beginning, tax credit can go as much as 30%, but then it is lowered to 7.5% of system cost after rebate. Therefore, 1.5kW system can get $735 worth of tax credit that comes from $14,000 deducted by $4,200 and then multiplied by 7.5%. With the same calculation, 3kW system will get $1,620 worth of tax credit (($30,000 - $8,400) x 7.5% = $1,620)

Based on the calculation above, cost of solar energy system for 1.5kW household is $14,000 (cost of the system) deducted by $4,200 for rebate and $735 for tax credit or a grant total of $9065. With the same formula, the cost for 3kW system is: $30,000 - $8,400 - $1,960 = $19,980. This calculation is only a rough estimate. They do not represent real figures, but only serve as a basic idea for the cost of installing a solar energy system.

Hot tips

Normally an energy independent home has higher resale value and the home is also highly preferred by home buyers. Therefore, if you plan to sell your home in several years, it is also a good home improvement option besides providing a nice saving on your electrical bill.

It is a good idea to include the cost for solar energy installation into your mortgage. Another thing that you should remember is that if you have low energy requirement, it means that you can lower the installation cost.

Choose your appliances wisely. You can reduce your electricity load by buying appliances with ENERY STAR logo. If you feel that full solar energy system is too expensive, you can opt for a solar hot water system for only around $3,000.

If your area has a high electricity rate, you will get more saving from your solar energy system. On the other hand, the system is also suitable if your home is located far from existing power lines.

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