Solar Power Incentives: Rising Energy Costs vs Solar Power

There are many solar power incentives, and none greater than the cold, hard fact that energy rates are always on the rise. But what happens if they were to reach, say, 12% annually? That is higher than the national average, but definitely somewhere in our future with the current state of world-wide political and economic problems in oil-producing nations. In the case of someone who has a solar power system in place, the faster rates go up, the quicker you break even! In a typical situation, a common residential water heater solar system in the U.S. can expect to pay for itself in 52 months. Solar power incentives in the form of 12 % annual increases in electric bills would shave off almost a complete year, paying us back in 44 months.

And one of the most important of all solar power incentives is the wonderful fact that the amount of power needed to heat an amount of water doesn't change. We could get into BTUs and boiling point and volume, but basically, the amount of energy needed to heat any amount of the water was the same a thousand years ago, and will be the same in a thousand years. The rate we are charged for that energy is all that changes, and as it goes up, we save more.

Some solar power incentives that you maybe didn't take into account tend more to the comfort side. Now you can take showers as long as you like, spend all the hot water you want for that bubble bath, there is no need to skimp since your heating cost is zero.

But before you try and calculate your solar power incentives in the form of monthly savings, and rush off to build a huge PV system, take this into account. Your rate structure will dictate what size and type of system you will build. In a “tiered rate” billing system, the highest rate you pay can be 3 to 4 times the regular rate. Since solar power systems cancel out the higher rates first, you have powerful solar power incentives in the form of lees time before you break even, sometimes half as long as the above example.

Because a solar water heater can offset 14% of a typical household's energy use, but may comprise as much as 35% or more of the total tiered rate bill, you can save some serious money. But make sure you keep your investment as small as possible in a tiered rate structure. The more money you spend, the lower the savings rate, because you begin to pay off the lower power rates with the larger system.

“Time of Use” (TOU) rate schedules are different from Tiered Rate systems, and make figuring solar power incentives difficult. You are simply billed by the rate at the time of day you consume it. Obviously, during peak hours (from 12 noon to 6pm) when most people are up and moving around, the draw on your local utility is greater, and rates go up. The rate then can be 3 times that of off-peak hours. Off-peak hours are late nights, weekends and holidays. If you are in a TOU area, you can combat this by using more utilities in the off-peak times, and conserving during peak-hours.

So figuring solar power incentives is based on when you use what energy amounts. Now you must figure what part of your bill is consumed from noon to 6 pm. Get an itemized bill that shows hourly consumption, and you can figure your costs during peak and off-peak hours.

Things like refrigerators need to be plugged in 24/7, so there is no way to save there. But by showering in the early morning or later in the evening, using sunlight instead of electric lights during peak hours and using natural breezes instead of AC between noon and 6 pm, you can instantly accentuate your solar power incentives with good old economical maneuvering.

But since PV systems make the most energy during peak hours, they are excellent investments for families with TOU structures. If you cut back on your drag during peak-time, and your PV system is cranking at the same time, your return on investment goes through the roof.

And as far as solar power incentives go, how about the bottom dollar addition to your home's value that even a small PV system offers? In a typical $2,800 residential system, using national averages, savings of about $48 per month can be realized from a solar water heater. This $600 a year savings feature will raise the value of your home. But let's suppose a seller wants to sell their house 5 years after installing the solar heater system.

That $48 a month can now be spent elsewhere. You could get a larger mortgage, and in the mortgage game, every dollar now is multiplied in value later. For example, you can figure 125% appreciation for new equipment. This would mean $3,500 ($2,800 cost x 125%). After the water heater system pays itself off after 44 months, you get nothing but pure profit and free energy. And when she sells, she has enjoyed 16 months of free energy output from her system, and still enjoys the $3,500 increase in property value.

One of the best solar power incentives involves rate ratios. When your solar system is returning more on energy savings than you are paying to purchase the system, it pays for itself every month. When you get your solar power system financed with a home equity loan, there is no upfront cost, and your system begins to pay itself off from day 1!

To illustrate, let's say you borrow $1,400 to help buy a solar water heater that shows a scenario of $27 a month in savings. A 6% interest only loan for $1,400 is $8 per month. That is a first month savings of $18! And as energy rates go up, you make more money. Now that is truly one of the stronger solar power incentives available. Take that $19 per month and divide into your loan of $1,400, and you see that you get full “pay back” on your loan in 74 months, and if your interest is tax deductible, that can drop to 40 months, depending on your tax rate.

And here is one final word about solar power incentives. If your water heater breaks, explodes or crashes, you have to replace it, there is no denying that. You are going to spend some money, so why not the move to solar now? If a normal water heater costs you $1,400, and a solar setup is $3,000, your actual outlay is $1,600. But if you replace a perfectly fine, functioning water heater with the solar variety, your cost is the full $3,000. Lesson? When you have a water heater that stops working, make the move to solar, and enjoy one of the most profitable solar power incentives available.

And none of the examples above take into account tax rebates, tax deductions, local incentives and state rebates. Did you know that some states offer as much as 50% of the cost of your PV system back in rebate form? Check out the Database of State Incentives for Renewable Energy at for information on tax rebates and other incentives. They have a wealth of information. Also, ask local contractors about city-based paybacks and rebates. As you can see above, these financial benefits are not necessary for a system to make sense, but why turn down solar power incentives that have the possibility of paying for a big chunk of your PV system?

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