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Northshore Conifer
Psst...Here's a Hot Tip: Invest in Solar Energy
By: Rhonda Landry
Need a hot tip to make a lot of green? With a volatile stock market and extremely low rates on investments like CDs, you may be wondering where you can make a decent return on your investment these days. What if you could realize a 12-15 percent return on investment while simultaneously increasing the value of your home; reducing dependence on oil; and using a clean, renewable energy source? Sounds too good to be true, right?
As it turns out, it is true. Investing in solar energy for your home is one of the best ways to go green in every sense of the word. "If you compare it to the stock market or CDs, it's a better investment, plus it increases the value of your home and generates money day after day for the next 25 years or longer," said Robert Snuggs, JR., Chief Operating Officer for South Coast Solar in New Orleans.
In years past, the cost of installing a solar energy system for your home was daunting. But the Louisiana legislature has promoted the adoption of solar energy in a big way and now has some of the best tax credits in the country. The federal government also wants as many people to convert to solar as soon as possible, with the stated goal of having one million solar roofs by the end of 2010 in order to case the stress on electrical grids across the nation.
"We are very blessed that our state has chosen to do this. There is no way we could afford to do this without the rebates, but when you apply those it becomes a no-brainer," said homeowner Mike Schrantz, who recently installed a solar energy system for his 4800 square foot home near Bush, LA. "Last month my electricity bill was $9 and I'm hoping to have a credit this month," he added. What is a Solar Energy System?
A solar energy system converts sunshine into usable energy in one of two ways. Photovoltaic (PV) systems use an array of silicon cells to generate direct current electricity. This current then goes to an inverter which converts it into household AC. It's the same technology found on pocket calculators, just on a larger scale. PV systems can be designed to generate the majority of electricity used in your home, or just a portion of it. Every home and situation is unique. Before spending money on a solar energy system, you should make sure your house is an air-tight and energy-efficient as possible. You may also be limited by available roof space or shading.
Stand-alone PV systems are completely independent of the power company, require extensive battery backup systems, and are more complex and expensive to install. Most people opt for a grid-connected PV system and most states, Louisiana included, allow for net metering. If you generate more electricity than you use, the excess goes back to the utility company, spinning your meter backward and giving you a credit for the electricity you system generated. Net metering can effectively eliminate your utility bill for the life of the system. The disadvantage for this type of system is that when the power grid is down during an outage, you system also shuts down.
ADVANTAGES OF SOLAR
The advantages of solar PV systems are many. The power source is free, the production of solar energy is non-polluting, and most PV panels require no maintenance during their lifespan, which can be 30-40 years. According to Snuggs, one of the biggest advantages of installing a PV system is that you're locking in prices at today's value. "The cost of electricity will only go up, but you can stabilize your cost at less than half what you're paying now," said Tommy Livaudais, CEO of Solar Power Today in Covington.
Indeed, utility company increases have averaged between four and seven percent per year. Livaudais said the typical solar energy system saves the homeowner $1,000 per year at today's costs and as energy prices continue to increase, that savings will be even more. "The bottom line is that you can effectively lock in an energy cost of $0.05/kWh for the life of the system, which is 25 years or more," he added.
Switching to solar power can also increase your home's value. A study published by the Appraisal Institute estimates that for every utility-bill dollar saved due to an energy improvement, you gain $20 in property value. So, a solar system that saves $1,000 per year in utility costs can increase your home's value by $20,000. And today, home buyers are more aware than ever of reduced operating costs and carbon footprints. The U.S. Department of Energy recently found that even in soft housing markets, a home with solar will sell in half the time as one without. The best part is that the extra value a solar energy system gives your home is not taxable. "The added property value cannot be added on to the assessed value of your home - it is non-taxable by state law," said Snuggs.
HOME MUCH DOES IT COST?
Again, every home and situation is different. As an example, a "typical" system for an average 2,000 square foot energy-efficient home designed to generate 100 percent of the home's electrical needs could cost $40,000. After state and federal tax rebates and incentives, there could be an out-of-pocket expense of $8,000.
"For an investment that's less than a used car. The average consumer can save a substantial amount on utility costs for 25-40 years," said Livaudais. Taking into account rebates, increased property value, and utility savings, the average amount of time to break even is 6-7 years and the return on investment is 12-15 percent! "Try getting that at the bank," he said.
TAX CREDITS
The federal tax credit has been extended through 2016 and offers both residential and commercial taxpayers a 30 percent credit with no cap. The federal tax credit is not refundable and only goes toward the amount of tax you owe, but can be carried over each year until 2016.
The state credit applies to residential taxpayers only and offers a refund of 50 percent with a cap of $25,000 per system. You can put multiple systems on one home, until 100 percent of your energy comes from solar, and still receive the state tax credit on each system. "The best part about the state credit is that even if you don't owe the state any money, they will cut you a check," said Snuggs.
When you combine the state tax rebate with the federal program, 80 percent of the cost is covered, making solar an affordable and sensible investment for homeowners. "I would encourage you to run the numbers and see if you can get the payout only paying 20 percent on the dollar," said Schrantz.
CREATIVE OPTIONS If that 20 percent cash outlay is still a problem, most solar companies are offering creative financing programs. Snuggs said South Coast Solar has also been very active in lobbying for state legislation that would provide tax credits and leasing programs for commercial property owners in addition to the existing 30 percent federal tax credit. Free programs like One Block Off the Grid help to educate consumers, find and vet installers, and provide group purchasing to save an average of 15 percent off the cost of purchasing individually.
Louisiana has also passed legislation allowing creation of Property Assessed Clean Energy (PACE) Financing. This program allows municipalities across Louisiana to set up their own sustainable energy financing districts which will provide loans to residential and commercial property owners making energy-efficient upgrades and retrofits. The loans are then paid back over 20 years through the property tax bill, eliminating up-front costs. New Orleans is one of the first areas taking advantage of this program.
LESS EXPENSIVE OPTIONS
If you're not ready to install a whole-house PV system, you can take advantage of some less expensive solar options. Solar water heaters use the second method of thermal energy to heat your home's water supply and offer of the fastest paybacks of any solar system you can install.
"An electric water heater accounts for 15-20 percent of your energy consumption and a solar thermal system can eliminate 85 percent of that cost," said Snuggs. According to Livaudais, the price tag of a solar thermal hot water heater is around $8,000, but after rebates "costs about the same as changing out a standard water heater." After a 2-3 year payback period, you'll be heating your water virtually free.
Another low-cost option is the solar attic fan. "A solar attic fan costs less to install at the end of the day than a quality ventilator from a big box store," said Livaudais. With an average after rebate cost of $150 and a payback period of as little as one year, a solar attic fan can save the typical $100 per year cost to run an electric attic fan and will reduce attic temperatures by 50 degrees, reducing the load on you A/C unit 20-30 percent.
"The more the consumer knows, the more they will want a solar energy system. If you're looking for long-term savings with little up-front costs, there's not a better place to invest. It's the right thing to do," said Livaudais.
