Many people who are contemplating installing solar electric systems on their homes struggle with the high initial costs. To pay for a system, they either have to dip into their savings or take out a loan. A 3- to 5-kW grid-connected solar system, suitable for most homes, can run $30,000 to $50,000.
Even with recent legislation that provides a 30 percent tax credit for solar and wind systems for homes and businesses, the cost of such as system will still cost $21,000 to $30,000, which is a substantial piece of change.
Isn’t there some way to reduce this cost?
There is. It's called efficiency.
Richard Perez, founder of Home Power magazine, ran the numbers. He found that every dollar invested in energy efficiency could reduce the cost of a photovoltaic (PV) system by $3 to $5.
By reducing the size of a system one must install to meet his or her needs. The economic savings from efficiency are quite substantial. For instance, a $2,000 investment in home energy efficiency — for example, weatherization, insulation and energy-efficient compact fluorescent or LED light bulbs — will reduce the demand for electricity. This, in turn, will reduce the size of the PV system required to meet one’s needs. It could easily save $6,000 to $10,000 on the cost of the system of a 3- to 5-kW PV system before tax incentives. Taking into account the 30% federal tax credit, the savings would be $4,200 to $7,000.
Spend a little more on efficiency and the cost of the system drops even more. If you invested $4,000 in efficiency, the total system cost would decline by $12,000 to $20,000. Taking into account the federal tax credits once again and the decrease in initial cost would be $8,400 to $14,000.
That’s not a bad return on an investment in efficiency.
Instead of spending $21,000 to $30,000 for a system, you’d pay $12,600 to $16,000.
So, if you're thinking about installing a PV system, think efficiency first. It’s a gift you give yourself and the planet. It will reduce energy demand, reduce pollution, and reduce the cost of a system substantially. Moreover, the savings will provide dividends for the life of the house.
Contributing editor Dan Chiras is a renewable energy and green homes expert who has spent a lifetime learning life’s lessons, which he shares in his popular blog, Dan Chiras on Loving Life. He’s the founder and director of The Evergreen Institute and president of Sustainable Systems Design. Contact him by visiting his website or finding him on Google+.