Renewable Energy Corporation explains why going solar is becoming more of an affordable option for Americans.

The advantages of solar power are clear: cheap energy, with no need to burn coal, oil, or wood. Add in the fact that most installations are located on the home or business owner’s property, and freedom from the local power utility becomes part of the list of benefits.

However, one sticking point for many of those who wish to go solar are the initial costs involved. These include the panels themselves, as well as the inverter and the lines to carry the energy generated. Add in a battery reserve for nighttime or cloudy days, and the total costs involved can represent a substantial investment.

Fortunately, a number of strategies exist for reducing these expenses. Prices for the panels and other equipment have been dropping for several years, due to more efficient manufacturing methods. The result is that the benefits of a solar power setup are more affordable than ever. With that in mind, let’s look at the options available.

Leasing

This is especially popular in California, where 47% of residential solar arrays are leased from third parties. The company owns and maintains the equipment, while the property owner pays a set rate to the company. The amount is generally locked in for an extended period, with 20 years being common.

This option might vastly expand the number of persons who are able to enjoy the benefits of solar without a large initial outlay. Some industry observers compare these equipment leases to the early days of satellite television. In its first few years that industry required users to purchase their equipment. It was only after leasing options emerged that satellite TV took off.

Government Incentives

Public entities across the country offer a number of incentives to go solar. One of the best known of these is the Section 48 Investment Tax Credit of the Energy Act of 2005. It provides for a 30% federal tax credit in exchange for installing solar equipment. In addition, many states and local municipalities offer credits, rebates, or other incentives for those who use renewable energy sources.

Looking at the Big Picture

Understanding the cost of going solar means looking at more than the initial costs. Tax incentives and savings from not using the local power utility must be factored in. Here’s how to calculate the amount:

1. Start with the total cost of the installation.

2. Add up how much power, on average, the system will generate on a daily basis.

3. Find out how you’re currently paying the local power utility per kilowatt hour (pWh).

4. Determine the financial benefits you’ll enjoy. To do this, add in the effect of a lower power bill as well as the income you can derive from selling energy to the local utility.

5. Once you have the above information, you can determine the payback period for your solar investment, and thus the return on investment (ROI). To do this, divide the initial investment costs by your yearly benefit. For example, if the upfront fees totaled $20,000 and the yearly benefits total $5,000.00, you would calculate the ROI this way:

$20,000.00/$5,000.00 = 25% ROI per year

When looked at this way, it becomes clear that going solar is a smart move. Given that the costs of panels alone has dropped 80% over the past five years, now it a better time than ever to tap into the free energy that Mother Nature bathes us in every day.

About The Author: Ryan McNeill is the CEO of Renewable Energy Corporation in Timonium, Maryland. Renewable Energy Corporation installs solar panels in Maryland, Northern Virginia and Washington D.C.