Solar Cells Info

By DAMON DARLIN, New York Times,  April 14, 2007
Source: The New York Times
http://www.nytimes.com/2007/04/14/business/14money.html?ref=science

With a $2,000 federal tax credit and generous rebates from states like New Jersey and California, it has never cost less to install a solar power system.  And it still makes no economic sense. You might want photovoltaic solar panels to generate your own electricity out of a belief that you will save the planet. But, as is the case with hybrid vehicles, you certainly should not do it to save money.  An online calculator (www.findsolar.com/index.php?page=rightforme) created by solar power advocates and the Department of Energy demonstrates just how hard it is to justify the switch.

For instance, a homeowner in New Jersey whose electric bill is an above-average $100 a month could buy a system for about $54,000, it says. After the state rebate of $18,468 and the $2,000 federal tax credit, the system would cost $33,532. And how many years will it take before you see any savings? From 11 to 22 years. The average payback is 14 years, said Polly N. Shaw, a senior regulatory analyst with the California Public Utilities Commission.

The calculator provides a lot of other information, but it doesn’t figure in the $1,580 a year your cash outlay would have been making had you left the money in a conservative investment like a government bond. That’s more than enough to cover the monthly electric bill. As electricity costs — or the incentives — go up, the numbers start to make more sense. A person living in the scorching desert of California, where the financial incentives are said to be the most enticing, and paying $250 a month to stay cool would break even in three to eight years.

You can find what rebates governments and utilities are offering at a Web site set up by the North Carolina Solar Center and the Interstate Renewable Energy Council, www.dsireusa.org. “At this stage, you don’t put in photovoltaic panels for economic reasons,” said John Anderson, senior principal at the Rocky Mountain Institute, an energy consultant and research organization in Snowmass, Colo. He said the energy generated by utilities for 10 cents a kilowatt- hour held a distinct advantage over solar power that cost 20 cents to 40 cents a kilowatt-hour.

Ron Kenedi, vice president of the solar energy solutions group at Sharp, a major maker of solar panels, said, “The utility rates — that’s who we compete against.” The other variable, the cost of the solar panels, has not been dropping much. An incentive program two years ago in Germany distorted the market and created worldwide shortages of the silicon-based devices. Demand is still ahead of supply, which means prices have not declined.

Solar power advocates are urging Congress to make the tax credit even sweeter. It is set to expire at the end of the year, but until then your federal income tax can be sliced by a third of the cost of a system, up to $2,000. The lobbyists want the cap removed, as it is for businesses installing solar panels.

(If you made energy improvements in 2006, whether they are expensive solar systems or just insulating the attic, you can claim them on your tax return due Tuesday.)

Until Congress makes any change, the most compelling argument you will hear from advocates and installers is how solar power will increase the value of your home. Many pointed to a 1998 study by ICF Consulting (“Evidence of Rational Market Valuations for Home Energy Efficiency,” www.icfi.com/Markets/Community_Development/doc_files/apj1098.pdf) that concluded that every $1 reduction in annual energy costs would increase a home’s value by $20.73.

“If their reduction in monthly fuel bills exceeds the after-tax mortgage interest paid to finance energy efficiency investments, then they will enjoy positive cash flow for as long as they live in their homes and can also expect to recover their investment in energy efficiency when they sell their homes,” the study’s authors wrote.

The calculator cited above incorporates that theory. It said the New Jersey property would increase $11,000 to $21,000 in value. The California property, with a $22,412 solar system, would be worth $21,000 to $49,000 more. If true, appreciation like that would easily justify the expenditure.

The finest kitchen renovation with a Sub-Zero refrigerator, Italian mosaic backsplash and black slate countertops would never yield that kind of return. But like all the estimates of what a home improvement yields, it is only a guess.