It will take a perfect storm of converging forces to push solar power into the limelight as a practical source of reliable power. So far, concerns about climate change, diminishing oil reserves and environmental impacts have all contributed to the growing demand for alternative sources of energy. And for consumers, solar is starting to look pretty enticing thanks to government incentives. Find out what you can get for choosing to solar to power your home.

IN PICTURES: Top 10 Green Industries

Why Solar?
Solar power is theoretically limitless, clean and costs nothing to produce. The cost resides in collecting, storing and transmitting the sun's energy. To offset the cost to consumers, the federal government, and many state governments as well, have instituted programs to incentivize the purchase of various solar power systems.

The best part about it is that if you do choose to use solar power, it's not an all-or-nothing choice. Solar can be adapted for specific needs, rather than providing all the power for a home. For example, you can install a system to provide only hot water or heat a swimming pool, while continuing to power the remainder of your home with more conventional energy sources.

Passive solar heating is very effective in areas with lots of sunshine since storage is not an issue. Passive systems use the floors, walls, windows and custom landscaping to absorb and distribute solar energy without the use of any mechanical equipment or devices. (To learn more about solar power, read A Solar-Powered Home: Will It Pay Off? and Spotlight On The Solar Industry.)

American Recovery and Reinvestment Act of 2009
Commonly known as the "stimulus bill", this act extended energy-related tax benefits that were originally included and amended in two prior acts: the Energy Policy Act of 2005 and the Emergency Economic Stabilization Act of 2008.

The advantage of tax credits in this act over tax deductions is that every dollar spent is subtracted directly from the amount of tax owed, dollar for dollar. Itemized deductions allow you to recover only a fraction of what you spend depending on your income tax bracket.

Beyond the tax credits, rebates are available for specific energy-efficient appliances, automobiles and home improvements. Some of the current programs that apply to solar power are summarized below.

1. Residential Renewable Energy
A 30% tax credit is available for solar systems that are installed and operating by the end of 2016. There is no longer a limit on the amount of the credit, and it applies to energy systems for both existing and new homes. These credits are available for both a principal and second residence, but not for rentals. The credit applies to solar electric systems and solar water heating.

2. Home Improvements
A 30% tax credit is available for the purchase and installation of certain products that make homes more energy efficient. The limit is $1,500 per home and is effective through the end of 2010 for an existing principal residence. (For more on saving energy, see Home Energy Savings Add Up.)

While these improvements are not directly tied to solar power, they do increase the ability of the home to retain the heat and cooling generated by solar systems. The following items are eligible for this credit:

  • Metal and asphalt roofs
  • Insulation
  • Windows and doors
  • Ventilation systems

3. Solar and Wind
Going strictly solar for many people is currently an expensive option, making solar a long-term investment. According to, it's estimated that the average home solar system can be installed for about half the retail cost after accounting for tax credits and rebates. For a 2,000 square foot house, a system with an expected lifespan of 20 years would cost about $30,000.

Sunshine is a scarce commodity in many areas during certain times of the year, not to mention its lack of availability at night. In addition, battery technology has not yet reached the point where solar power can be cheaply and efficiently stored in great quantity.

The near-term answer may be a combination of solar and wind power, both of which are eligible for various tax credits and rebates. The rebate payments are in addition to the tax credits and vary by state. Massachusetts, Minnesota, Wyoming, Arkansas, Utah and Vermont are among the states offering sizable rebates for solar thermal, solar photovoltaic and wind energy systems.

In Massachusetts, for example, residents receive $1 per watt of generated energy and an additional $1 if they meet certain income requirements. A 10-cent per watt bonus is paid if the system is made in the state. A one-kilowatt solar system in Utah qualifies you for a rebate of about $2,000.

4. Connecting to the Grid
One advantage of producing your own power is that you may have the opportunity to sell the excess power that you don't need. A net-metering agreement between you and your utility company provides the option for the excess to be purchased by the utility at full retail price.

This power swap is accomplished as the electric meter spins backward when your power is fed into the grid. No additional metering is required as your existing meter can measure electricity flow in both directions.

The Bottom Line
Widespread implementation of solar power depends on reducing the upfront cost and dramatically improving battery technology. When deciding to purchase a solar system, do a thorough analysis of the cost and benefits. You may find that the credits and rebates make such a system a practical investment if you plan to remain in your home for many years. (Before you buy into the hype, learn how the industry works and how to spot the winners. Read Spotlight On The Solar Industry.)

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