The big question (Economics of Solar Power) for any homeowner considering installing solar power is a simple one: How quickly will the system pay for itself?
It depends on:
System size: A 4.6 kilowatt system, the average size for a residential solar installation in Maryland, produces 5,557 kWh (projected) annually. Recoded production:
2011 Production: 5,693 kWh
2012 Production: 5,930 kWh
Federal tax credit: The federal government offers a 30% investment tax credit on the cost of the system after rebates. To claim the full credit, your tax bill must be bigger than the credit.
Maryland Energy Administration Grant : This grant is taxable, because grants are counted as gross income on federal returns.
Rebates: Some states, and even cities and utilities, offer rebates that cover part of the purchase price of a solar-energy system installation. Local government rebates, however, have declined recently in response to declining solar-panel prices.
Estimated first-year electricity cost before solar: These included base rates, fees and taxes, and factor in typical regional power loads.
Estimated first-year electricity cost with solar: This is roughly how much you would pay for local electricity after accounting for the value of electricity your system produces.
First-year net cost: This is the balance after adding up the purchase cost minus rebates and tax credits. In some locations, where incentives flow in over years, they are included in the following category.
Cumulative savings over 25 years: This is the cumulative net cash flow from the system. Each month the system generates power, the homeowner gets a cash credit on his or her utility bill, and those credits add up. The purchase cost is also subtracted, less rebates and first-year incentives. Solar-panel manufacturers have dropped prices in recent years, but fewer rebates means homeowners generally don't pay less for the panels.
Payback period: This is a rough measure of the number of years it would take the system in each example to pay for itself. A 4.6 kW systems installed in 2007 in Howard County, Maryland paid for itself in about five years. Howard County provided $ 5,000.00 property tax credit for solar system at that time.