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Solar panels, also known as photovoltaic (PV) panels, convert the sun’s light energy into power for your home and/or business. You’ve most likely heard about many of the advantages of solar panels (lower energy costs, environmentally friendly, etc.), but you might not know if they’re right for you. Here are some of the basics to consider:

Calculate the Cost
You can calculate the cost of installation of solar panels based on the size of your home and your energy needs. The average American home consumes electricity at the rate of 1kW per day. Monthly, that works out to be about 730 kW. At $.10 a kW, the average electric bill is $73/month. However, in larger cities, the average can be three times this amount. Air-conditioning and the use of large, non-standard items like hot tubs and deep freezers will run your bill up even more.

You need about 100 square feet of solar panels per 1 kW of electricity. So, theoretically, 100 square feet of solar panels would run your entire home if you were average. However, the sun would also have to shine 24 hours a day! Realistically, most home require 400 to 800 square feet of paneling, even in a very sunny city like Denver or Phoenix.

How Much Does Installation Cost?
For a complete installation on an average home, you can expect to pay between $35,000 and $80,000. This cost is based on an estimate of $7 to $9 per watt of power generated. Many utility companies do offer incentives, though and will subsidize up to 50% of the cost. Even with this credit, though, a solar panel system would still take many years to pay for itself, but you would be diminishing your carbon footprint to nearly zero. In some areas, companies will buy back your excess energy to use for their own purposes, so you can even make money using solar panels.

Federal and State Tax Incentives
There are many federal and state tax incentives for homeowners and commercial builders who install solar panels. In October of 2008, the U.S. House of Representatives passed historic legislation that extended the 30% federal investment tax credit on solar installations for eight years. The solar ITC will be in effect until 2016, and it is applied for both residential and commercial installations. In addition, it also:

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  • Essentially eliminates the $2,000 monetary cap on residential solar installations
  • Creates a true 30% tax credit
  • Eliminates the prohibition on utilities from benefiting from the credit
  • Authorizes $800 million for clean energy bonds at the state level

While solar panels are very expensive, federal and local efforts to make them more affordable are increasing in availability so that the average homeowner can install these panels with about half the budget. The key to saving the most money is to tap into all available programs and consider do-it-yourself installation to save on costs across the board.

Related Stories:

• Home Solar Power: Cost v. Savings
• Daily Deduction: Energy Tax Credits
• Your Guide to Buying Energy Efficient Windows

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