Solar Power Is Getting Hotter -- and Cheaper: Should You Switch?

Solar powered homeHere's a question more of us may be asking soon: "Honey, did you remember to pay the solar bill?"

It's not as far-fetched as you might think: Solar power is no longer something only wealthy, eco-conscious homeowners can afford. It's now within reach for most electricity users in the U.S., and it may make financial sense for you to switch.

Rapidly plummeting solar costs have rendered solar not only affordable, it's now less costly than getting power from the grid in some parts of the country.

Here Comes the Sun

To give an example of just how low-cost solar has become, a competitive auction for solar projects in California recently brought winning bids of $0.089/kWhr. Compare that to the average retail price of $0.153/kWhr in the state.

These were larger utility-scale projects, but solar projects are also taking off in homes across America. Installations of solar projects in the U.S. grew more than 100% in 2011, with more than 50,000 residential customers in California, New Jersey, and Arizona taking the plunge into solar.

While the number of new solar customers is still small, the growth is significant -- as more solar is installed, new financing options are opening up and businesses are being created to install the green power systems. And for residential customers, it may now be more cost-effective to install solar panels on your roof than just pulling power from the grid.

How It Works

There are a growing number of ways consumers can go solar. You can pay for a system yourself, which has traditionally been the way to go solar, or you can use leasing programs to install solar.

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SolarCity (the largest residential developer with a presence in 12 states) and SunPower (SPWR) are among the large companies that have leasing programs that will provide solar panels at little to no upfront cost. The lease is paid for through utility bill savings over time, since solar lowers the overall electricity cost for consumers, especially in high-cost states.

Adding to the savings is the fact that the cost of the energy that solar panels produce has been steadily falling. First Solar's (FSLR) costs lead the industry at $0.73 per watt for a thin-film panel, down from $1.40 per watt in 2006. Polysilicon panels made by Chinese manufacturers like Trina Solar (TSL) are more efficient than First Solar's and cost $0.94 per watt, down from $1.57 per watt as recently as 2009.

This means that panels are selling for as little as $1 per watt and installations are going for as little as $4 per watt -- or about $0.15/kWhr with low-cost financing, on par with retail electricity costs. Compare that to nuclear power, which would cost over $6 per watt to build and doesn't come with free fuel.

How Much Could You Save?

The amount of electricity you can produce on your home may surprise you. For the average electricity user, 20 SunPower E20 panels (which are 5'1" x 3'5") installed on the roof would be sufficient to generate enough power for the entire house. That would be about 350 square feet of panels, which could easily fit on a typical rambler. At $0.15 to $0.20 per watt, that's only slightly more than what much of the country is paying for electricity from the grid -- and local incentives can bring those costs down even more.

Many states allow net metering, so you would just feed the electricity you don't use during the day out to the grid at market prices and pull the electricity you need at night. Electricity bill? Gone!

It's Getting Easier to Be Green

With costs falling rapidly and companies with the know-how to install solar popping up across the country, it's never been easier to be green. And you don't have to live in the desert southwest for solar to make sense.

SolarCity just expanded to Connecticut, partly because high utility costs make solar feasible there. New Jersey, better known for spray tans than real tans, is the second-largest solar market despite its small size. Even Minnesota has more solar radiation hit it than Germany, the world's biggest installer of solar power.

Maybe solar is something worth looking into to save a few dollars after all?

Motley Fool contributor Travis Hoium owns shares of SunPower. You can follow Travis on Twitter at @FlushDrawFool. Motley Fool newsletter services have recommended buying shares of First Solar.

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