Solar = Sun+Electricity Prices+Incentives

Ever wonder whether there’s enough sunshine where you live for solarpanels to work? Well, it turns out that sunlight is just one of the main ingredients that make a solar home energy system tick. For example,sunshine is probably not the first thing that comes to mind when youthink about New Jersey. But the Garden State is the country’ssecond-biggest solar market, after California.

New Jersey is America's second-biggest solar power market, after California

How is this possible? If you’re thinkingabout installing solar panels on your home or business, it’s helpful tothink in terms of three broad categories: sunlight, electricity pricesand incentives, like solar rebates and tax credits.

(1) Sunlight. Photovoltaic (PV) solarpanels generate electricity whenever they’re exposed to sunlight. So,unless we’re talking about Alaska during the winter months, chances aregood there’s enough sunshine in your part of the country to power asolar array.

>> See: How Solar Home Energy Works

Of course, all else equal, the more sun, the better. Just take a look at the sunshine numbers for Phoenix, Arizona, courtesy of the National Renewable Energy Lab (NREL) PVWatts Viewer:

Arizona gets tons of annual sunshine

It’s clear that Arizona is blessed with sunshine. In a typical year,Phoenix receives 6.17 kilowatt-hours (kWh) per square meter. Don’t worry about the details. All this means is that Phoenix gets about 30 percent more annual sunlight — or “insolation” — than Atlantic City, whichreceives 4.7 kWh/square meter in an average year.

>> The amount of sunlight hitting yourproperty may be impacted by trees, the angle of your roof and othersite-specific factors. For more info, read: What Makes a Roof Good For Solar?

You may be saying “duh,” at this point — you don’t need a degree inmeteorological science to know that Arizona is sunnier than New Jersey!But bear with me. My aim here is to show that a good amount of accuratedata goes into the solar design and installation process. This meansyou’ll know how much your solar home energy system will produce, yearover year.

(2) Electricity prices.

Notice something besides annual sunlight that’s different betweenPhoenix and Atlantic City? You got it: “ELEC RATE.” Simply put,electricity costs more in New Jersey than it does in Arizona. All else equal, the higher the per-kWh price for electricity, the better.

To take an example, let’s assume Pat and Kelly each buy a solar home energy system. For sake of simplicity, let’s say eachsystem cost $1,000 (in reality, PV systems cost much more than this) and that they both will produce 5,000 kWhs per year. The only thing thatdifferentiates the two solar buyers is that Pat pays five cents per kWh($0.05/kWh), while Kelly pays ten cents per kWh ($0.10/kWh).

Q: Who made the better investment?

A: Kelly.

Let’s take a quick look at the math. Pat’s system produces 5,000 kWhper year, saving $250/year in electricity costs (5,000 kWh/year x$0.05/kWh = $250). Kelly, meanwhile, saves $500/year (5,000 kWh/year x$0.10/kWh = $500). Saving $500 annually, it will take Kelly just twoyears to recoup the initial outlay of $1,000; it’ll take Pat twice aslong to do the same.

Granted, this is a vast oversimplification. But generally speaking,if you’re paying a high rate for your electricity, you stand to benefitfrom installing solar panels.

(3) Incentives.

What do both Arizona and New Jersey have in common? Residents in both states are eligible to participate in a solar incentive program.Arizona homeowners and businesses can receive solar rebate via theirutility, like Arizona Public Service. Owners of solar panels in New Jersey, meanwhile, can sell the solar renewable energy credits (SRECs) associated with their system’s output.

>> GetSolar Map of State Solar Rebates and Incentives

Also, don’t forget that, at the federal level, homeowners are able to take advantage of a solar tax credit worth 30 percent of installedsystem costs. And businesses that install a commercial solar energysystem in 2011 may receive a solar grant, also worth 30 percent ofsystem costs.

As it stands currently, incentives — like solar rebates and taxcredits — matter. Consider the fact that Ontario, Canada — which neither has particularly high electricity prices nor receives exceptionalamounts of sunlight – is one of the fastest-growing solar energy markets in North America.

To sum up: if you live in an absurdly sunny place, with sky-highelectricity rates and TONS of solar rebates and tax credits, youshouldn’t even think twice about installing solar panels. These kinds of places are admittedly few and far between. Instead, we find most people who are interested in solar power face a somewhat unique mix of sun,electricity costs and incentives. The best way to see what mix is inyour area is to get a free solar quote

3 Things That Make Solar Power Tick: Sun, Electricity Prices and Incentives

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