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Go green, a smart home improvement
New tax credits and rebates are making solar-powered conversions as smart as redoing your kitchen.
By Michael Copeland, Business 2.0 senior writer
October 31 2006: 6:52 AM EST


(Business 2.0 Magazine) -- Considering a remodeling project to boost the value of your home? Before you drop $40,000 or more on a new kitchen or master bath, consider the newcomer on the renovation block: a rooftop solar-power system that not only will lower your overhead costs and insulate you from a volatile energy market but will likely add just as much to your home value over the long haul.

The technology has come a long way in the past 30 years. And what's starting to be good for contractors is looking sweet for homeowners too. For starters, today's solar systems are far more efficient than their commercial predecessors, and most are warranted to last 25 years.


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WHY SOLAR MAKES SENSE
Major Kitchen Remodel Solar Energy System
Average cost $43,8621 $45,0002
Home value increase $39,920 $22,500
Rebates and tax credits3 - $15,000
Utility savings (5 years) - $9,950
PAYOFF -$3,942 $2,450


Source: Borrego Solar; Realtor Magazine
[1] National average. [2] Average cost for 2,000-square-foot house. [3] For California. Incentives vary by state; see www.dsireusa.org for a database of solar tax incentives.

More important, the federal government and some states are offering serious incentives that can slash the price of installation (typically over $40,000 gross for a full system) in half. In California and New Jersey - the first states to allow so-called net metering, whereby homeowners are credited for electricity they generate beyond their own use - going solar can pay for itself in several years.

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Home systems are still rare, so their value is difficult to assess, but home appraisers follow this general rule of thumb: Half the gross cost can be recouped in the home sales price as soon as it is installed. True, that's well below the recovery rates for kitchens and bathrooms (which range from 70 to 90 percent), but your kitchen doesn't pay the power bills.

And solar's ability to lower energy costs also adds value. A study in Appraisal Journal found that for every utility-bill dollar saved annually because of an improvement, you gain $10 to $20 in property value. So if you can zero out a $1,000 annual electric tab by installing solar, you'll get back $10,000 to $20,000 in home value.

Whether it pencils out for you depends foremost on where you live. California and New Jersey lead the nation in offering financial incentives, but states like Arizona, Colorado, Nevada and New York are ramping up fast.

Another determinant is your typical electric bill. "If it's under $100 a month, people just put in solar because they want to be part of the solution," says Mike Hall, VP at Borrego Solar in Berkeley. "When you get to $100 to $150 a month, the financial arguments start to take hold. Anything north of $200 a month is a no-brainer."