Harness the sun to Control Your Fuel Costs

Physician's Money Digest, December 2005, Volume 12, Issue 16

In an era of rising energy costs, Dr. James Chenitz,section chief of orofacial pain at Monmouth MedicalCenter in Long Branch, NJ, and director of temporomandibulardisorders and orofacial pain at Newark Beth IsraelMedical Center, is now saving about $100 a month on hishome electric bill. How did he do it? By installing solar panelson the roof of his newly renovated house in Rumson, NJ.

Dr. Chenitz is one of an increasing number of peoplewho are harnessing the power of the sun by convertingtheir home to solar energy. Thought once to be too cost-prohibitiveto install, solar electric systems, also known asphotovoltaic (PV) systems, are becoming a popular choicedue to financial rebates and state and federal tax incentives,such as NJ's Clean Energy Program. "Through ourrebate program, residential and commercial users arealready saving more than 60% off the upfront cost ofinstalling a solar electric system,"says Jeanne M. Fox,president of the NJ Board of Public Utilities, which runsthe program.

For Dr. Chenitz, this meant the state kicked in $43,890for his $62,700 system. Despite the $18,810 he paid out ofpocket, he expects an estimated 16-year payback period forthe 7980-W system installed this past July. But due to anotherNew Jersey incentive called the Solar Renewable EnergyCertificate (SREC) Program, Dr. Chenitz may see the pay-back time cut in half—potentially leadingto "free"electric at some point overthe life of the solar panels.

Buy and Sell Green

SRECs, New Jersey's answer togreen tags, are certificates that representthe clean energy benefits of electricitygenerated from a solar electric system.Once a home solar facility has generated1000 kWh (1 MWh) measures of green energy,the user can "sell"the green tag to electricsuppliers, who use SRECs to meet the state'sRenewable Portfolio Standards. This mandaterequires companies to obtain a minimumof 0.01% of the electricity they sell in 2005from New Jerey solar energy systems. Dr.Chenitz's system is expected to generate nineSRECs worth $160 each, or $1440 annually."Counting this savings, I expect to cut the paybackin half the time,"Dr. Chenitz says. "With the$100 per month in savings plus the green tags, I'llpay the system off in a little less than 9 to 10 years.A financial advisor may not find great merit in this.However, time will tell."

Gaurav Naik of GeoGenix (www.geogenix.com)in Rumson, NJ, which installed Dr. Chenitz's system,feels the investment will pay off—and in amajor way. "The average homeowner is looking ata 7-year payback period,"Naik says, contrasted bya 30-to 40-year panel lifespan.

DSIRE for Clean Energy

Buying "green"for most consumers has typicallymeant paying more money at the onset to saveresources over time—so New Jersey's program representsa refreshing change. "In New Jersey, now it's aneconomic decision. Residents can actually save moneyover the life of the system,"says Sue Gouchoe, managerof the nationally recognized Database of StateIncentives for Renewable Energy (DSIRE).

Established in 1995, DSIRE is an ongoing projectof the Interstate Renewable Energy Council(IREC), which is funded bythe US Department of Energyand managed by theNorth Carolina Solar Center.In addition to a glossary,its Web site (www.dsireusa.org) contains a comprehensivelisting of incentiveswith descriptive summariesand contact informationbroken down bystate. Information isupdated each weekwith additional newprograms and changesto existing programs.On average, approximately60 programsare verified or updatedeach month.

Unfortunately, New Jersey's advantageousmix of incentives is not indicativeof many other states. "Clearly,New Jersey is a leader,"Gouchoe says.In states that do offer financial incentives,solar electric system ownerswill generally break even over thelife of the system. "Even then, thefinancial incentives really do vary,"Gouchoe says.

Besides New Jersey, 17 states plus theDistrict of Columbia offer direct incentivesfor solar electric: California, Connecticut,Delaware, Maine, Maryland, Minnesota,Montana, Nevada, New York, Ohio, Oregon,Massachusetts, Rhode Island, Vermont, Washington,Wisconsin, and Wyoming. Twelveadditional states offer tax credits for residentialsolar electric systems, including Arizona,California, Hawaii, Iowa, Massachusetts, Montana,New York, North Carolina, North Dakota,Oregon, Rhode Island, and Utah.

In fact, of the states with incentives for solarelectric, seven of the programs were instituted asrecently as 2004 and 2005. New Jersey's program,which began in 2001, really kicked into high gearjust this year. In 2004, the state had a total of 282solar panel installations, but by fall of2005, there were 368 new installationsalone. "The program isbecoming extremely popular,"Naik says."It changed dramaticallyin 2005.There's a lot of talkabout energy costs,and people are gettinginformed that they havea variety of options."

Financial Motivations

As of August, the EnergyPolicy Act of 2005 established a30% federal tax credit, up to$2000, for the purchase and installationof residential solar electricand solar water heating, effectiveJanuary 1, 2006. Net-metering isanother incentive that can make a financialdifference. The electric meter spins forwardwhen electricity flows from the utility into a homeand backward when power flows from the home tothe utility grid. The electric utility credits solarusers with any excess energy produced by theirhome systems. This offsets electricity that wouldhave been purchased at the retail rate, such as atnight, when panels do not generate power. "If consumersare in a state without net-metering, it is adisadvantage,"Gouchoe says.

Practical Packaging

Regardless of all the different forms of incentives,"It's the package that matters,"Gouchoesays. For instance, while some states offer rebatesfor the purchase of a solar electric system,others offer "production-based"incentives. Such incentives provide solarelectric owners with cash paymentsbased on their home's electricity production.Washington was the first state toenact purely "production-based"incentivesthis past May, and individualscan now earn $0.15 per kWh (capped at$2000 per year).

For Dr. Chenitz, his motivating factor in choosingsolar power was a commitment to the environment.He has been recycling for over 30 years—well before it was fashionable, easy, or required—and he drives a hybrid. In fact, he likens his investmentin a solar electric system to his purchase of ahybrid, which was also bought out of environmentalconcern. When gas prices spiked after HurricaneKatrina, "I suddenly thought I was amazinglysmart,"he jokes.

Dr. Chenitz also feels it is important to practicewhat he preaches where his children are concerned,and thus isn't concerned with realizing any greatfinancial savings due to his solar investment. "This isgoing to have to work exceedingly well to produce apositive cash flow,"Dr. Chenitz says. "If I breakeven, then I'm happy with what I've done. Certainly,there is much more to going solar than just themoney. The more people who participate, the betteroff this planet will be."