Solar Power Hits Home

As utility bills go up, new solar-panel financing is helping homeowners mortgage the sun

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Robert Nickelsberg / Getty

Solar panels are also getting better-looking, like these in San Ramon, Calif.

There were limits to how green Bruce Letvin was willing to go. For years, the 53-year-old anatomy professor had wanted to install solar panels on his Manhattan Beach, Calif., home. But the up-front installation costs always outweighed the benefits for the environment and his conscience. This spring, however, he managed to work out green financing with the help of solar company SunPower. After determining that his electricity bills and roof exposure were large enough to make him a good candidate for its solar panels, the company, based in San Jose, Calif., helped him find a 15-year loan for the $64,500 system. Yes, his $550 loan payment is more than the $300 or so he used to spend each month on electricity bills--so far, he has generated enough solar power that he doesn't need to take any juice from the grid--but after he pays off the loan, his power will be free. And this year, he'll get a $16,000 rebate in the form of federal and state tax incentives for solar. "I really wouldn't have been able to do this without the financing," he says. "But with [the loan], it's a no-brainer."

That stiff up-front cost has always been the biggest barrier to residential use of solar power. An average set of rooftop panels costs $20,000 to $30,000 and takes 10 to 15 years to produce enough electricity to pay for itself--a deal not unlike asking a new cell-phone owner to pay in advance for a decade's worth of minutes. But that equation will change as the cost of solar panels drops and the price of fossil-fuel-generated electricity rises. (Letvin's utility provider just put in for a 30% rate increase for the heaviest power users.) Photovoltaic solar installations were up 45% last year compared with 2006, with about a third of those systems going on residential roofs. And now solar companies and banks are helping homeowners stretch the cost over the lifetime of the panels, and sunny California is at the forefront of this trend. In April, SolarCity, one of the biggest panel installers in the state, began offering no-money-down leases for home installation. Says ceo Lyndon Rive: "If you had the choice of using clean power over dirty power and paying less for it, wouldn't you take it?"

Sure, solar panels are a hefty investment, and credit markets are tightening up. But with carbon caps looming on the horizon and power supplies running short, customers like John Stubblebine of Cupertino, Calif., can insulate themselves from future electricity shocks. A technology consultant, he financed a $35,000 system with a 15-year lease from SolarCity. "If the worst forecasts are true, I'll come out a big winner," he says.

Still, solar isn't for every home. Different parts of the U.S. receive vastly different amounts of sunlight, so a solar panel in sun-drenched Las Vegas will always be more productive than one in cloudy Seattle. Incentives vary from state to state and can tip the numbers as well. But financing means that at least you won't need a lot of excess green to go green.