A recent New York Times article blasted solar energy systems as making “no economic sense.”[1] The truth: solar photovoltaic systems aren’t cheap but they do payback. Sales of solar photovoltaic systems have been rising up to 50% annually in some states and it’s not just environmental do-gooders who are investing in the renewable energy. For many homeowners, solar energy is about dollars and cents.

Solar systems incur significant upfront costs but both federal and state governments offer incentives. The Energy Policy Act of 2005 included two ways to receive a tax credit for solar energy from the federal government. You can qualify for 30% of the system cost (up to $2,000) for either solar water heating or for solar photovoltaic (PV) electricity.

At the state level are more incentives. Over half of the states in the nation offer solar energy rebates offset the cost of solar power systems –New Jersey rebates cover more than 50% of retail costs. An additional income tax incentive is offered in 17 states. Add it all up and some homeowners are installing PV systems for a third of the retail price.

The cost-effectiveness doesn’t end with installation. Federal law allows independent power producers to connect to the utility grid and requires utilities to purchase excess electricity. Over 30 states allow net metering which accounts for a PV system’s electricity production and allows homeowners to receive the full value of the electricity by selling excess back into the grid.

The most common method for net metering is a single, reversible meter. As a PV system produces electricity the kilowatts are first used to meet on site demand for lights and appliances. Instead of into a battery storage system, extra kilowatts feed into the grid turning the homeowner’s electric meter backwards. At the end of each metering period, the utility company credits the homeowner for the extra kilowatts, paying out either monthly or annually.

The cost of installing a PV system depends on the kilowatts needed to power your home – the more power needed, the larger the array and the bigger the costs. An average homeowner can expect to pay $40-50,000 for a photovoltaic system. Add in the rebates and tax credits and the upfront costs drop, in some cases 50%.

The time frame for a PV system to be paid off and start paying back can be anywhere from 8 to 25 years. It depends on the initial costs of the system, the available rebates and the cost of electricity. In some instances, homeowners who finance their system find loan payments to be less than their monthly electricity bill, which no longer exists.

The kicker is that when the system is paid off, the net metering keeps rolling and homeowners keep getting paid for extra kilowatts. In other words: positive cash flow. Another bonus to solar photovoltaic: energy-efficiency equals increased resale value. Even if you don’t see your solar system through to payoff, the next owner will pay you for your energy saving efforts.