Got solar? How about geothermal? Maybe a little wind turbine for the back yard?
Renewable energy technology for the home has gotten more popular and affordable in recent years, but is such an ambitious energy project the right choice for your home and pocketbook?
Make plans to set aside time, because you have research to do.
Solar energy seems to be getting the most attention. You might have heard recent news reports about the sliding cost of residential solar energy and its rising support in Washington. A recent White House report noted that the average cost of a solar electric system has dropped by 50 percent since 2010 and that federal agencies are working to make it easier for lower-income taxpayers to borrow up to $25,000 for solar and energy efficient home improvements.
And many are rushing to do installations by the current year-end expiration date for 2016 in order to benefit from the 30 percent federal consumer energy efficiency tax credits covering solar energy systems, small wind turbines and geothermal heat pumps.
If you're a homeowner considering options in solar, wind, geothermal or other renewable energy technology, here are a few questions to address before making a decision:
Could starting small be a better idea? Before you decide on an expensive solar or other renewables project, see if incremental changes around the home make more sense. You can improve the performance of heating and air conditioning systems and seal air leaks from windows, doors and other areas of the home. A do-it-yourself or professional energy audit might be a good first step in detecting energy waste.
What makes sense locally? When it comes to renewable energy - geography matters, and not just for tax breaks and credits for systems. Weather, temperature, wind and sun exposure measurements should be taken into account as you consider various projects. For example, the Solar Energy Industries Association notes that solar has expanded most on the East and West Coasts simply because sun exposure is greater than in the center of the country. State and local organizations dealing with renewables can offer guidance to cost, effectiveness, installation and any additional issues you will need to evaluate. A local evaluation of options is essential.
How well do you understand the technology? There is no doubt that technology is always evolving, and this is one of the reasons why solar and other renewable energy options are becoming cheaper. However, even with falling equipment costs, it is essential that you understand what you are buying and how it works in order to hire the best people to install, service and upgrade the system over time. A good place to start is the U.S. Department of Energy website, Energy.gov, in the renewable energy section for the basics.
Should you buy, lease, or borrow? One of the drivers behind the recent growth in solar is a new generation of vendors who provide one-stop shopping, installation and billing for systems at little or no initial cost. These vendors facilitate cash purchase, purchase by loan and lease options or all three. Though this option is convenient, watch for inflation clauses, fees and penalties that could drive you above what you are paying for conventional, utility-produced electricity. As more traditional lenders and new service providers get involved in financing renewables projects, confirm that your credit reports and credit scores are in good shape.
How will it affect resale? There is a fair amount of debate that encircles the concept of green home improvements boosting home prices. Remodeling magazine, which publishes the widely watched Cost. vs. Value report on home improvements, hasn't begun to report data on major renewable energy projects because there are countless variables addressing their value in different geographical areas. Many real estate experts have mixed opinions about how prospective buyers feel when considering purchasing a home with existing renewable energy equipment, whether the equipment was bought or leased.
Should I involve my financial or tax advisor? Whether you plan to buy, borrow or lease a system or do intermediary energy improvements around the home, talking to a qualified financial or tax advisor is worthwhile. It is also a smart idea to speak with your homeowners insurance agent to see if your project will affect your coverage.
Bottom line: Want to help the environment and save money at the same time? It is important to research small energy improvements around the house along with major new technologies in solar, wind and geothermal before you invest. Although saving money on monthly utility bills may be a driver, the decision should make sense for your overall personal finances.
Nathaniel Sillin directs Visa's financial education programs. To follow Practical Money Skills on Twitter: www.twitter.com/PracticalMoney