Green Home

    Home Energy Audit

    Selecting a
    Green Builder

    Financing Green
    Home Projects

  Cost is what keeps many people from
  investing in projects that make their
  homes green. You should look at each
  project as an investment with cost and
Financing Green Home Projects

Deeper Dive

Cost-Payback Models

This spreadsheet models the cost-benefit for several popular green home improvement projects. They include value over time calculations to show how long the project will take to pay for itself. Projects include:

  1. Renewable energy - solar PV, wind, geothermal, solar hot water.
  2. Appliance purchase – refrigerator, dishwasher, washing machine
  3. Home remodeling – shower heads, toilet

State Incentives for Renewable Energy
The definitive list of incentives available to residents in every state of the union. It is organized by state, but includes local and private incentives. It also includes loan programs.

Financing Green Home Projects

The most common question I hear is “how long will this project take to pay for itself”. To answer that question you need to consider the specifics of the project and the sources of money to pay for it. The major components are:

  1. Project cost
  2. Maintenance cost over time
  3. Energy savings
  4. Water savings
  5. Income generated (renewable energy projects)
  6. Grant money
  7. Tax on grant money
  8. Tax savings
  9. Interest on loans

I have created a spreadsheet that models the payback period for some of the most popular green home projects including renewable energy projects like solar panels. Look in the Deeper Dive column to the right for the details.

Grants and tax credits for green home projects. Grants and tax credits are free money and the first place to look for help paying for your projects. Organizations want to encourage you to make your home energy efficient and generate renewable energy. There is a 30% federal tax credit for energy efficient home improvements available to tax payers for 2009 and 2010. Over the two year period you can get up to $1,500 in credits. There is also a 30% federal tax credit without an upper limit for geothermal, wind, and solar energy systems that runs through 2016. There is a 30% federal tax credit with a limit of $1,000 per kW capacity for fuel cell systems. EnergyStar has a good description of these programs and the IRS has the details.

Ohio has programs for residential installation of solar and wind electrical generation. Solar installations can receive $3 per watt of nominal production for a maximum of $25,000. Since the average cost of PV production in Ohio is $6 - $8 per watt this grant covers 35% - 50% of the installation cost. Wind installations get $2 per kWh of production with a maximum of 50% of cost. Grants require application and have an approval period of up to 60 days. There are lots of qualifications and rules so proceed carefully to make sure you get as much as you can. Grants are usually taxable income, so make sure you are talking to an accountant. These are big numbers and failing to comply with tax laws will move your payback for the project into the next century.

Tax credits are different from tax deductions. Deductions are money that you do not have to pay taxes on so a deduction reduces the cost of your project by whatever your nominal tax rate is on the deduction amount. A tax credit is a part of your tax bill that you don’t have to pay. It reduces your project cost by 100% of the credit.

Renewable Energy Credits. Some state governments have placed requirements for renewable energy generation on energy utilities doing business within their borders. Solar energy generation is sometimes specified separately. If requirements are not met, then fines are levied on the utilities. Any electricity that you generate reduces the fines. This has led to a market for “credits” for the power generated. Depending on the state, you can get $350 - $700 per kWh. This can lead to thousands of dollars per year and should be part of your calculations for any solar installation. There is a complicated network of states with requirements and states that power companies do business in that determines where you can sell your credits.

In general, the process for selling your credits is:

  1. Certify your system in your home state and any state where you are eligible to sell.
  2. Set up your SREC tracking account. There are several systems used by different states.
  3. Establish an account with a trading company.
  4. Sell.

Your installer may offer to buy the SRECs from you, or may stipulate that they own the SRECs. Read the contract carefully. Some installer got into exclusive deals with companies to sell the SRECs before the online auctions became available and got locked into some very low rates for a long time.

Talk to an accountant about how to report income from SRECs.

Subsidized loans. Your state may have programs to encourage local banks to provide subsidized loans to home owners or the banks may do it on their own to show how “Green” they are.