Solar energy has been gaining a lot of popularity over the last few years, with the rising cost of electricity combined with the lower cost of installing
solar panels. Even better, many governments are now offering individuals incentives to get solar panels, which vary by location. These are commonly known as a feed-in tariff, because you get compensated for “feeding in” electricity to the grid.
What is a Feed-In Tariff
There are several different versions of the feed-in tariff, depending on where you live. Basically, the government or power provider will pay to feed energy back into the local grid. Depending on your local setup, it could be a set rate or variable rate based on demand. There may be other rate structures as well.
There are two basic setups: a generation tariff, in which the government pays you a set amount for every kWh you generate, regardless of whether you feed the grid or use it yourself. There is also an export tariff, which is where you get paid for any energy you export to the grid that is not used by your house.
What are the Costs?
The biggest cost involved is building a solar system for your home. This means installing the panels on your roof or in your yard, and rewiring the electrical system to accept the solar power. Many utilities also require new panels and meters, as well as permits and other fees. A well-designed system for a small home could run anywhere from $15,000 to $20,000. The upfront cost can be much higher if you have a larger home and depending on where you live but the ROI of these systems is often about 10 years which means you will generate passive income from your system in time.
What are the Benefits?
The benefits of installing a solar electricity system for your home are the cost savings involved. If you average $100/mo in electricity bills, and you build a system that covers your bills for $15,000, you will essentially get free power once the system is paid off in roughly 10 years.
However, many governments offer rebates to install these systems, so your costs may even be lower. Plus, you could build a system that is a little more than you need, and get paid for the excess power you generate.
Would you consider investing in solar or wind power via feed-in tariff if you could generate income by doing so?
(Photo credit: mikecogh)