So you want to install solar panels or solar thermal heating equipment, but how will you pay for it? Solar installations may appeal to you because your monthly heating bills are currently way too high, or because you want to use alternative energy sources that curb global warming and decrease your carbon footprint. While it may take years to see the return on a $20,000 investment (less than half that amount for solar thermal projects), there are ways to reduce the initial sticker price for much lower up-front costs. Here are some of them.

Power Purchase Agreements

Power purchase agreements, or PPAs, occur when your solar installations are financed by a company. In return, you sign a contract agreeing to purchase electricity from that company. These companies often supply, own, and maintain your solar panels for a minimal charge. While you won’t own your panels, you will be reaping their benefits without having to worry about maintenance or high up-front costs.

PPAs are growing in popularity, accounting for 50 percent of new U.S. installations in 2007, up from 10 percent in 2006. Corporate companies such as Silicon Valley’s Sun Run, utility companies, and cities participate in PPAs. See what’s available in your area.

Solar Loans

Another option is to apply for a solar loan, which is typically offered at current market rate. Contact your city or utility company, which may have a contract with a bank or credit union for customers who install solar power systems. At the end of last year, for instance, the City of Berkeley approved a loan program that would pay the high upfront costs of solar projects for property owners and businesses. The homeowner or business owner would then pay the loan back as part of their property taxes over a period of 20 years.

Also try checking with the Clean Renewables Energy Bonds (CREBs), which offers loans for projects involving solar thermal and photovoltaic energy, and with the USDA Renewable Energy Systems and Energy Efficiency Improvements Program. Loan amounts are up to 50 percent of the price of qualifying projects.

Solar Rebates and Tax Credits

These are the buzz words when it comes to solar power installations. Tax credits are currently around 30 percent, depending on your area and system size. This is subject to change in 2009. You can apply for an Energy Efficiency Tax Credit, a federal solar tax credit, or a state-based incentive.

Another option is to start off with a smaller photovoltaic system and add on to it as finances allow. In addition, the more energy efficient your home operates overall, the more you will get from your solar energy system, regardless of its size or cost. And whatever you choose, select a qualified solar installer to ensure your investment is well spent.

Links:

• Companies give folks solar help to go green
• Berkeley to finance solar installations
• Power purchase agreements to spike