The True Costs of Renewable Energy

As utility costs mount ever higher, Americans now have real options to take home energy matters into their own hands with "green" systems that can pay for themselves in as little as a few years.

Among the choices: wind, solar, geothermal and a "microhydro" option that is potentially cheaper than a year's tuition at many state colleges.

Choosing the do-it-yourself route can offer the freedom of going partially or totally off the grid. And, if the energy generated exceeds your actual usage, you can even sell the excess juice to your utility company. But none of this is free. Here's how much change you should expect to kick in:

Solar power

The economics of a small photovoltaic system depend not only on the cost of designing and installing the system, which can vary considerably, but also the expense of maintaining and operating the system over the course of its serviceable lifetime, which usually spans between 25 to 30 years. The cost-effectiveness of such a system also depends on how much sun you get where you live, your electricity usage, and the size of your system.

If you're an average American household that uses 11,000 kilowatt-hours (kWh) per year, and you want to harness the power of the sun for 50 percent of your energy use, you can expect a 7.76 kilowatt (kW) peak power system to set you back about $35,000 to $52,000, according to, an online calculator sponsored by the U.S. Department of Energy, the American Solar Energy Society, and the Solar Electric Power Association.

You can probably shave off a few thousand dollars once state and federal rebates come into play.

Assuming a property value appreciation of $14,000 to $27,000, as well as average annual utility savings of $1,000 to $2,000, you can potentially recoup your investment in three to 14 years.

Wind power

At $3,000 and $5,000 per kilowatt of wind-generating capacity, or around $40,000 for a 10kW system, according to the American Wind Energy Association (AWEA), a small wind-energy system is generally less expensive than its solar-powered counterpart. With few moving parts, wind turbines don't require much maintenance and operate practically automatically, while lowering your electric bill by 50 to 90 percent.

As with solar panels, the cost effectiveness of your installation depends heavily on its performance, which is, in turn, contingent on its geographical location. (Enter your zip code at MyWattsEstimator to find out what the wind potential in your area is.) With the right state and federal incentives applied, however, well-located wind turbines can pay for themselves within 15 years, or half their useful life.

There are also a few upfront fees with wind power, because wind turbines are tall structures that require building-related permits. You may require a conditional-use permit, zoning variance, or structural plan drafted by an engineer before you begin work, says the AWEA. Fees for permits and plot plans can go anywhere from $400 to $1,600, while public notifications, hearings, and environmental-impact studies may necessitate another few hundred to several thousands dollars.

Hydroelectric power

Large hydropower projects that interrupt the natural flow of a river and damage downstream ecosystems have a bad rep among environmentalists, but small-scale hydroelectric systems (also known as "microhydro") that operate "run of river" have little environmental impact because no large dams or reservoirs are built.

Although arguably the most cost-effective way to generate renewable energy, microhydro requires very specific conditions: at least 2 gallons per minute of flowing water, living on or near an active stream or river, and a decent amount of drop. You'll also need to shelter your water turbine from inclement weather, which means building a small shed or waterproof vault.

Many microhydro systems can generate 75 to 350 kWh per month, according to Scott Davis, author of Microhydro: Clean Power from Water (New Society Publishers, 2003). Unlike solar and wind, microhydro runs 24/7 and therefore requires much less battery storage than the aforementioned technologies. Plus, it can supply 10 to 100 times more power than photovoltaic panels or turbines for the same amount of capital invested, says Energy Alternatives Ltd.

Depending on where it's situated, the average system will cost about a few thousand dollars — $10,000 for really large systems — but installation, permits and piping costs can quickly add up the further the water or electricity needs to travel from the generator to your home, especially if the terrain makes pipelines difficult to install. The break-even period? As little as a couple of years, depending on your energy usage.

Geothermal power

A geothermal heat pump system costs roughly $2,500 per ton of capacity, according to the California Energy Commission, so an average-size home using a 3-ton unit would end up paying $7,500 or so. Of course, you'll also have to include the cost of drilling to your tab; how much exactly depends on how your system will be positioned, whether it'll be wedged vertically deep underground or horizontally a shorter distance below ground. Drilling costs can fall anywhere between $10,000 and $30,000.

While a geothermal system costs more than a conventional oil- or natural-gas-dependent system, the cost of running heat pumps is actually 30 to 40 percent less than a conventional system that runs fossil fuel, meaning you'll be able to save enough on reduced heating and cooling bills to break even in two to 10 years.

Durable and almost maintenance-free because their components are sheltered underground away from the elements, geothermal heat pumps are guaranteed to last 25 to 50 years.

What else you got?

Let's say that you have no savings for a new home energy system or prefer the reliability of the utility company, you still have green options to reduce dependency on non-renewable, highly polluting energy sources such as coal, oil and natural gas.

Many consumers can exercise an option with their power supplier to switch over to electricity generated from renewable sources, either from their utility or through the purchase of renewable energy certificates. (Visit the U.S. Department of Energy's Web site to find out if you can purchase green energy in your state. Rules vary state-by-state.

This option comes at only a small premium, say an extra $10 monthly, but obviously, you're still tethered to the energy grid.