Solar Dollars and Sense

Photovoltaic solar systems, or solar electric panels, are the sexy star of home renewable energy. Thousands of homeowners are putting shiny silicon panels on their roof to reduce or eliminate their electric bill and maybe even make the meter spin backward to get paid by the electric company for becoming an electric generator.

However, there is a less sexy, but cheaper and more efficient, way to harness solar power. Solar thermal panels directly heat water instead of indirectly converting the sun's heat into electric power. The hot water can then be used for showers, cleaning and more. It takes the place of water from the hot water heater, which is typically run on natural gas or electricity. Solar thermal is the same concept as making sun tea instead of using electricity to heat water on a stove or in a microwave.

The simplicity of the process makes solar thermal systems cheaper and greener than solar electric systems. They use fewer rare metals, and take a smaller amount of resources to produce.

A federal Department of Energy study found that solar thermal systems can cut utility water-heating costs by 50 to 85 percent. The DOE also estimates the average homeowner spends about 25 percent of home energy costs on heating water.

Experts estimate homeowners can recover the cost of a solar thermal system in seven or eight years, compared to a 20-year payback period for costlier, less efficient photovoltaic systems.

Both solar thermal panels and photovoltaic panels are eligible for tax credits. However, they offer largely the same percentage of savings for both photovoltaic and solar thermal systems, so the thermal panels are still cheaper. You can claim a credit for up to 30 percent of the cost of solar installations. There is a restriction on solar thermal: at least half of your hot water heating must come from the solar panels.

Many states, cities and utility companies offer additional rebates and incentives for solar panels. Some of the programs were recently launched as part of the federal stimulus funding. The money was distributed to states, which are allowed to design plans and rebates that suit their residents needs. Here is a database of federal and state incentives for renewable energy installation.

So solar thermal is more sustainable than solar electric, and can save money for homeowners. However, with either system, you can only maximize energy savings by making the rest of your home more efficient. Start by adding insulation throughout the home and around water heaters and pipes. Caulking and weather strips around windows and doors also make a big difference in energy efficiency.