In the past few years, installing home solar power has become an affordable option for many more people. As more homeowners tap into solar power, we collectively reduce our reliance on fossil fuels that drive climate change. Here are the factors that are changing the playing field.

Lower prices. Solar panels are a sizeable investment, but according to a recent report from the Solar Energy Industries Association, the average national price for a solar electric system is now less than $5 per watt installed. That’s a notable drop since 2009, when prices averaged $8 per watt. Ten years before that, they were about $12 per watt. A small home solar electric system might be 2 kilowatts (kw) — or 2,000 watts. At $12 per watt, the system would have cost $24,000. At $5 per watt, it’s more like $10,000.

Federal incentive. You can receive a large federal tax credit for purchasing a home solar electric system. This tax credit — which is available through 2016 — is 30 percent of the price of the system, with no upper limit. So for that same 2-kw, $10,000 system, the cost would now be down to $7,000. (For more information, visit Energy Star.)

Local incentives. As energy prices climb and the public’s understanding of climate change deepens, many states are taking steps to support renewable energy, including tax incentives and grant programs. Twenty-nine states have adopted Renewable Portfolio Standards, which set specific quotas for how much of a utility’s power must come from renewable sources. To comply with these policies, many utility companies offer rebates to customers who install grid-connected solar electric systems, and those rebates can add up.

Kansas City, Mo., for instance, has a big local rebate — $2 per watt. Jeff Droz is a solar installer in the area, and his company, Roof Power Solar, installs systems that are about $4.50 per watt, or $9,000 for a 2-kw system (before rebates). The local rebate and the federal tax credit would bring that cost to $3,500.

When the costs are that low, solar panels pay for themselves relatively quickly in lower utility bills. For residential home solar power projects, Droz says the payback period is typically five to six years. A similar project without any local incentives would take roughly twice as long to pay for itself. For businesses, the incentives are even bigger, and the payback period can be less than two years. Quite the bargain, says Droz: “Very few investments will return your money in a couple of years and continue to save thousands of dollars each year for 25-plus years.”

Getting the rules right. While incentives are enticing, they’re not the only factor in small-scale solar’s growth, says Jim Kennerly, a solar policy analyst at the North Carolina Solar Center. “Incentives are important, but they’re going to become less important than rules. Rules are what will allow you to sell your power,” he says. Most utility companies allow homeowners to connect to the utility’s grid and sell their excess power. Related policies include interconnection standards (technical, legal and procedural requirements that customers and utilities must abide by), net-metering regulations (which essentially allow you to “bank” your excess electricity production on the grid), and feed-in tariffs (long-term contracts with a utility to buy your power at a set price).

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