March 29, 2018 Solar Energy Written by Greentumble Editorial Team
Solar energy incentives and rebates
The average payback period for

investing in a solar system through recouping utility bill savings is seven and a half years [1]. For the remainder of the 25 year life span of your solar panel system after the investment has been repaid, you will save tens of thousands of dollars, depending upon your electricity use.

Given the political instability of the fossil fuel market and the tumultuous effects of climate change, savings could be even more.

Residential electricity rates have risen considerably over the years. In January 2001, the average price to the end consumer was 7.7 cents per kilowatt hour. Prices peaked at 13.3 cents per kilowatt hour in September 2017 when the oil rigs in the Gulf of Mexico were evacuated and refineries shut down in the Houston area when Hurricane Harvey hit. The most recently released data for January 2018 shows current prices averaging 12.23 cents per kilowatt hour [2].

The cost of a solar energy system depends on the number and quality of the panels. Presently a high quality 7 Kilowatt (kW) system costs about $21,700 before any tax credits or rebates. In Los Angeles, a 7 kW system would more than cover the energy needs of the average household. Solar power generation varies by area, the placement of the panels in relation to the sun and other factors affecting the efficiency of the system.

A valuable tool to determine what a solar system suited to your needs would cost in your area is the solar calculator.

While at first blush it appears to be just a marketing tool to open the door for solar installers to call you, the tool was initially funded in part and is recommended by the US Energy Administration to help prospective solar power investors enter customized information and make better-informed decisions [3].

Of course, there are also advantages to obtaining quotes from local installers who are familiar with the weather patterns in your area.

The net metering program

Ongoing significant savings can be experienced through net-energy metering. Net energy metering is a widely available solar incentive that allows a solar homeowner to store excess energy produced in the electric grid and then draw from credits issued for that excess energy generated when the household needs it.

For example, if excess solar energy is produced on a sunny afternoon when no one is home, it can be drawn upon at night when energy is not being produced. Many states have mandatory net metering rules for utility companies and a few even compensate solar generators for unused power.

The most comprehensive and up-to-date information on net metering policies and other solar power incentives can be found in the Database of State Incentives for Renewables and Efficiency.

The Federal Solar Investment Tax Credit

The Federal Solar Investment Tax Credit or ITC is a federal incentive to invest in solar power. It is a dollar for dollar reduction in income taxes that a person would otherwise owe the Internal Revenue Service (IRS).

It can be taken on thirty percent of the amount of investment in the solar system (after any rebates) through 2019. Construction of the system must have begun by 2019 to take advantage of the full thirty percent credit. This tax credit will drop to 26 percent in 2020, 22 percent in 2021 and then will no longer be available [4].
State solar tax credits
Some states have tax credits similar in structure to the federal ITC. Again, this is an item to search the Database of State Incentives referenced above to see if your state presently offers a tax credit.

Solar Renewable Energy Certificates (SRECs)

Many states have Renewable Portfolio Standards in effect that require electricity providers to produce a certain percentage of their power from solar sources. These utility companies or cooperatives must provide proof to the State by presenting Solar Renewable Energy Certificates (SRECs). Homeowners earn one SREC for every 1000 kilowatt hour produced by their solar panel system. One SREC may command as much as $300.

You can continue receiving this income from the State even after you move unless you expressly transfer that right to the new homeowner [5].

Additionally, your utility company, municipality or possibly your state or other organization interested in promoting solar energy may offer a rebate that can further help to reduce the cost of your system.

Solar system loans and solar power purchase agreements

What if you don’t have the cash to purchase a solar panel system right now but want to take advantage of the incentives currently in place that may not be available in the future?

One option is a solar loan. Some states offer subsidized solar energy loans with lower than market interest rates.

Even if you must pay the market rate for a typical home improvement loan though, consider that the monthly payment may well be below what you are saving in your electric bill and that you will continue to experience savings for years after the loan has been repaid.

Another option is to simply rent a solar panel system, rather than purchase it. These solar leases or power purchase agreements (PPAs) are offered by solar installers. Leasing generally means that the installer who owns the system will maintain it, while you still experience anywhere from 10-30% savings on your electric bills.

Terms can vary widely. Some installers even offer a zero down payment option [6]. The installer as owner will take advantage of the tax credits, so if this is an option you are considering, the best terms will probably be available while the federal ITC is available.

Perhaps the best incentive is the independence from fossil fuels as well as political vagaries. The US Environmental Protection Agency estimates that the average household emits 20 metric tons of carbon pollution each year. A typical two person-household can reduce its carbon footprint by three to four tons annually by going solar [7].