Financial Incentives for Solar Power
Are There Financial Incentives for Using Solar Energy?
Optimizing your lifestyle to incorporate solar energy might be a significant investment. Many people start the exploration process due to environmental concerns, but the overall cost might outweigh the outcome once the math is complete.
The good news is that some financial incentives are available if you use solar power. These incentives vary depending on where you reside. If you live in the US, you can see what solar incentives your state offers by visiting a website like SolarReviews.com or simply Google “Solar Incentives [your state]” and start your research there.
The two most common and beneficial solar incentives are net metering and tax incentives. In this article, we’ll share a high-level overview of each and a few additional incentives that you might be qualified to utilize, depending on your location.
Net Metering
Net metering (also called net energy metering or NEM) is when your electric company purchases the excess solar energy your solar panels generate. The extra energy goes back into the grid, and you receive a credit per unused kWh (kilowatt-hour) your solar panels produce.
If you are often away from home during peak daylight hours, you most likely won't be using a lot of electricity during this time. That means that most of the energy your solar panels produce will go directly back into the grid, earning you credits for when you need them. You can bank your unused kWh credits throughout an entire rolling year. Your kWh credits will be exceptionally beneficial for areas with long sunny days in the summer and shorter days in the winter. If planned appropriately, it’s possible to bank enough credits to last you through the winter during the summer months.
How your energy credits roll over and save depends on your electric company’s net metering policy. Understanding the specific policy before planning your solar setup will be essential. If you want to build a robust solar system to eliminate your electric bill, be sure your net metering policy aligns with your goals.
Where is net metering available?
In the US, as of January 2022, net metering is mandated in some capacity for 38 states and Washington DC. Most states offer some type of net metering program even if it’s not required, except for Tennessee and South Dakota.
Unfortunately, many utility companies don’t necessarily favor net metering mandates. They are fighting to increase their companies’ profit margins by ultimately reducing or completely cutting net metering programs. Due to this controversial battle, net metering programs may change significantly in the coming years.
Who qualifies for net metering?
Anyone who resides somewhere that has net metering mandates or programs in place qualifies for net metering incentives. Of course, you must have a solar system in place installed to the requirements of your local policy. You still have to be tied into the grid with the ability to report your kWh generation and use.
Do I get paid for net metering?
Net metering programs offer credits per kWh of unused power generated by your solar panels that are sent back into the grid. You don’t receive cash for excess energy generated, but if planned correctly, you could end up with a net-zero power bill each year due to kWh credits made and used
Federal Tax Credits
The Federal Solar Investment Tax Credit, or ITC, will only be around for a few more years. If you’re planning on installing solar, now is the time to do it! It currently provides a 30% tax credit for solar systems installed through 2032.
A Production Tax Credit (PTC) is also now available to commercial taxpayers.
State Tax Credits
Some states offer solar tax credits in addition to Federal tax credits. Not sure if your state provides a solar tax incentive? Simply Google “[your state] solar tax incentive,” and a plethora of information will be available for you to research.
Other Solar Incentives
In addition to Federal and State tax credits, there may also be grant and loan programs available from some government agencies. These include the U.S. Department of Energy (DOE), the U.S. Department of Agriculture, and the U.S. Department of the Interior.
Solar renewable energy certificates and performance-based incentives may also be available to you. You can claim these state-specific incentives alongside other solar incentives, including net metering and cash rebates.
Solar rebates
Some states and electric companies offer solar power rebates. Solar rebates by state vary, and commonly are in the form of cash incentives that credit a specific percentage of the cost of your solar system. You won’t necessarily get a per solar panel rebate, but you may see as much as a 20 percent decrease in your overall solar system cost.
Solar incentives for businesses
If you’re a business owner and want to consider solar power for your business, you may be able to utilize an additional tax incentive. The Modified Accelerated Cost Recovery System, also known as MACRS, allows you to accelerate your depreciation time for your solar installation, which lowers your taxes based on the amount you spent on solar.
There’s a lot of math and specifications for this incentive. The SEIA, or Solar Energy Industries Association, has some great information outlining the MACRS and how you can utilize it for your business.
Subsidized solar installation loans
Some states offer subsidized loans for your solar panel setup. These loans typically have a reduced interest rate and arent’ provided consistently. It’s worth doing some research to see what’s available in your state and if you can qualify.
Property tax exemptions
Even if the overall value of your home increases due to your solar panel system installation, you may not have to pay taxes on the increased value. Some states don’t require the added value in property tax assessments, so you won’t have to pay additional taxes annually on your upgraded system.
Is Solar Power Worth It?
The cost of installing solar panels can be high, even if you qualify for multiple incentives. Solar energy will always be worth the investment when considering the planet in general. It’s sustainable, renewable, clean energy that can provide endless electricity when paired with the correct energy storage opinions.
Solar power is definitely worth the cost if you’re planning on being in your home for years to come and want a sustainable way to generate electricity. If you're only planning to be in your home a few years before moving, unless you can recapture your installation cost in resale, it might be better to wait to convert to solar until you’ve settled somewhere long-term.
Solar Incentive Summary
Due to decreasing solar incentives, now is the time to install solar to take advantage of these programs while they are still in place.
Federal Tax Incentives are available to everyone, but they will be obsolete in 2024.
Utility companies are fighting to cut solar incentives like net metering to increase profit margins.
Other solar incentives vary by state and municipality.
