Savings with Solar Rebates & Incentives

Rebates and incentives play a vital role in promoting the widespread adoption of solar energy and home electrification throughout the nation. These incentives often come from your local utility, state, or federal government as tax credits, property tax exemptions, one-time or ongoing rebates tied to performance.

By reducing the cost of installing solar panels, more community members can transition to solar energy, contributing to cleaner air, a stronger and more reliable energy grid, decreased energy costs, and reduced emissions from fossil fuels.

Solar Incentive and Rebate Programs

The goal of solar incentives is to lower the cost of solar energy so that more people can access clean energy sources. However, the world of solar incentives can be complex due to the many acronyms and industry terms involved. This guide is designed to clarify the most important concepts.

Here are some key terms to know:

Solar Incentives: These are benefits offered by government agencies or utilities to homeowners or businesses installing solar systems, intended to encourage the adoption of solar energy.
Rebates: These are one-time payments or reductions in cost for installing solar, offered by utilities or government agencies.
Tax Credit: This is a dollar-for-dollar reduction of your income tax liability, directly lowering the amount you owe to the federal government.
Tax Deduction: This reduces your taxable income, potentially leading to a larger refund or a lower tax bill.
Utility Rebates: These are cash payments from utilities to homeowners who install solar, aiming to promote the use of solar energy and meet certain regulatory requirements.

Solar Incentive and Rebate Programs

Federal Solar Energy Investment Tax Credit (ITC)

The Residential Clean Energy Credit, also known as the solar investment tax credit (ITC), offers a 30% tax credit to homeowners on expenditures for solar installations and battery storage. There is no upper limit to the credit amount, allowing for substantial savings. For instance, if you spend $20,000 on a solar system, the tax credit is worth $6,000, while a $75,000 expenditure on a comprehensive solar system with batteries translates to a credit of $22,500.

To claim the solar tax credit, you must apply it to your federal tax return to reduce your tax liability. It does not come as an automatic cash payout. Additionally, you need taxable income to utilize the credit. This could pose a challenge for retirees or individuals with limited taxable income. If you cannot use the entire credit in a single year, it can be carried forward to future tax years.

The Inflation Reduction Act of August 2022 increased the credit from 26% to 30% and extended its availability through 2032. Although renamed the Residential Clean Energy Credit, many people still refer to it as the ITC or solar tax credit.

Regional Incentives

One-time incentives for homeowners installing solar panels can be distributed through local jurisdictions, such as cities or counties. Examples of local solar rebate programs include:

Fort Collins, Colorado: Offers a local rebate of $250 per kW of solar installed, with a maximum of $1,000.
Sunset Valley, Texas: Provides a solar rebate of $1 per Watt, with a cap at 3,000 Watts, which translates to a maximum rebate of $3,000.
Philadelphia: Introduced a solar rebate program in 2019, providing $0.20 per watt for residential projects. Unfortunately, this program was suspended due to budget cuts during the COVID-19 pandemic.
Energy Smart Colorado: Collaborates with communities and utilities to offer rebates for solar panel installations and other energy efficiency measures.

Incentives Tied to Achievements

Performance-based incentives (PBIs) are financial rewards provided for the energy output of a solar system. The compensation is determined by the amount of energy (measured in kWh) a solar system generates within a specified timeframe.

By tying incentives to production, PBIs motivate both installers and solar system owners to focus on optimizing and maintaining performance throughout the system's lifetime.

For instance:

The Solar Massachusetts Renewable Target (SMART) program provides performance-based incentives of up to $0.043 per kWh generated.
New Jersey’s Successor Solar Incentive Program (SuSI) grants one certificate valued at $90 for every 1,000 kWh of solar electricity produced over a 15-year period.

Empowering Sustainable Choices

Renewable Energy Certificates (RECs) enable homeowners to sell renewable energy to utilities that are required to meet governmental regulations on renewable energy production. One REC represents 1 megawatt-hour (1,000-kilowatt hours) of energy generated from renewable sources. Depending on the size of the solar system, homeowners can earn between three and seven RECs annually. These RECs can be sold or traded on the market, offering an additional incentive for homeowners to adopt and produce solar energy.

Solar Energy Credits and Their Impact on Renewable Energy Markets

SRECs, or Solar Renewable Energy Certificates, function similarly to standard RECs, with the distinction that SRECs specifically pertain to energy generated from solar photovoltaic systems. These certificates are not universally accessible across all states, and their market prices fluctuate regularly.

Solar Incentive and Rebate Programs

Several states have implemented rebate programs to incentivize the adoption of home solar and battery storage systems, providing additional savings beyond the federal tax credit. These state-level rebates can significantly reduce the cost of going solar.

For instance:

In Oregon, homeowners can receive rebates of up to $5,000 for solar system installations and $2,500 for battery storage systems.
New York provides upfront rebates of up to 20 cents per watt of installed solar capacity.
Maryland offers a $1,000 rebate for solar photovoltaic or solar shingle installations above 1 kW.
In California, qualifying homeowners can access rebates of up to $1,000 per kWh of battery storage capacity.

State Incentives for Solar Energy Installation

Many states provide their own solar tax credits in addition to the 30% federal solar tax credit, which can significantly reduce the cost of installing solar panels. For instance:

New York offers a 25% state solar tax credit, up to a maximum value of $5,000.
Hawaii provides a 35% state solar tax credit, with a maximum value of $5,000.
Utah has a solar tax credit for residential installations, capped at $400.
South Carolina offers a 25% state tax credit, worth up to $35,000 or 50% of the taxpayer’s annual liability, whichever is less.
Massachusetts provides a 15% state solar tax credit, worth up to $1,000.

These state incentives can make solar installations more accessible and affordable for homeowners and businesses.

Reducing Costs: Solar Property Tax Exemptions and Abatements

It's well known that solar installations can enhance property value, similar to renovations like updating a kitchen or adding new appliances. While this can be beneficial when selling a home, it can also lead to higher property taxes. However, many locations offer financial relief in the form of exemptions or abatements for the increased value due to home solar systems.

Abatement refers to a temporary reduction in property taxes over a specific period.
Exemption means a reduction in the taxable value of the property.

Over 30 states, shown in purple below, offer either statewide or local solar property tax exemptions. Additionally, New York City provides a solar property tax abatement worth up to 20% of the cost of the solar system.

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Net Energy Metering

The billing system described here allows utility companies to credit you for feeding your surplus solar energy back into the grid. This credit can then be applied towards your electricity bills when your solar panels are not producing energy. Not all states offer this billing arrangement, so it's a good idea to verify whether your state participates in this program.

Key Takeaways

Thanks to the Residential Clean Energy Credit introduced by the Inflation Reduction Act, homeowners across the US can benefit from a 30% incentive when they choose to install solar energy systems.

Additionally, local and state governments, as well as utility providers, may offer further incentives. It's advisable for homeowners to explore these potential opportunities in their region to optimize their solar savings.