Claiming Solar Saving Incentives
Investing in solar power is a great way to save money on your energy bills while enjoying clean, renewable energy for your home, but it often comes at a high initial installation cost. Fortunately, there are a number of financial incentives available to solar power home owners that can add up to thousands in savings, reducing the cost of solar power installation and making solar power a good long term investment. These include solar power rebates, tax advantages, power payments, and even low cost financing.
Solar Power Rebates
Solar power rebates are by far the best financial incentive available to solar power home owners. In most cases, they return a portion of your solar power expenses directly to you, simply for having installed a solar power system. They’re typically offered by utility companies and can put thousands of dollars back in the pockets of solar home owners.
Some solar power rebates are just a few hundred dollars, while others can be up to $12,000 or more. Rebates are typically offered on a per kilowatt basis, and will often have a cap or limit on the amount of money you’re able to get back. The availability of rebates, as well as the amount of money offered with each, largely depends on your state’s policies and local utilities.
Solar Power Tax Credits and Exemptions
There are a number of tax advantages available for many solar home owners, including income tax breaks and exemptions on sales and property taxes.
Solar Power Income Tax Credits
Income tax credits for solar power may be available on both the state and federal level. For federal income taxes, home owners can take advantage of the 30% consumer energy efficiency credit. This credit applies to existing homes and new construction, and offers 30% of your installation cost with no upper limit. This is an excellent tax break, but to claim it, you’ll have to act quickly, as it is set to expire at the end of 2016.
In addition to the federal 30% tax credit for solar power, many states with income tax offer a break on taxes for solar home owners as well. Like the federal tax credit, state tax credit programs for solar power often allow home owners to deduct a portion of their installation costs from state income taxes. Home owners may be capped on their deduction in a single year, but are typically able to roll deductions into subsequent years to receive the full benefit.
Solar Power Property Tax Exemptions
One of the most common financial incentives available for solar power, property tax exemptions allow home owners to invest in and increase the value of their home, but not have to pay any taxes on that additional value. Many states offer a perpetual 100% property tax exemption, which is an excellent benefit if it’s available.
A property tax exemption means you’ll increase the value of your home by thousands, but still pay the same amount on your property taxes that you did before you installed your valuable solar power system. This can save you thousands over the life of your solar power system, not to mention dramatically increase your resale value without financial repercussions.
Solar Power Sales Tax Exemption
Just like property tax exemptions, a sales tax exemption allows home owners to avoid paying sales tax on the cost of a solar power installation. This incentive is especially enticing, as unlike other benefits that may pay you back at tax time, after installation, or over a period of several years, sales tax is an incentive that you can use immediately. Instead of paying sales tax on your solar power purchase, you’ll be able to avoid that extra cost entirely, keeping potentially hundreds or thousands in your pocket.
Solar Power Payments
In addition to rebates and tax incentives, home owners can actually earn cash and credits for generating solar power, often whether they use the solar power or not.
Solar Renewable Energy Credits
Known as SRECs, Solar Renewable Energy Credits or performance payments, are tradeable credits that are created when your solar power system generates electricity. Each time your solar energy system generates 1,000 kWh of electricity, you’ll be issued a SREC. You can sell or trade this credit, and it is sold separately from the power, meaning you can generate and use solar power in your home while still earning money from your SREC.
SRECs are typically purchased by utility companies. Utility companies use them to meet renewable portfolio standard requirements set by the state. With a SREC, a utility company can get credit for using 1,000 kWh of renewable energy, which can add up to the mandated level when enough credits are purchased. The value of SRECs depends on the supply and demand of credits available to utilities, as well as the renewable portfolio standard and compliance fee schedules in the state. Ultimately, in states with a good SREC environment, home owners can earn a few hundred to a thousand dollars annually from SRECs — while still getting to use the solar power they generate.
Solar Power Net Metering
Solar power installation companies will assess your home’s power needs and capabilities to ensure that your solar energy system is the right size for your home. But even with the ideal solar power system size, you will end up with excess solar power on particularly sunny days or those with low power usage. You can receive credits or cash payments for this excess power that is sent to the grid using net metering.
With net metering, your utility company will monitor the amount of solar energy you produce, use, and most importantly, the energy you don’t use and send to the grid. This excess energy will be returned to you as a credit on your next electricity bill at either the avoided cost rate or the full retail rate. State policies vary on how long you can carry a surplus on your bill, but many allow you to carry your surplus indefinitely or even receive cash payments for your excess energy.
Solar Power Financing
Installing solar power can be expensive, but with low cost solar power financing, home owners can get a break. Property Assessed Clean Energy (PACE) financing offers home owners the ability to obtain a low cost loan to install a solar power system.
With PACE financing, home owners will receive a loan with a low, fixed cost rate. The loan will be paid by a special assessment and lien on their property, which will be paid along with property taxes. When the loan terms are met, the lien will be released.
In addition to commonly found rebates, tax breaks, payments, and special financing, there are hundreds of financial incentives available for renewable energy. Learn more about specific financial incentives available in your area by reading our state profiles.
Photo by Flickr user nait