What is the most cost-effective way to cut electricity bills? Find a location with plenty of sunshine and add solar panels to your home. Sure, making the initial decision to go solar is simple, but from there things can be a bit tricky. Purchasing twenty five years of electricity upfront seems to be out of the question for many. Some would-be solar electricity buyers are so intimidated by the initial price tag, they don’t look into it any further. Discounting solar energy based on the sticker shock can be a mistake. There are many new ways of financing solar energy that can put in in reach for everyone, not just the well-to-do. There are still solar PV incentives for consumers to take advantage of and prices have also come down.
One of the initial things a prospective buyer of a grid-tied solar electric system should do is check if net metering if offered in your state or utility district. Net metering is the term applied to the fact that your electric meter runs backward when your solar system is producing more energy than you are using.
If you generate more electricity than you use over a billing period, net metering is what the utility company uses to credit you for it. At the end of a billing period (which could be once a month or possibly once a year), your credits are “netted out” against the electricity you purchased from the utility. If your solar PV system was designed to offset all of your use, your bills may reflect only mandatory fees the utility system charges you for your use of its distribution, billing system or other non-electricity costs.
In certain cases, you may find you produced more electricity from solar than you used. Rules vary from state to state and from one utility to another on whether you’ll be compensated. Overproduction isn’t very common. This is because most incentives aim to size systems to deliver no more energy than the household uses.
It is important to understand if the ongoing credits applied for your solar production are offered at the same retail rate you pay for utility power.
A good resource to make sense of the rules and policies of net metering from state to state is the Database of State Incentives for Renewables and Efficiency (DSIRE). The database will give you a comprehensive list of state policies on net metering.
For example, Tennessee does not presently have a statewide policy on net metering. However, the Tennessee Valley Authority offers its solar customers a production-based payment that serves as an enticing alternative. If you discover that your state or utility district does not offer net metering or any alternative, don’t hesitate to make your views known to your local politicians.
With net metering, the availability varies from state to state, among utility districts and even between cities and towns. The DSIRE database can direct you to the agencies that administer incentives in your area, where you can obtain the most current information. Incentives are always changing. Right now, several types of financial approaches are used in the U.S. to encourage consumers to go solar.
Another money saving approach is to obtain a rebate for purchasing and installing a solar electric system. Normally, solar rebate amounts are calculated per watt of a system’s rated production capacity. This refers to the maximum amount of electricity it is projected to be able to produce under ideal conditions. An average residential solar system may be rated at 5 kilowatts (5,000 watts) of DC capacity. Just to note, rebates have declined in California over the past ten years from as much as $4 per watt to as little as 65 cents per watt since installation costs have declined.
The DSIRE database will help you find out of your state or local jurisdiction offers tax credits. The federal government offers a tax credit for 30 percent of the cost of a solar PV system.
The federal tax credit, known as the Residential Renewable Energy Tax Credit, is set to expire at the end of 2016. For business owners, this credit is known as a Business Energy Investment Tax Credit.
Businesses can also be eligible for accelerated depreciation of solar equipment purchase. Certain states offer their own tax credits for solar PV installations, others consider property-tax exemptions, and others offer sales-tax exemptions for buying solar equipment. The DSIRE database is the best source to find out what is available and where.
Renewable Energy Credits or Certificates
If consumers lease a solar PV system or sign a power purchase agreement with a solar electricity company, the incentives often go to the company. The same goes for another incentive, known as Renewable Energy Credits or Certificates, or, if designed solely for solar generators, Solar Renewable Energy Credits, or SRECs.
These credits are available to homeowners in only a limited number of states. Property owners can use the electricity their systems generate but can sell the credit for producing it to someone else. Many utilities are required to include renewable electricity in their generation portfolios. Companies and other organizations that want credit for producing renewable electricity also buy these credits.
Prices and rules vary widely for different marketplaces. Usually, one credit is given for every 1,000 kilowatt-hours of electricity generated. An ideally located 5-kw residential solar system can generate about five to eight credits a year depending on their location and factors like weather that can affect solar production.
In New Jersey, the recent price was as much as $685 per credit.
It can be challenging for homeowners and other small-scale generators to partake in large SREC markets. However, some specialized companies have appeared to help make the process easier. Even some solar installation companies can help as well. In some instances, small-system owners can sell the rights to their credits ahead of time and receive a lump sum payment.
Production-based incentives can help make a solar electric system profitable. Be sure to do your research since rules vary in different areas.
A feed-in tariff is another type of solar incentive. This pays solar owners directly for the electricity their systems produce. It’s based on a particular price per kilowatt-hour, paid for a certain period of time. Feed-in tariffs have helped turn Germany, not exactly well known for its sunshine, into the leader in solar production capacity. Solar PV has become one of Germany’s top industries. Spain adopted a feed-in tariff in 2008, causing them to jump into second place, behind Germany, in solar capacity.
Direct solar feed-in tariffs have been attempted in the United States, mostly as pilot programs. The programs were extremely popular in every instance, especially with homeowners. The state of Vermont, the city of Gainesville, FL, and the state of Oregon have mad
e feed-in tariffs available. The city of Los Angeles is considering them.
Don’t let the initial cost of installing a solar PV system scare you. There are many incentives that make it affordable for the average American to enjoy the benefits of solar panels in their homes and businesses. Be sure to take the time to investigate all the incentive options available in your area, and your worries about the cost of solar installation should begin to fade.