I had a spurt of creative energy this afternoon and decided to make a movie about how much sense solar power makes, particularly in New Jersey. In this little episode, smug Charles cannot contain his disdain for residential solar energy. Our smart thinker suggests he look into things further. I hope you like it!
Published on August 28, 2010 by Dan Hahn.
Categories: Reports.
When states give you a sales tax break on solar, we notice. You should too.
The chart above provides a simple reference for you to see if your solar investment is exempt from sales taxes. You’ll know you’re dealing with a shady installer if they include taxes on your system when there is no need! Then again, why would you be dealing with a shady installer in the first place when you could get a great group discount on solar from a trusted installer?
Taxes on large purchases aren’t something to shrug off! With purchases of solar systems in the 5 digits, you can expect a hefty surcharge, unless state legislatures reward you for your contribution to a growing green economy.
State sales tax exemption status for the purchase of solar energy systems were sourced from the Database of State Incentives for Renewables and Energy Efficiency. Sales tax exemptions, if present, were all 100%. A handful of states are completely exempt from sales tax regardless, and therefore received ‘A’ grades by default (OR, DE, MT, AK, and NH).
Published on August 27, 2010 by Dan Hahn.
Categories: Reports.
Loans for solar!
Yes, these are the details on state loan programs available for those of you who do not have piles of disposable income lying around. While private financing is readily available in juicy solar states, many times the state loan options available cannot be beat. If you find yourself short on cash, but have good credit and own your home, a solid state loan program for solar energy can unlock the door to your solar investment.
I don’t understand your acronyms or the terms of the loans. Where can I find the links I need to apply for some of these loans?!
The specific details of each state’s loan program are located on your state’s solar page. Click your state on the right sidebar of this page for more info. Or, if you’d prefer request some more information from our solar experts. They’ll help you out in a jiffy.
What does “PACE” mean?
PACE stands for “Property Assessed Clean Energy”. Basically, the state allows your city to finance your solar energy installation with an assessment on your property taxes. Watch this video Dave narrated to learn why it is awesome and very important:
So PACE seems great, why are some states that passed legislation for PACE to work still getting failing grades?
While many state legislatures have indeed paved the way for cities in their state to finance energy improvements through property tax assessments, very few cities are equipped with the tools, support, or know-how to do anything about it. For specific cities, PACE is slowly getting off the ground. We’ve noted those areas above by stating, “PACE programs”.
The big elephants in the room are Fannie Mae and Freddie Mac, who scoff at the idea of a solar installers or any other contractors being paid off immediately through property taxes instead of them. That complicates things!
While rated at just 3% of the overall report card summary grade, property tax exemption status is a very important consideration when putting together your solar investment information. The availability of a property tax exemption for solar energy was sourced from the Database of State Incentives for Renewables and Energy Efficiency. The stronger the tax exemption, the higher the grade.
Why should I care about property tax exemptions for solar?
When you add solar panels to your roof, you’re adding value to your home. Not only are solar panels beautiful, they produce a clean, economical, and reliable source of electricity for your family. Some states ding you with added property tax for your forward thinking, while others reward your common sense with a tax exemption.
How much value will solar add to my home?
Solar will immediately add approximately twenty times your annual electricity bill savings immediately to the value of your home upon installation. For many 5kW systems, that amounts to about $20,000. Don’t believe it? Check out this video!
Whoa, that’s a lot of property value increase!
Indeed it is. However, an additional $20,000 in property tax basis in many states amounts to a big chunk of change owed back to the state come tax time. If you’re lucky enough to live in a state with a complete exemption from added taxes, you can breathe a sigh of satisfaction that your state legislators are doing something right!
While state tax credits do not account for a huge chunk of the overall solar incentive pie (4% of the overall report card), they can be an important factor consider, especially if you have some personal tax liability. In certain circumstances, state tax credits can provide a very powerful incentive for people to go solar.
For example, pretend you’re in Idaho. Yeah, some people give Idaho a bad wrap, though if you were to have $20,000 in personal tax liability and live there, you could install a fine 3kW solar system for about $20,000 and write off the whole shebang on your taxes – installation, permitting, metering, everything! Free electricity! That’s pretty sweet.
Also, one of our readers pointed out that in Louisiana, you may install multiple systems and qualify for their $12,500 tax credit multiple times. Nice tidbit to know!
The details on all the state tax credits above were sourced in August of 2010, from the Database of State Incentives for Renewables and Efficiency.
Here’s the state by state listing of solar rebates for 2010. In the left column, we list the expected amount of rebate for a 5kW residential solar energy system installed by state. Rebate program details were sourced from the Database of State Incentives for Renewables and Efficiency in August of 2010. Rebate grades are worth 5% of the overall summary report card (see the pie chart in the Part 2 summary grades).
Performance payments represent a big chunk of the financial rationale for going solar, and in many instances they make your decision a wise one. For certain states, if you’ve got solar panels on your roof, not only will you be cutting your electric bill down to size, but you’ll be getting paid additional cash from your utility company. Pretty awesome, huh? Not only are you generating electricity for yourself, freezing your own popsicles with with sun, and feeling like you’re doing something smart for your children or any of the other 4 reasons people go solar, but you are getting PAID!
Utility companies aren’t benevolent creatures and most don’t have deep pockets flush with Benjamins, why would they be giving anything away other than a rate increase?
That’s a great question. Utility companies are paying people with solar panels on their roofs because their states say they have to, otherwise they will pay a fee. Therefore, the payment amount to homeowners is typically a little bit less than the amount they would be billed for by the state. For states with these alternative compliance fees, Solar Renewable Energy Credit (SREC) exchanges have popped up. In the above chart, we outlined an estimate of yearly payments a homeowner might expect from the utility company for the SREC credits from their solar energy system.
I need some visual explanation of this, too many words. I’m confused.
Fine. Check out this video:
Why are some utility companies paying people in certain states, but not all?
Some states have strong renewable portfolio standards, and other states do not! For those that do, SREC exchanges develop and homeowners get paid. For those that don’t, you are mostly out of luck, even if you live in a sunny state like Mississippi.
How many SRECs does a typical solar system crank out a year?
It’s usually about a 1 to 1 ratio between SRECs and the size of your solar system. For example, a 5kW solar system will pump out about 5 SREC credits a year.
Why are SREC credits are worth different amounts in different states?
The variation in SREC credit amounts is largely dependent on the size of the alternative compliance fee imposed on utilities for not meeting their targets by the specified year for solar energy generation in the renewable portfolio standard.
Aside from SRECs, what other payments are there?
Some states and larger municipalities have adopted pilot feed-in tariff programs, which pay homeowners a set amount per kilowatt hour of electricity produced from the panels, usually at a considerable premium to the going rate of electricity. Those yearly estimates are also outlined in the left-most column. For example, Washington and Oregon have great feed in tariff programs.
I checked out part 3 of your snazzy report, and my state doesn’t seem to have a strong RPS. Why are there SREC credits even available to me?
Even though many state legislatures have not stipulated a specific solar set aside in their RPS, the rules in states that do are lax enough to allow bordering states to participate in state renewable energy credit (SREC) exchange programs. Those states are illustrated below in this informative infographic from SRECtrade:
A special important note though, for homeowners to participate in the SREC programs in Pennsylvania and DC, your utility company needs to be part of a special district called the PJM, outlined below:
Published on August 19, 2010 by Dan Hahn.
Categories: Reports.
About the chart above:
Here’s this year’s solar incentive summary breakdown by state. The incentives portion of the report is worth 50% of the total overall report card grade (See the green sections of the weighted pie chart).
The graded sections are described in detail here and the weights used for scoring are in parenthesis. Aside from the years to payback column which we covered in Part 1, each of the following will be covered in more detail later.
Years to Payback (25% of total summary grade)
The question so many homeowners ask themselves first when considering an investment in solar energy, “How long is it gonna be before I see a return on my investment?” That answer was calculated for each of the 50 states. The assumptions were a resident in each state installed a 5kW system at $7/watt (or $35,000 total) on a south facing roof with no trenching or extensive racking required.
We then calculated the amount of time it would take the homeowner to recoup 100% of the costs by using amount of electricity generated by the 5kW system, the average cost of electricity in the state, the 30% federal tax credit, SREC or feed-in tariff payments for the electricity generated, available state and utility rebates, and state tax credits. The calculations did not take into account immediate property value increases, which would have created immediate payback in many states.
SREC / FIT Payments (10% of total summary grade)
Expected SREC payments were calculated by using the latest trade values in the SRECtrade database. The availability of feed-in tariffs were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the expected monthly payments, the higher the grade.
If you don’t know what an SREC is, or how they work, check out this great SREC video.
Rebates (5% of total summary grade)
The availability of state and utility rebates were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The better the rebates, the higher the grade.
For more information on how state rebates compare, check out Part 6.
Personal Tax Credits (4% of total summary grade)
The availability of personal tax credits for solar energy were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the tax credit amount, the higher the grade.
You can view our detailed grades and calculations and tax credits for a 5kW solar energy system by state below.
Property Tax Exemption (3% of total summary grade)
Property tax exemption status is a pretty big factor when putting together your investment considerations. Solar will add approximately twenty times your annual electricity bill savings immediately to the value of your home upon installation. for many 5kW systems, that amounts to about $20,000. An additional $20,000 in property tax basis in many states amounts to a big chunk of change owed back to the state. However, many states have complete exemptions from added taxes when you install solar on your home!
The availability of a property tax exemption for solar energy was sourced from the Database of State Incentives for Renewables and Energy Efficiency. The stronger the tax exemption, the higher the grade.
For detailed descriptions of state property tax exemptions by state, use the report card navigation below.
Loans (2% of total summary grade)
State loan availability for solar energy differs wildly by state, but are an important component to consider, especially since many homeowners don’t have thousands of dollars lying around to put on their roofs. The availability of a state loan options for residential solar energy was sourced from the Database of State Incentives for Renewables and Energy Efficiency. The stronger the loan program, the higher the grade.
For the details behind the state loan programs, click here (published later).
Sales Tax Exemption (1% of total summary grade)
When states give you a sales tax break on solar, we notice. You should too. State sales tax exemption status for the purchase of solar energy systems were sourced from the Database of State Incentives for Renewables and Energy Efficiency. Sales tax exemptions, if present, were all 100%. A handful of states are completely exempt from sales tax regardless, and therefore received ‘A’ grades by default (OR, DE, MT, AK, and NH).
Published on August 17, 2010 by Dan Hahn.
Categories: Reports.
What is an RPS?
State legislatures pave the way for strong solar energy incentives to flourish. How? By stipulating standards for renewable energy generation within their territories. Those standards are called the state’s renewable portfolio standard (RPS).
If utility companies do not meet these standards, they must pay alternative compliance fees directly to the state. Many utilities then determine the best ways to source their energy from renewable sources that are less expensive than this fee.
What are Solar Set Asides? Why are they Important?
A solar “set aside” is a mandate the state sets in its RPS. This guarantees a specific portion of the overall renewable energy mix generated comes from the sun. For those states with progressive standards, high alternative compliance payments, and clear solar carve outs, the faster those areas become ripe for solar.
Some states have higher alternative compliance fees than others, and as you can see above, some states have more progressive alternative energy standards and deadlines than others do.
For instance, New Jersey has an overall RPS of 22.5% by the year 2020. That requires local utilities to source 22.5% of their energy mix from renewable sources by the year 2020. Pretty good. However, New Jersey also has a specific solar set aside of 2% by 2021. That’s the type of firm commitment which really gets the industry rolling forward. No wonder why New Jersey is the hottest solar market right now!
Why are Electric Rates Part of the Report?
The states without any renewable standards tend to be heavily reliant on cheap coal for electricity, and also have very low electricity prices. When electricity prices are artificially low, that hinders the ability of solar energy to achieve meaningful payback in the state.
About the grades above:
We ranked the states based on the strength of their policies on a 1-5 scale. While 38 out of the 50 states have a renewable portfolio standard, only 17 states have a specific carve out for solar energy. Many states have passed legislation in 2010 to at least have some sort of standard in place.
This portion of the report is worth 30% of the overall state summary grade. The solar set aside is weighed at 15%, the overall state RPS is weighed at 10%, and the electric utility prices are weighed at 5%.
Published on August 15, 2010 by Dan Hahn.
Categories: Reports.
About this report card:
Over the past 20 years, best practices have emerged for connecting to the grid. There’s no need for a particular state to reinvent the wheel. Some states simply need to get their butts in gear and adopt best practices. To hold them accountable, we created a state solar report card last year. The 2010 results are published above.
It’s important to note that 42% of our states received passing grades (up from 30% last year) and 9 states got ‘A’ ratings (up from 4 last year).
The first two grading sections of the report (incentives and utility rate policies) were scored in 2010 by Solar Power Rocks. The last two sections (net metering and interconnection) were scored by the Solar Alliance and the Interstate Renewable Energy Council (IREC) in their 2009 report, “Freeing the Grid”.
Grading Criteria:
Scoring criteria were developed by Solar Power Rocks, guided from the Solar Alliance’s Four Pillars to Cost Effective Solar Policy.
Incentives (50% of total summary grade) – Available utility, state, and municipal incentives for customers to adopt solar energy. Rated by Solar Power Rocks in July, 2010. More info on all the states on the right hand sidebar of this page.
Grades reflect: Years to system payback accounting for all available incentives (25%), Tying residential solar incentives to system performance by opening the state market to SREC trading or large scale adoption of feed-in tariffs (10%), strength of utility and state rebates (5%), personal tax credits (4%), property tax exemption status (3%), availability of state loans (2%), and sales tax exemption status (1%).
Utility Policies (30% of summary grade) – Strong utility policies include a specific solar carve out in the state’s renewable energy portfolio. However, many states do not even have a renewable portfolio standard to speak of. Some states also continue to subsidize large non-renewable, polluting electricity generators which artificially creates lower utility prices. This lengthens payback on a solar investment. Compiled by Solar Power Rocks, 2010.
Grades reflect: Strength of a solar specific set aside in the state’s renewable portfolio standard (15%), strength of the overall state RPS (10%), existing electric rates (5%).
Interconnection (10% of summary grade) – The technical rules for solar customers to “plug in” to the electric grid. The more complex, out of date, or nonsensical the state rules are for plugging into the grid, the lower the grade.
Grades reflect: Eligible technologies, individual system capacity, removing interconnection process complexity for smaller systems, interconnection timelines and charges, engineering charges, prohibiting the requirement of unnecessary external disconnects, certification, spot interconnection vs. wide area interconnection, technical screens, friendliness of legalese, insurance requirements, dispute resolution, and rule coverage.
Net Metering (10% of summary grade) – The billing arrangement where customers get can sell excess electricity back to their utility for equal the amount they are charged to consume it. The more customer friendly net metering policies, the higher the grade.
Grades reflect: Individual solar system capacity, caps on program capacity limits, restrictions on “rollover” of kWh from one month to the next (yep just like cell phone minutes), metering issues (like charges for new meters), Renewable Energy Credit (REC) ownership, eligible customers and technology (the more renewables the better), being able to aggregate meters across the property for net metering, and safe harbor provisions to protect customers from solar tariff changes.
Thank you for your continued support, comments, and feedback. And please, if you are not in the position to even consider solar energy on your home, share this with your friends and family. Spreading the word about where states are and where they need to be helps us continue to research and provide easily digestible information to everyone on a regular basis.
If you haven’t already checked out your state’s solar return on investment timeframe, check it out here. Chances are you’re impressed and would like some more info or you’re disgusted and want to know why your state isn’t keeping up with the others. Ready to dive into the data and find out why your state scored the way it did? Awesome, let’s get started!
