2012 Illinois Solar Power Update
The Land of Lincoln is the 5th most populous state in the nation, and has the 5th largest state economy. With all those people and all that capitalism going on, we expect you to have some pretty extensive incentive programs for solar power.
We can’t quite say we’re disappointed –strong solar power rebates help push the payback timeframe on a solar power system to an acceptable 9 years– but we were not exactly blown away either. Read on below to find out why.
Illinois’ Renewable Portfolio Standard
A Renewable Portfolio Standard (RPS) requires utilities in the state to source at least a certain percentage of their electricity from clean, renewable sources by a set year in the future. Illinois has an RPS that is well crafted, but which should be extended to all of the state’s utilities (more on that in a bit). Here, 25% of the state’s power production must come from renewable resources by 2025. That’s not the best we’ve seen, but it’s pretty solid.
What’s more, Illinois has a specific solar carve out! 1.5% of electricity must come from photovoltaic systems by the 2025 target. To cap it off, Illinois also mandates 1% distributed generation by 2025, making sure at least a little bit of your energy isn’t coming from giant planet-killing power plants.
Renewable generation goals will be met with yearly phase-in targets. Currently 6% of energy must come from renewable resources. That bar will go up by 1% per year through 2016, followed by jumps of 1.5% per year until the 25% target is met in 2025.
When the RPS was first implemented in 2007 it applied only to investor-owned electric utilities (EUs) serving over 100,000 Illinois customers. The only EUs that met those criteria were Commonwealth Edison and the Ameren Corporation companies (AmerenCILCO, AmerenIPL, and AmerenCIPCO). Recently the RPS was expanded to include other large utilities, but municipal and cooperative utilities, as well as multi-jurisdictional utilities serving less than 100,000 customers are still exempt from the RPS. Those companies may not serve many people individually, but they add up. Even if all the utilities subject to its policies meet the RPS’s goals, the 25% statewide production target won’t really be met unless all Illinois utilities are required to participate.
Illinois’ Electricity Prices
The average price of electricity in Illinois is 11.23 cents per kilowatt-hour. That’s right around both the national average of 11.43 cents/kwh and the regional average of 11.51 cents/kwh. All of those numbers are pretty cheap as far as energy goes. Why is energy so cheap? Oh, only because coal and other destructive fossil fuels are generating all that energy.
No biggie. NOT GOOD! When all of the fossil fuel we’re burning starts to catch up with us, energy prices are going to rise, and rise, and rise. That is … unless you are making your own power from say, a home solar power system.
Illinois Solar Power Rebates
A nice chunk of change is available through the Illinois Renewable Energy Resources Program (RERP). RERP offers a solar panel rebate of $2,250/kilowatt up to 30% of the project costs. Photovoltaic (PV) systems must have a rated design capacity of at least 1 kilowatt (kW) and either be listed by Underwriters Laboratories (UL) or have successfully completed at least one year of field-testing. Don’t worry – the expert installers we partner with will make sure you get the right UL-certified equipment. You won’t have to do a thing. Just make sure you sign up early; space RERP space is limited!
Rebates are available to applicants that contribute a minimum of 25% of the total project cost. You may utilize funds from other incentive programs, but the total incentive from additional programs plus the RERP rebate may not exceed 75% of the project cost. This includes the 30% Federal Solar Tax Credit.
In addition to the state solar power rebate, residents of Springfield may be eligible for a rebate of $1,500/kw up to $15,000 through City Water, Power, and Light.
Illinois Solar Tax Credits
Illinois lacks any tax credits to incentivize the installation of renewable energy systems. We can’t lay too much fault here, given the state’s strong solar power rebate program that covers nearly one-third of your costs.
Illinois State Solar Tax Exemptions
Illinois has a property tax incentive to encourage solar power use. When you register your solar system with the chief county assessment officer (again, our partners on the ground will take care of all of this for you), your solar equipment will be valued at no more than the value that would be given to a conventional energy system. That’s not as clear-cut as the 100% property tax exemption that we’ve seen in a lot of states, but money saved is money saved, right?
Unfortunately Illinois lacks any sales tax exemption whatsoever for solar equipment and installation. That absence is nothing to sneeze at; depending on where in Illinois you live a sales tax exemption would save you between 6.25% and 9.5% on your solar power system.
Illinois Performance Payments (and RECs)
Solar Renewable Energy Credits (SRECs) are generated when you create electricity from clean sources, like solar panels on your rooftop. What makes them valuable though are the hungry eyes of your utility company, who will pay you straight up cash for the SRECs you produce, just to be able to say they are meeting their RPS targets and avoiding higher alternative compliance fees to Springfield.
The price of SRECs in Illinois have come down recently as more and more folks recognize the potential for huge savings, and install their own solar power systems. Just a couple years ago each of your Illinois SRECs would fetch about $300. As more people have entered the market prices have come down; now you’ll only get between $75 and $150 for your SREC. Put another way, that’s between 7.5 cents and 15 cents for every kwh of solar power.
That’s pretty low. As one installer we spoke to put it “the real goal of your system is to pay for itself via your electric bill savings, SRECs now are just the bonus on top.” To be sure, the $75-$150 per SREC, or between 7.5 cents and 15 cents for every kilowatt hour of solar power you produce. That isn’t exactly breaking the bank. But money is money, and SRECs may still get you a nice weekend on the lake! Moreover, your SRECs have a shelf life on them. If you don’t need the cash ASAP, you can hold on to your SRECs for a couple of years and wait to see if the market rebounds and fetches you a higher price.
If you need the cash now you should look into the Illinois Solar Energy Association’s (“ISEA)” aggregation program. By bundling and selling megawatt sized blocks of SRECs, the ISEA’s aggregation program was able to return $200/REC, or 20 cents per kwh in 2011, even in the current market. Space is extremely limited however. The aggregation program is currently full, and will not reopen until late 2012.
Net Metering and Interconnection
With net metering in place, your utility is required to track your renewable energy production and consumption during each monthly billing cycle. Any surplus you produce is carried over as a credit onto your future bills. Net metering is required to be available for you under Illinois law, unless your electricity is supplied by a cooperative or municipal cooperation. So far so good.
Illinois’ net metering policy would be just about perfect, if those credits hung around indefinitely, but they don’t. At the end of every annual period all remaining credits expire and revert back to the utility without compensation. You may select an annual period that ends with last day of either their April or October billing period, so at least you have a bit of flexibility to maximize your credit usage.
Also note that in some states opting into net metering forces you to sacrifice your SRECs, but not in Illinois! Your SREC or other greenhouse gas reduction credits are yours to keep, even when you take advantage of net metering credits.
Illinois net metering has all the right stuff –except for the 12-month expiration on your credits—and your interconnection standards are pretty strong as well. Your single-home residential system using certified equipment (our on-the-ground partners have still got that covered!) qualifies for Illinois’ simplified interconnection procedures, and it should be pretty easy for you to get on the grid and start taking advantage of net metering. Your connection also will not be required to carry additional liability insurance; such safeguards are limited only to very large projects where mandatory insurance coverage makes more sense.
The only hang-up or expense associated with interconnection in Illinois is the requirement of an external disconnect switch. Such switches are redundant, and they cost you money without good reason. In the grand scheme of things, however, this is pretty minimal as far as interconnection red tape goes. The only thing we’d like to see improve, besides dropping the requirement for disconnect switches, is for Illinois’ interconnection laws to be applied to municipal and cooperative electric companies as well. They’re currently exempt, just like they are from the RPS.
5kW Example Return on Investment
So what does all of this add up to for your wallet? Glad you asked! Let’s have a look.
The amount of sun you get in Illinois varies a bit depending on where you live. In particular, the southern and western parts of the state tend to get a bit more sun than residents in the more populated northeastern areas. The savings on solar power are so big that we don’t need to fluff; we’ll stay conservative in our example and assume you live in or around Chicago, meaning that you get a bit less sun than say, Springfield residents. We’re also going to assume your electricity is provided by Commonwealth Edison
Installing a typical 5kW solar system in northwestern Illinois is likely to run you about $25,000 (don’t panic, this is going to drop a LOT). It could be a bit more or less, depending on your local market, but $5/watt is a pretty solid average.
- Illinois’ RERP solar power rebate cuts 30% of the cost off the top. Subtract $7,500, for a new price of $17,500. That’s a big cut already!
- If you decide to cash in your SRECs right off the bat, you can make some cash despite the currently weak market. We averaged the $75-$150 estimated price right down the middle, for a return of $112.50 per REC, or 11.25 cents for every kwh you produce. That’s another $658 to subtract, for a new price of $16,842.
- Next we take off the federal solar tax credit. The feds calculate your costs after Illinois solar incentives are subtracted, so you get 30% of $16,482. That means you can subtract another $5,053 for a new price of $11,789.
- Finally we subtract your annual utility savings, approximately $657 in the first year. After subtracting that $657, we arrive at a final out of pocket cost in year 1 of approximately $11,132 – less than half of our starting price!
- Estimating your annual electricity savings and REC profits, your solar power system should pay for itself in just 9 short years.
- On top of all those savings, your home value just went up by a cool $13,000 brother. While Illinois does not offer you a blanket exemption from property tax increases, the value of your new solar power system will not be calculated as a single cent higher than a conventional energy system for tax purposes. One of our local partners can give you a better estimate on both the increase to your home value and the savings on property taxes.
- If all of that weren’t enough for you, you’re doing some good work for Earth as well. In fact, your new solar power system is the equivalent of planting 103 trees every year!
Remember that these figures are estimates. We try to be conservative in calculating future energy savings and sunlight measures, but your savings could be a bit higher or lower than what we calculated because every home is different.
The best way to find out how much you can save with a solar power system is to fill out the form below and get a free quote from one of our expert installers in your area. Heck, get five quotes. They’re free! Our partners on the grounds will help you plan a system to the specifics of your home that will save you the maximum amount of cash.
It was a close call, but we just can’t give Illinois an A in solar policy. While a 9 year payback timeframe is pretty strong, it’s just a bit short of our target of 8 years or less in every state. Illinois is missing out on an easy way to get to that 8 year mark by failing to adequately support its state REC program. In other states we’ve seen straightforward legislation set fair prices at which the utilities will purchase your RECs; Illinois should follow suit.
Moreover, while many states also lack a sales tax exemption, Illinois is behind the curve with its unnecessarily complicated property tax law; this should be a simple, straightforward, 100% exemption.
All in all though our biggest gripe about Illinois is that too much of the state’s solar policy is unnecessarily complicated. Again we are looking at the property tax credit and the REC program, both of which could and should be significantly simplified.
On the other hand, $2,250/kw up to 30% of costs is a heck of a solar power rebate. Combined with the federal tax credit you are getting a 60% discount on the price of your solar power system before you even start thinking about savings on your electric bill.
Combined with the solid but not spectacular payback timeframe, and a strong RPS program with one of the nation’s few solar-specific carve-outs, that’s enough for us to award Illinois a solid B.