Illinois Solar Energy Rebates, Tax Credits, and Incentives
Chicago skyline
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.
Consensus
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.
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$360.00 per ton of greenhouse gas, that may be of some help if everyone could afford to do it
Take that same $24,000 (cost of system minus tax refunds/rebates) and invest it at 6.00% for the same 25 years and you would have $107,000 in the bank (assuming no taxes paid on earnings for simplicity). The advantage is that you would have the money to take with you when you sell your house and it wouldn’t depreciate or require periodic maintenance.
Another thought is to invest the $24,000 and use the yearly earning to pay your utilities. At 6%, it would generate $1,480 per year (which would just about cover my annual utility costs).
What many sites fail to include in their savings calculations are the increased property taxes involved. Here in Illinois, there is a 2-year break on this type of investment and the homeowners would then see their home value jump by the $36,000 improvement. Where I live, that would result in an additional $720/year in property tax, which would exceed the savings in utility costs as a result of the PV system. Instead of paying the utility company, I would be paying the county government and local school systems.
If I sold my home and the buyers refused to recognize any value to the solar system, I would basically have to give it to them for free in order to sell the house and I would end up with a total loss of my investment. If I kept the money in the bank earning interest, I could take every penny of it with me when I moved.
Another huge factor is, it seems you’ve (and this site) missed a key component; rising utility costs which we could realistically see double in 5-7 years. Our customers generally go for a 10 year financing program, even with attached interest, they will more thank likely see savings during the payback period alone!
You’ve also completely dismissed the government rebates, so who’s paying $24,000? We sell a 5k system for just about the same cost as in this example. We put people into a 12 month no interest period so that our customer can get their rebates before they really see a statement. At that point, they’re at about $14,000.00 which equates to about a $140 payment over 120 payments (10 years) with a HELOC (usually around 3-4%).
Then, there’s SREC. And, for the life of me, I can’t understand why Solar Power Rocks keeps showing only a one year example of SREC credits. That’s a yearly thing!! iiirrrgggghhh…. it’s so frustrating!! Even at $500 a year (at low rates they’re about 4750 with a 5k) it will be as if you are freezing your current bill price.
In other words, the electricity savings plus SREC’s fully cover your bill. THAT IS WHAT IS MAKING YOUR PAYMENT FOR YOU. Essentially, there is nothing out of pocket.
In 10 years, YOU OWN IT!
In 10 years, a $140 bill may look something like $400-500 a year.
Now, do the math.
Frank Perrelli
interstatesun.com
888-605-0804
Jeff,
I’m hearing a lot from you about why not to go solar. However, your $24,000 banking assumption earning you 6% interest with no taxes for simplicity sake is, well.. a little overly simplistic.
1) You’re gonna be significantly taxed on that “put it in the bank and pay your bills from the interest” scheme.
2) Your property tax will not jump by the $720 a year or $36,000 improvement factor as you mention. In fact, your property taxes will increase by ZERO. When installing solar in Illinois, any reputable installer will alert you to alternative valuation of energy systems on your property: You compare the value of any applicable heating or cooling system already on your property to the value of your new solar energy system. Whatever one is the lesser of the two (99.8% of the time this will be your existing heating or cooling system) is what is used to compute your property taxes.
Not convinced? This is straight from the Illinois tax code and verified via phone today at 10:20am PST:
“Sec. 10-10. Valuation of solar energy systems. When a solar energy system has been installed in improvements on any property, the owner of that property is entitled to claim, by filing with the chief county assessment officer, an alternate valuation of those improvements. When a claim for alternate valuation is filed, the chief county assessment officer shall ascertain the value of the improvements as if equipped with a conventional heating or cooling system and the value of the improvements as equipped with the solar energy system. So long as the solar energy system is used in total or part as the means of utilizing solar energy improvements, the alternate valuation computed as the lesser of the two values ascertained under this paragraph shall be applied.”
3) It ain’t up to the buyers to appraise your home. It’s up to the appraiser. That said, your home value will immediately increase in value by a factor of 20 times the amount of energy you save annually. So in this case, you get an instantaneous return on your investment once you are tied into the grid. When you sell your home, you get all that money to take with you (less capital gains taxes). If you find the same type of ROI in any other type of bank investment nowadays (and god bless you by the way for having faith in one of the banks to actually survive long enough to continue paying your 6% or whatever on your long term CD), we’ll come over to your house and bake you a cake.
4) Scheduled “maintenance” for solar PV systems include hosing the panels off once a year and switching out your inverter after year 15. There are no moving parts.
Cheers,
- Dan
Dan
I do agree with your note (except for the jump in the value of the home by 20 times the annual energy cost saving). I am not sure what is the source of this information – as I have heard 10 times as a more reasonable and commonly used number.
My other request for Jeff is to provide us with additional information on the 25 year 6% guaranteed scheme.
Ciao
Sandip
Sandip,
Thanks for piping in. Check this PDF from the Appraiser Journal confirming home value increases at 15-20 times your annual electricity savings. Granted, appraisers are still figuring standards out for valuation of systems, but consider most solar energy systems produced now are guaranteed to perform at 80% of their peak efficiency at year 25. Therefore, if you install a new system and you sell your home, the new property owner gets all that production. In my estimation, this should be even more than 20x annual savings as you don’t even have to go the step of installing the system any longer and utility prices will be rising at at least 6% year over year.
what credit would a do-it yourself person get.
All of this just makes too much sense to me. I have been in the roofing industry for more than 30yrs. and have been involved with a few PV projects. Unfortunately my experience is limited just to my field.
I am considering installing a system on my residence and wondering what are the drawbacks to makeing this a DIY project?
I will be calling in favors from various professionals so the technical portion shouldn’t be an issue.
Hello,
Can you please tell me if you are aware of any solar panel installation courses available in the Chicago land area? My boyfriend has been a General Contractor for over 15 years and would like install solar panels on his industrial building and become certified in order to offer this service to his clients in the future.
He has attended several workshops but is now interested in formal courses and hands on training. Any information would be greatly appreciated.
Please advise,
Sincerely,
Nelly Rodriguez
I did a solar install in N.Y. about ten months ago on my own home and had an electrician sign off and tie -in invertor. all is great. However, I am now trying to re-finance to a lower rate and term on my mortgage. The appraisor did not give me any value on my system stating that my house is comped to others that do not have a system. Doesn’t every improvement on a home have a value. I paid $350 for an appraisal that is not an accurate value of my home. Do I have an arguement?
Chris,
You definitely have an argument. Take the information from the appraiser’s journal article located above and get a re-appraisal. That system you have on your roof in NY is worth a LOT of $. It needs to be valued as part of your home.
Nelly, this is the only large-scale place, it’s in WI:
http://www.the-mrea.org/course_workshops.php
They are doing some workshops in IL, and the ISEA is moving in this direction, but for now you will need to head north.
One question I have not seen the answer to anywhere has to do with system improvements and obsolescence. I imagine that after 20 years we will be several generations of improvements along in the solar technology, yet you will be stuck with an obsolete system. Even if you lease the system, which is now being offered, there would be removal and installation costs to put the new and improved product in.
Mike,
Solar does not improve as radically as computer chips. There will certainly be improvements, but, for example, we’ve improved solar efficiency from about 8% in the 1970′s to now around 18%. (By efficiency, I mean that 18% of the sunlight that hits solar panels gets converted into electricity.) So, technology has doubled in 40 years, not every 5 years or whatever. Bottom line, if you size your system correctly, you’ll be way ahead of the game financially as well as for the planet. If you keep waiting, it will improve, but not dramatically, and meanwhile, you’ll have lost all of these financial and environmental gains. Hope that answers your question.
Has Illinois approved the rebate for solar installations yet. As of mid August it had not yet been released.
Thank you
Kurt,
As far as we’ve been able to tell, there is no more funding for Illinois solar rebate right now. Please yell at Blago’s successors and see official announcement. :(
http://www.commerce.state.il.us/dceo/Bureaus/Energy_Recycling/Energy/Clean+Energy/01-RERP.htm
Solar Energy International in Colorado has a hands-on as well as an on-line component. It’s not cheap.
I will have to say that taking a 1 or 2 day class can set you up to learn the basics.
There is no substitute for a Certified Professional in this or any field.
There are codes and trade specific information that a seasoned veteran will, in the long run, save a lot of time expense and headaches.
Youtube has a couple of “self proclaimed” experts that show you exactly how to install something that will get you in serious trouble down the road.
The groups that give you these 1 or 2 day “workshops”, give you enough info to go to the next, “advanced workshop”.
For a homeowner looking to put up a system and get some knowledge of what’s being put on their roof, that’s o.k.
For someone to do this as a vocation, get some serious training.
Remember, this is electrical work, this can start fires and endanger lives if installed improperly.
This technology is severly underutilized due to a weak marketing strategy by everyone involved.
Most people just assume solar energy is cost prohibitive and only has evironmental value. John and Jane Doe care about the environment, but don’t ask them for a $15-50k (after rebate) donation. With the exception of the “Off-Grid” abodes, I only see Solar Energy adds profiling fine homes, so it must be only for the rich or the different. (No offense different folks).
I’m curious why manufacturers in this industry (Panels, Inverters, etc…) have not invested in a partnership with local colleges to establish professional (Certified) Solar Energy and Solar Thermal Installer training sites in every area.
Illinois, an incentive is only an incentive if you fund it.
K, sry for the rant, but I’m going to have to travel a long distance from Southern Illinois to get the expensive certification training I need to sell this idea (figuratively and literally).
We have engineers and electricians researching design schemes to determine how much affordable solar energy can be made. High priced products ensure enjoyment by the few, but denial by the masses. Researching the cheapest method of delivery is critical. Every citizen is entitled to the benefit of nature’s cheap energy
I am currently a student with the I.B.E.W. and I am learning PV istallation. I am working towards receiving entry level NABCEP certification. I have been part of the unemployed for the last year and a half. I have focused my energies in the renewables markets. It appears to me that the cost of a residential system still remains high in Illinois even after incentives. I understand that Illinois offers net metering, but the buyback rate is low .03 per. kw. Com Ed seems to have control of the situation in the Chicago area. What will have to change in Chicago to create a PV boom?
Very simply, Rob, the rebates have to continue and perhaps a little more federal help. There’s a new clean energy bill on the way in Congress right now. That will be help to Illinois. Plus, it would help if Illinois and Chicago would pass a PACE program.
We are just South of Chicago and are interested in Open Energy SolarSave tiles. We are having a hard time finding installers. Would anyone here know who to contact? We are about 75 miles South of the city.
How much does it cost to install a solar system to heat a 500sqft indoor pool in Chicago?
How much would it cost for everything if you built the panels yourself?
Hi Ry,
There’s a lot of stuff on the internet about “building your own solar panels,” but unfortunately, they are scams, more or less. It would not be possible for an individual to make a panel that would last 25 years more economically efficiently than a large manufacturing facility, even with their marketup.
Is this all a conspiracy. Clean, cheap renewable energy is here, but the utility gangsters, spend our money on keeping residential production out of reach.
anyone out there?
Yes John, we’re here.
I am looking into a possible solar setup for my home in Central Illinois. I am curious as to how much a system would cost, that would be just to help my electric bill. Currently our rates are high and going up. My summer bill is around $180 avg and can be over $400 in the winter a month. Any suggestions?
Joe – Hawk Energy Solutions locating in Washington Illinois is doing Solar Electric installations. He just installed my system in Monee, IL – but he is much closer to you. Here is the web address http://www.solar-pv-system.com/Renewable-Solar-Energy/Solar-PV-System.html
Does anyone know if there is anyone buying srecs (sp)? for energy generated in Illinois
Great posting site. I’m the Property and Grounds leader at our church and we are looking at installing anywhere from 20 KW to 40 KW of panels on our roof which is perfectly sloped facing south, without obstruction. What kind of incentives are available to non-profits (tax rebates don’t help us, etc..) Church has the money and even something as long as a 15 year payback is not an issue. We’re trying to be a leader in the city, and a green neighbor, so this is one way to start. We pay almost $0.18 / kw for power, and our bill runs about $800 / month. Any help would be appreciated.
What does are the requirements for a foreign UK renewable energy company to set up a solar energy company in Chicago.
What if a family doesn’t have this money up front but still wants to do the right thing? We live on a great corner to show off this modern technology. Are homes ever chosen and funded because of their location?
hey Jeff, how is that 6% annual return investment looking these days?
After reading the info above i realized that you do not get credit for excess power generated. It doesent make sense to oversize the system because you can’t make money by selling the excess. Do I have that right? Why wouldn’t we be treated like other utilities?
Kevin, that very much depends on the utility which you connect to. Check their policies. Some give 1:1 credit on future use, in such case oversizing the system does not make sense. Some pay their avoided cost for excess generation. Inquire to be sure before designing.
The Illinois rebate is no longer 30% and one has to submit within a week or so from when it opens to receive it. Having just installed a second 8 kW myself, I believe it was 25%. It is also not a rebate but a grant so one has to pay Illinois income tax on it. In addition, other than for the ISEA program, for which one needs to be a member (should be anyways) I know of no other place to “sell” SRECs. For it, also, one has to submit rapidly after it opens. I also recommend the use of Power Smart pricing if with Ameren since they pay and charge at an hourly rate which is higher during the day when you are producing, than at night when you use their power and they will warn you by e-mail the few times in the summer when prices are expected to be greater than 11 cents/kWh. An aditional upcoming problem is that the state is apparently going to prevent home owners from installing a system themselves, requiring it be done by state licensed installers
So would it still be a better choice to go with soloar replacement over traditional gas furnace, and does the solar panels run everything electric?, Hot water, airconditioner, lights? etc.