2012 Iowa Solar Power Update
Anyone whose ever spent time here in the Hawkeye State knows how beautiful it is. More than just windswept plains and farmer’s fields, Iowa is home to some of the most beautiful prairies and savannas anywhere in the world, and a plethora of indigenous wildlife. Those of you that live here know what we’re talking about. That means you also know how important it is to protect that environment by getting off of dirty energy, and onto clean sources like solar.
Unfortunately the solar incentives picture isn’t as pretty as the Iowa prairies. While the legislature has done a decent job in non-monetary areas, actual cash incentives are sadly lacking. As we’ll see, that puts payback timeframe in less than acceptable areas. Even some of the non-monetary policies could use tweaks to improve them, but first and foremost the legislature needs to create some programs to get you some cash back, and drop the front-end costs.
Iowa (Kind of Has A?) Renewables Portfolio Standard
A Renewables Portfolio Standard (“RPS”) is a law or other piece of regulation that mandates that a certain percentage of at state’s energy production comes from renewable resources by specified target dates. If you keep up with renewable energy policy, you already know that a great many states have passed such Standards. Many of the RPS’ mandate goals as high as 30%, even 40% production in the pretty near future.
So, where is Iowa in this awesome environmentally-friend policy trend? Sadly it’s still mostly in the solar dark ages (pun intended). Iowa technically has an RPS, but that RPS is perhaps the smallest and least effective we’ve seen of any state that has any RPS targets at all. How bad are the Iowa RPS targets? Pretty bad; they mandate only 105 MW of renewable energy from the state’s two investor-owned utilities – MidAmerican Energy (“MAE”) and Alliant Energy Interstate Power and Light (“AEIPL”). While that target has been declared met for years there is not a peep coming out of Iowa about increasing those pretty low standards.
Iowa really needs to get with the program on this one. Colorado, California, New York, New Jersey, Connecticut, Rhode Island, Oregon, Washington, Arizona, and a whole bunch other states that have legislated strong renewable energy goals to ensure a bright future for solar power. In fact, the lack is probably the biggest reason that Iowa lacks (as we’re about to see) the financial incentives that we see in those other states.
Iowa Solar Performance Payments
Back in 2007 the Iowa legislature provided for a REC payment program to help MAE AND AEIPL purchase renewable energy from residential producers, toward satisfaction of their share of the 105 MW renewables target. Unfortunately, with the RPS considered filled since 2007, the REC program has similarly gone the way of the dinosaur. Iowa currently does not offer any performance payments incentives for solar power.
Unless you happen to live in Kalona, that is. For Kalona residents, Farmers Electric Cooperative (“FEC”) has introduced a performance payment plan that will buy up to 25% of your produced renewable energy at $0.20/kilowatt-hour (“kwh”). $0.20/kwh is a pretty solid price – well above Iowa’s retail electricity rate (covered below). In order to take advantage of the payments you must enter a program where you purchase 100% of your electricity consumption from FEC. FEC will, in turn, buy back up to 25% of your monthly consumption at the $0.20/kwh rate. Energy production beyond the 25% you sell back can be used to off-set your bill through FEC’s net metering program. Net metering is discussed in detail below.
Iowa Solar Power Rebates
Iowa lacks a statewide rebate program to encourage renewable power, solar or otherwise. In some other states missing statewide programs we’ve seen utilities come to the rescue with strong solar power rebates of their own. Not so much in Iowa, where we find only two utility-backed rebates for renewable energy.
First, the previously mentioned FEC offers its Kalona customers a rebate of $1,000/kw (up to $5,000) to go along with it’s 25% purchase program. Of a bit more help is the rebate offered by AEIPL – one of Iowa’s two largest utilities. AEIPL offers customers a rebate starting at $0.75 per kilowatt-HOUR (“kwH”) of expected 1st year energy production. This is a little bit different than we’ve seen in other solar power rebates, which are almost always based on installed kilowatt capacities, not expected kwH production. The sum shouldn’t work out too differently from you than a lot of other rebates we’ve seen; the particulars of your home will change this number a bit, but most AEIPL customers should expect to get a rebate for nearly $5,000.
Iowa State Solar Tax Credits
Iowa offers a personal tax credit based off of the federal solar tax credit you will also claim in April. Individuals are eligible for a state tax credit equal to 50% of your federal tax credit, up to a maximum of $3,000. Any excess credit (i.e., if your credit reduces your tax burden to $0) may be carried over for up to ten years.
Solar Tax Exemptions in Iowa
Your solar power system adds value to your home. A bunch of value – like, thousands, even tens of thousands of dollars of value. Normally all that added value comes with added taxes. In Iowa, however, the increase in property value resulting from the installation of a solar power system is exempt from all associated property taxes for five full assessment years. That’s not the full (i.e. not time limited) exemption we’ve seen in a lot of other states, but it IS a nice chunk of change you won’t be responsible for paying.
Another chunk of change you won’t be responsible for paying is the 5-7 % sales tax (depending on where you live) attached to most other items. Yep, Iowa exempts your solar power system from this one too. Good show, Iowa! You just made up for a bit of that incomplete property tax exemption with a simple and smart law that we’ve seen too many other states miss.
Iowa Utility Prices
Iowa pays an average price of 9.84 cents/kwH for electricity. We look at a lot of electricity data (we’re solar geeks) so believe us when we say that 9.84 c/kwH is cheap. Really, really cheap. The north-central plains are, in fact, the cheapest region in the nation for electricity.
We know you love not paying those high electricity prices that the coastal cities pay, but have you stopped to think about why energy is so cheap? Oh, only because of all the dirty coal and oil we’re burning to produce it in massive, inefficient, earth-killing ways. When all that fossil-fuel burning starts to catch up with us (and with the fossil-fuel supply), you know what’s not going to be cheap? Energy. You know what your neighbors will think you are with that shiny solar system humming along, producing clean, efficient, (still) cheap power? A genius!
Net Metering and Interconnection
Net Metering requires your utility to monitor how much energy your solar power system produces and how much energy you actually consume, and make sure you get credit for the surplus.
Iowa was one of the first states in the country to get on board with net metering, passing it’s first standard way back in 1984. The current net metering policy, leaving it solid, but not spectacular. First off, the net metering policy applies only to MAE and AEIPL – municipal and cooperative electric utilities are not covered. Second, MAE and AEIPL used to have to cut you a check for any surplus you generated, but more recent changes now allow the utilities to carry your surplus forward toward future bills, rather than actually giving you cash back. Don’t get us wrong –savings are savings– but we sure do like it more when the cash goes straight to you every month.
5kW Example Return on Investment
What do all the numbers add up to for you? Glad you asked! Let’s see.
We based our rebate numbers for the typical resident of Des Moines. Like most Iowans, that means no solar power rebates, and no performance payments. Keep in mind that these final prices may be lower (and your savings and profits bigger) if you are getting one of those rebates
- Installing a typical 5kW solar system should start at about $25,000. Don’t fret; that’s still gonna drop by a big chunk, even without state solar incentives
- First we take off the state solar tax credit. You’re getting the max, so subtract $3,000 for a new price of $22,000
- The feds calculate your federal solar tax credit based on out of pocket costs. That means the state tax credit doesn’t lower your federal credit, and you get the full $7,500 off your federal tax bill, for a new price of 14,500.
- After the federal solar tax credit, we subtract your first year’s energy savings, which we estimate to be about $614. That brings your final cost after the first year to $13,886. That’s a discount of more than 11 grand off the starting price
- With a conservative estimate for the future rise of electricity prices, you can expect your new solar power system to pay for itself in about 16 years.
- In addition to those direct savings on your monthly electric bill, you also just increased your home’s value by more than 12 grand – tax free for the first five years!
- And of course, you’ve done some good for your earth along with your wallet. The fossil-fuel generated energy you’re replacing with clean solar energy is the equivalent of planting 110 trees a year.
Like we said, the best way to know exactly how much money solar power can save you is to talk to one of our partners on the ground. Just fill out the form below and one of then will be more than happy to go over all those details and help you craft a plan to get the absolute most out of a solar power system in your home. Your quote is 100% free (yes, that’s right, 100% free) and you can get as many of them as that smart shopper in you desires!
Iowa is far from the worst state we’ve seen, but it’s also far from the best. What’s the bottom line here? The background policies are OK, with adequate grades in net metering, interconnection, and tax exemptions. What’s missing is solar power rebates and performance payment incentives. Money. Dinero. Moolah people! Cold hard cash. The cost after year 1 is adequate, but not outstanding for a state with friendly foundational policies. Because starting costs remain somewhat high and there are no ongoing performance incentives, the payback timeframe on a solar power system here remains a fairly slow 16 years. Again, not the worst we’ve seen, but a long way from good. We were tempted to give out a “C” because of the strong policies, but without cash rebates and payments to push payback up a few more years, we’re still in “D” territory here. Time to get on it, legislators!