A beautiful day for a stroll in the French Quarter
Solar policy in Louisiana is a bit stop-and-go. More policies and incentives are missing than we’re used to in a state with costs as low and payback time frames as short as they are here. Most of that low cost and quick payback is due to the MASSIVE personal tax credit available for installing a residential solar power system. While relying so heavily on one incentive makes us worry just a bit, the tax credit is SO huge that it pretty much makes up for everything else. Read on to find out the details of that tax credit and all of the other solar policies and incentives here …
Louisiana’s (Lack Of A) Renewable 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 not-that-distant future.
Typically you can tell how strong a state’s solar incentives are just by looking at the RPS. A strong RPS means strong rebates and other cash incentives. A weak, or worse, no RPS at all generally means little to no incentives for solar power.
Fortunately that’s not the case here, thanks to that tax credit we’ll get to in a second. But even still, a strong RPS could help shift some of the cost of incentivizing solar power to the utility companies that are still chugging along on fossil-fuel based power.
Solar Performance Payments and Utility Rebates in Louisiana
Like we said, this is where you really see the effect of having no RPS here. Without mandatory minimum levels of renewable energy, the utility companies are happy to keep relying on all those fossil fuels so long as the profits keep coming in. If they have no incentives to encourage solar power, the utilities aren’t very motivated to give you any incentives either. That’s why there are no performance payments or utility rebates available here.
Louisiana Solar State Tax Credits
That’s 50% of the cost off your system up to $12,500. If you don’t owe that much in state tax you get a CHECK. Also, the $12,500 cap is PER SYSTEM so you could duplicate it if you have multiple meters to solar up.
Solar Tax Exemptions in Louisiana
Louisiana has a 100% property tax exemption for all solar power systems. See, when you install a solar power system in your home, you add thousands of dollars of value (we’ll get to how many thousands in just a minute). Normally that would mean more taxes every year. But thanks to this 1994 law, you won’t pay a dime.
All that’s missing from the state tax code is the matching sales tax exemption. While it may seem like small change compared to that massive credit and the property tax exemption, we’d still like to see you save that extra 4%.
Utility Prices in Louisiana
Louisiana pays an average of 8.12 cents per kilowatt-hour of electricity. That’s cheap. The cheapest in the national by a pretty wide margin, in fact. Cheap electricity rates mean you’re probably not feeling too much of a strain in your pocketbook …. yet. Just don’t forget why electricity is so cheap.
That’s right, fossil fuels. Lots and lots on non-renewable, greenhouse gas producing fossil fuels. Down here in The Bayou State, we know all too well about the potential costs of fossil fuels, especially all that drilling out in the Gulf. When all those fossil fuels really start to bite us in the butt, or start to run low … or both … electricity rates are going to rise, and fast. When that happens you’re going to be really, really happy you switched early to all that efficient, clean solar power that will be in high demand. Remember, when there’s a solar energy spill, you just call it a nice day.
In the meantime, solar power will still save you a chunk of change here. We’ll go over just how much in a minute.
Louisiana 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. Louisiana’s net metering rules , established in 2005, cover residential systems up to 25kW and commercial systems up to 300kW. Net excess power generated gets credited to your next bill at the full retail rate. Unlike many other states, Louisiana’s net metering program contains no limits; your credits continue to build indefinitely, and are never relinquished back to the utility for non-use over time. For the final month in which you take service from the utility, the utility will pay you for the balance of any credit at the utility’s avoided-cost rate.
The one real downside to Louisiana’s net metering program is that not everybody can get into the program and meet all of their on-site generation needs. We’d like to see the aggregate capacity limit (i.e. what percentage of electricity can be generated from net metered systems) be raised from the current 0.5%. The system size limit should also be raised for commercial and industrial customers to let the largest potential users meet all of their generation needs via solar power.
We gave net metering a mediocre overall grade here because of those small cap sizes. That said, if you live in an area where aggregate capacity limits are not an issue, you shouldn’t have any problems taking full advantage of net metering as a residential customer.
Louisiana’s net metering law includes basic interconnection requirements, but does not establish any set any actual interconnection rules beyond those basic safety compliance requirements. As a result, there is no standard interconnection process here. The net metering law does not address insurance requirements. Sadly the law does require a redundant external disconnect switch, though many inverter-based systems (as yours almost certainly will be) can qualify for an exemption if other safety shutdown features are in place.
5kW Example Return on Investment in Louisiana
What do all the numbers add up to for you? Let’s check:
Installing a typical 5kW solar system should start at about $25,000. Don’t freak – that’s gonna drop really, really fast with two massive tax credits coming.
- Let’s start by subtracting the state tax credit. You’re getting the max, so subtract $12,500, for a new price of … yep … $12,500.
- The federal tax credit gets calculated based on out of pocket costs. Since that state tax credit is not an up-front rebate, you get to calculate the federal tax credit based on the full $25,000 price tag. Subtract another $7,500 for a new price of $5,000.
- Finally we subtract your first year’s energy savings, which we estimate to be about $507. That brings your final cost after the first year to an absurdly low $4,493. That’s more than 82% off the sticker price, and the lowest cost after year 1 we’ve seen in the entire country.
- With a conservative estimate for the future rise of electricity prices, you can expect your new solar power system to pay for itself in just 8 short years. After that you’ll be turning a profit to the tune of nearly 20 grand over the life of your system.
- In addition to those direct wallet-fattening savings, you also increased your home value by $10,134.
- On top from all that green in your pocket, you’ve created a bunch of green for the planet; 110 trees worth, every year your solar power system is humming, and you’re not buying fossil-fuel based electricity.
These numbers are estimates. Your home is unique and how much power you generate and how much money you save depends on that uniqueness. The best way to find out how much cash switching to solar can save you is to get one of our free quotes, and an expert installer in your area can draw up a home-specific estimate for you.
Louisiana Solar Consensus
The Louisiana legislature has promoted clean energy big time. It seems they’re spearheading a whole new market considering all the reconstruction that needs to be done. These incentives for installing solar electricity and hot water systems are going a long way toward reinvigorating the local economy. Now is the time to get moving on solar power. Get a quote below! laissez les bons temps rouler!