A while ago, we wrote a scary blog about how solar incentives are disappearing. It’s true! Many of the best solar rebate and tax credit programs of the past have gone away, because solar prices have gotten so low that the discounts (other than the Federal 30% tax credit) are no longer necessary to make solar a good deal in most states.
But the best news out of all this is there are still places where incentives can save you thousands of dollars of the costs of a shiny new solar installation. Here’s a beautiful infographic with more information:
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Let’s dig deeper into these incentives.
First, a little terminology:
- SRECs is an acronym that stands for “Solar Renewable Energy Certificates.” They’re like proof that your panels generate renewable energy, and they’re very valuable, because utilities in some states will pay big money for that proof, in order to avoid fines for not producing enough electricity from solar. These states have markets where you can sell your SRECs through a broker and take home a tidy sum every time your system generates a megawatt-hour (MWh) of electricity.
- Performance payments and feed-in tariffs are kinda the same thing and kinda not. In this case, the state or a utility company is paying you directly for each kilowatt-hour of juice your panels pump out. Performance payments are paid on top of your bill savings, and feed-in tariffs are paid instead of your bill savings. That means a feed-in tariff price can be set lower than the cost of electricity from the utility, but the good ones—like in Rhode Island—are more like triple retail.
- Tax credits are pretty straightforward. They’re money you get back at tax time for doing something the government likes enough to subsidize, like having kids or putting money away for retirement. The thing you have to watch out for is how you get that money back. Some places only allow you to take out what you already owe. That makes a place like Louisiana—where you can get the full amount back whether you owe any taxes or not—a really special place.
- Rebates don’t really make an appearance on our list of the top 5 state incentives, because they’ve mostly gotten so small that none rises to the, well… “top.” States that are serious about solar have SREC markets, and rebates are mostly around one or two thousand dollars on a 5-kW system.
And now, the top five states!
1. Massachusetts – SRECs
- Value: About $250/SREC
- Paid: For 10 years
- NPV @7%: $9,400
A typical 5-kW solar system on your Massachusetts roof will earn close to 6 SRECs in a year, which can be sold for about $270 apiece, meaning about $1,600 a year. Every. Year. But know this: The fines levied on utility companies for not producing enough solar (Solar Alternative Compliance Payment, or SACP) will start to go down, and so will SREC sale prices. About $12 per year in the next 10 years.
The best news of all is that SRECs contracts are written for a decade, so, your 5.85 SRECs per year will end up netting you over $13,000 during your contract. Can you say “cha-ching!?” To get more information about how this all works, we strongly recommend connecting with our network of experts who can help get you a customized quote, free home evaluation, discounts, and even system financing. Just fill out our contact form and we’ll be in touch.
2. New Jersey – SRECs
- Value: About $200/SREC
- Paid: For 15 years
- NPV @7%: $8,400
For New Jersey solar panels, the ratio of SRECs produced per year to system size in kilowatts is about 1.15 to 1. So if you’ve got a 5-kW solar system (a solid average for a single-family home), you will generate a little less than 6 SRECs a year.
SRECs are traded on an open exchange, so their value will vary from year to year. However, in New Jersey, their value is strongly correlated to the Solar Alternative Compliance Payment (SACP), which is the fee the utility would incur for not meeting their requirement to source some of their electricity from the sun.
As of 2017, the SACP has dropped to $315, leaving SREC prices hovering between $195 and $260. The SACP will be slowly decreasing to $239 by 2028. Recent SREC market prices can be found at the New Jersey Clean Energy website. This is a whole lot of money, paid straight to you every year! SREC prices should continue to track the SACP, meaning you figure to bank well over $1,000 a year for a good while.
3. Rhode Island – Performance Payment
- Value: $.38/kWh
- Paid: Over a 15- or 20-year term
- NPV @7%: $5,200 to $7,300
Rhode Island actually has a few amazing solar incentives, including a great rebate program and the performance payments we’re talking about here. The rebate is good for $1.05/watt off the up-front cost of your solar installation, but you have to choose either the performance payments or the rebate.
There’s a case to be made for getting money off your solar panels right away, but then you’re subject to the whims of the legislature or public utilities commission. They could follow in the footsteps of other states and change the way solar owners are paid for their energy with little warning. That’s why we think a 15 or 20-year contract that locks in the price paid for your solar energy is better.
That contract program is called the Renewable Energy Growth Program. It succeeds (where a previous program failed) by offering direct payments for all the energy generated by small scale solar projects (up to 25 kW).
Aiming to install 3 MW of small scale solar per year for the first four years, this program means business, and it puts money in your pocket if you own solar. The program pays solar energy producers 37.65 cents for every kilowatt-hour their panels send to the grid for 15 years, or 33.45 cents/kWh for 20 years.
The prices paid under contract are much higher than the current retail electric rates you’d get paid under a net metering arrangement. And although they’re fixed, they still represent a great deal of value—If rates rise by the historical 3.5% rate per year, the 15-year contract would be put an additional $11,000 in your pocket by 2031. That’s like $7,300 in today’s dollars.
A long-term price for your electricity generation is a dream come true for solar owners. And even after your contract is done, your panels will still be kicking out the kilowatts, and can be connected to the grid under a net metering or other arrangement.
That. Is. Huge.
4. New York – Solar Tax Credit
- Value: 25% of system cost up to $5,000
- Paid: Tax time next year
- NPV @7%: $5,000
New York has a special kind of solar tax credit that earns it the #4 spot in our list. It’s special because it applies to solar panels you own or lease. That’s a really good deal for people who get panels installed by a third party.
If you pay cash for your system, you’re entitled to 25% of the purchase price off your tax bill. the credit can be up to $5,000, and you can claim it over as many years as necessary to recoup the full amount. Combined with the 30% federal tax credit, that’s over half the cost of your solar system taken care of in less than a year. Wow.
But wait! New York recognizes that not everyone is going to plunk down the cash to pay for a solar system. If you sign up for a solar lease or PPA with a term of at least 10 years, you also get 25% of those payments back as a tax credit. That might mean only a couple hundred bucks a year, but it’s a great way to make the savings from a solar lease even bigger!
5. Hawaii – Solar Tax Credit
- Value: 35% of system cost up to $5,000
- Paid: Tax time next year
- NPV @7%: $5,000
Hawaii’s solar tax credit is also $5,000, but does not apply to third-party owned systems. It’s a nice straightforward tax credit that applies to anyone who buys a system in Hawaii. Aloha!
There are other places in the country that have great incentives that didn’t quite make it to the top 5. Here’s a quick rundown of what you can expect with a 5-kW install in some of those places:
- Washington D.C. – SRECs – Paid through 2023
- Oregon – Rebate & Tax Credit – Paid within 1-4 years of install
- Maryland – SRECs and rebates – Paid through 2031