Mother Earth Living

Financial Incentives for Solar Electric Systems

Solar electric systems often make economic sense when financial incentives such as federal tax credits and local utility rebates are available to utility customers.
By Dan Chiras
July 2011 Web
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"The Homeowner's Guide to Renewable Energy" discusses how to conserve energy and cut heating bills, and how to prepare for renewable energy options. Focusing on strategies for replacing specific fuels, the book then examines each practical energy option available to homeowners.


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The following is an excerpt from "The Homeowner's Guide to Renewable Energy" by Dan Chiras (New Society, 2011). The excerpt is from Chapter 8: Solar Electricity - Powering Your Home with Solar Energy. 

Solar electric systems are a great source of clean, reliable electricity. Solar electricity can be stored in battery banks for use at night or on cloudy days. Or it can be “stored” on the electrical grid. Remember, even though initial costs may be high — from $5,000 to $40,000 or more, depending on the size and the type of system — the fuel (sunlight) is free, abundant, and clean, and it’s not under the control of some powerful multinational corporation. Financial incentives discussed (see below) and good net metering laws help make this venture more cost-effective, too.

Solar electric systems require minimal maintenance, too, unless batteries are included in the mix. And solar electric systems are a relatively environmentally benign source of energy. In addition, they operate quietly, unless you need considerable backup from a generator. Solar electric systems are modular, which means that you can install them incrementally. You can start small and expand as your finances permit. Solar electricity, like other technologies discussed in this book, provides energy independence. No matter whether you live in a busy city or a sleepy town or a remote rural area, solar electricity can meet your needs, and help replace waning supplies of oil and natural gas.

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Solar Electric System Incentives 

Solar electric systems can make sense in places where electrical costs are extremely high. In California, Hawaii, and Germany, for instance, conventionally produced electricity goes for premium prices.

Solar electric systems also often make economic sense when financial incentives are available to utility customers. Financial incentives come in several forms. The most common are federal tax credits and local utility rebates. Together, they can decrease the initial cost of a solar electricity system by about one half. US businesses can receive their federal tax credit almost immediately by filing for a grant from the US Treasury Department once the system is installed. There’s no need to wait for tax season. And businesses don’t even need to have a tax liability to qualify for a tax credit.

US businesses can benefit from an additional economic incentive: accelerated depreciation on federal income tax. This allows businesses to depreciate the cost of a solar electricity system in five year’s time, which effectively reduces the initial cost of the system by approximately 30 percent, depending on the business’s tax bracket.

In the United States, the US Department of Agriculture offers grants for renewable energy systems that cover 25 percent of cost of the system. These grants are available to businesses in rural areas (areas with a population under 50,000).

Generous incentives such as these dramatically reduce the initial cost of solar electric systems and the cost per kilowatt-hour of electricity they generate over their lifetime, often making the electricity cost competitive with conventional electricity.

States and utilities also provide incentives. The state of Illinois, for instance, currently offers generous incentives totaling about 50 percent of the cost of a solar electric system. New York State offers its residents a 25 percent tax credit. The state of Florida currently exempts solar electric systems from certain taxes, and some areas like Colorado’s Roaring Fork Valley, home to the prosperous town of Aspen, offer zero-interest loans for homeowners who install solar electric systems. A number of states, including Colorado and Missouri, require investor-owned utilities (IOUs) to provide rebates to customers who install solar electric systems. The rebates are frequently about $2 per watt of installed capacity (discussed shortly). To put this in perspective, it typically costs about $6 to $8 per watt to install a grid-connected system.

And there is more good news. In 2009, the price of solar electric modules tumbled and has remained low. (They’ve never been cheaper.) Thus, if you live in a state like Arizona, Illinois, New York, Colorado, or New Jersey, or are served by a utility that offers generous financial incentives, you may want to retrofit your home or business right now. If you own a business, especially one in a rural area, you can acquire additional benefits like a USDA grant for 25 percent of the system cost.

To determine whether you are qualified to receive a rebate, call your local utility. Better yet, check out incentives on the Database for State Incentives for Renewable Energy.

If there aren’t any incentives available in your area, you can still consider installing a solar electric system as a hedge against rising prices. Or you may, like me, want to install a system to achieve energy independence and reduce your environmental impact. Because solar electric systems can be expanded, you can invest in a few modules at a time and build your system over a period of five to ten years. For more on financing a renewable energy system, see Allan Sindelar and Phil Campbell-Graves’s article on the subject in Home Power magazine, Issue 103.


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