Incentives and Rebates For Solar Energy Systems For Homeowners

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Incentives and Rebates For Solar Energy Systems For Homeowners

Uncle Sam is continuing to make it easier for homeowners to include solar energy as a viable, affordable means of powering their homes. Not to be outdone, most states are also devising ways to encourage their residents to “switch on” to renewable energy, often through electric companies. Renewable energy includes leveraging the power of the sun. Here are some examples of how both forms of government attempt to do so. Check dsire.org for more information on all incentives, as they can be complicated and constantly change.

Federal Tax Credits

With the adoption of the Energy Policy Act and the subsequent Energy Improvement and Extension Act, Americans are now eligible for a 30% rebate through the Federal Government toward a residential solar power system. In addition, there is now no limit to the amount that can be claimed toward the cost of a photovoltaic system. In the past, the amount was restricted to $2,000. The rebate currently covers both the cost of the materials and the labor. For example, a PV system with a cost of $25,000 would be eligible for a $7,500 credit. A credit, unlike a deduction, is applied directly to the taxes owed, so it would therefore reduce your total taxes owed to the IRS by $7,500.

Along with their standard tax forms, residents would use IRS Form 5695 to earn their rebate. However, something to keep in mind is how this relates to other incentive programs. Talk to your accountant about how to treat this credit, plus any other rebates and incentives you might be receiving. Generally, the 30% credit is taken on the cost of a system AFTER other rebates.

Municipal Financing

Another attempt at making solar power attainable for the everyday homeowner is a program that allows the cost of the PV to be covered by municipal tax funds over an extended period. In most cases, this payment plan lasts for twenty years. If the home is sold before that period, the solar power system and whatever tax liability remain to go to the new owner of the home. Municipal bonds usually fund the program. Many cities in California have incorporated this program, some in Colorado, Maryland, and Louisiana.

Net Metering

Many energy companies are implementing programs that enable residents with a photovoltaic system to “sell” the extra electricity they obtain back to their energy companies. The specially built meter spins backward if the customer’s system generates more than they consume. All utilities in the US are required to purchase back consumer-produced power, but the rates at which they do so vary widely.

Renewable Energy Credit (REC)

Producing renewable energy is seen as a good thing, and installing a system can create a credit that traditional utilities and state governments want to buy. This usually takes the form of a check written directly to the homeowner for a percentage of the system. In Colorado, for example, Xcel Energy will pay $1.50 per watt in RECs when you install a system and connect it to its grid. Some manufacturers, such as Sharp, will even deduct this amount from the system’s price and then pursue the credit from the utility. This makes it easier for the customer to afford the system since they won’t have to wait for the utility rebate, which can take a few months.

Feed-in Tariffs (FiT)

As an extension to the process of buying back energy, the state of California and the city of Gainesville, Florida, have begun enacting feed-in tariffs (FiT). FiTs are designed to pay for installing a solar power system plus a small profit. California electrical company, Southern California Edison, requires that clients sign a long-term contract for 5, 10, or 15 years. Still, the price is adjusted based on the time of day of the power generation. For example, for a system producing power throughout the day, a 15-year contract signed with SCE would earn about 15 cents per kilowatt-hour on a summer weekday, while a system generating power from 8 a.m. to 6 p.m. (such as a solar power system), would earn about 22 cents per kilowatt-hour under the same circumstances. Overall, the tariffs range from 8 to 81 cents per kilowatt-hour. This encourages both production of renewable energy and the conservation of existing energy since every penny a producer saves off consumption will go straight to their pocket in production. However, residents earning the tariff sometimes cannot participate in other state incentive programs.