Solar, which costs an average $20,000 or so to install, probably seems like one of those far-off, “someday” items. Sure, it would be nice to reduce or even eliminate your utility bills. And you love the idea of doing something good for the environment. Plus, how cool would it be to generate energy right from your very own rooftop? But you might feel like it’s not in the cards until you pay off a couple of bills first or win the lottery—whichever comes first.
But out-of-pocket isn’t the only route to solar. Residential customers use a variety of incentives and payment methods to afford their solar panels—which makes solar a lot easier on the budget than you’d think. Here’s how it works.
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The Government Gives You an Automatic 30% Off Your Solar Installation
The government may have its fair share of problems, but this is one place they get it right. The Residential Renewable Energy Tax Credit returns US taxpayers 30% of their costs to install solar on their homes. That includes not just the price of equipment, but the cost of labor and interconnection, too.
The credit gets subtracted from your tax liability—i.e. what you owe the IRS after you calculate your taxes and deductions. If you don’t owe anything this year, the government rolls the credit over for next year so it won’t go to waste. However, the 30% rate is only in effect through the end of 2019. After that, it drops to 26%.
All you have to do is complete form 5695 with your income taxes and watch the savings come rolling in!
Many Electric Providers Pay Solar Customers for the Energy They Generate
In 1979, solar advocate Steven Strong made a powerful discovery: by connecting homes to utility grids, solar panels could be used to power other grid connections. His revelation allowed solar homeowners to do something they couldn’t before: send the excess energy they generated back to be used by utilities.
Throughout the 1980s and 1990s, public utility commissions began approving this technology, dubbed net metering, for residential utility customers. State governments, following suit, adopted their own net metering policies. Many of these laws incentivized utilities to offer credits to net metered households.
That’s where you come in. The overwhelming majority of states have legalized net metering for grid-connected solar homes. The details and requirements differ state-to-state, but in most places the kilowatt hours you return to the grid are credited back on your utility bill. That means you pay the balance—the energy you draw off the grid minus the credits you earn for extra energy.
In some cases, those credits may completely offset your costs—meaning a net zero bill. In some states, like New Jersey, you can even sell energy back at the retail rate, which adds up to a pretty sweet deal for the solar homeowners there.
Net metering credits can considerably reduce your payback period for solar panels. With this incentive, some homeowners pay almost nothing for energy. That’s like getting back a free $1,300 every year!
You Don’t Have to Pay for It All at Once
Even with the government and utilities picking up part of the tab, most of us don’t have enough spare cash sitting around to drop tens of thousands of dollars on a whim. Although solar pays for itself over time, it’s still probably way down on your list of investments.
Thankfully, solar providers have begun to recognize that not everyone has $20,000 to spend upfront, and many now offer alternative payment methods and plans. For instance, you can opt for a loan serviced directly through your provider—similar to buying a car. Of course, any smart investor investigates all their options before making a decision. Many financial institutions now offer personal loans for solar systems, too, just like they would for any other home improvement. There are also institutions like Greenworks Lending and SunLender that specialize in residential solar loans.
You may also be able to participate in a power purchase agreement. In this model, your solar provider installs your system for a reduced cost—or even for free, in some cases. In exchange, they charge you for the electricity you use, at a rate well below the average retail cost. They may even offer you the option to eventually buy out your system for a reduced cost.
Other options include solar leases, where you essentially rent solar panels from your provider. The installer usually charges you a very low upfront payment—or even no payment at all—in exchange for the tax credits you receive for the installation. It’s a very low-cost way to make solar a reality!
Of course, it’s still a lot to take in at once, which is why we created our ModSun solar calculator. Use it to analyze your expenses and predict incentive eligibility ahead of time. Or just get in touch with one of our representatives to start the process right away. Your “someday” has just arrived!