What is the initial cost of solar panels?
An average cost of a
PV System ranges from $6-9 per Watt depending on whether you are a residential or
commercial installation. The solar panel system will vary greatly based on your
power needs and the specifics of the site.
What kind of payback can
you expect on a solar panel system?
With all of the federal and state tax
credits/rebates currently available, you could possibly cover most of your
initial expenses within the first few years. Once installed, solar panels can
save you up to 50% (or more) on your monthly energy bills. This means an
immediate payback to you every month.
Example: If your monthly energy
bill would have been $200 without solar panels, then with solar panels saving
you 50% you would save $100 a month or $1,200 a year. Savings will vary based on
the number of people living in the home, climate, and a number of other factors.
What kind of payback can you expect with a solar thermal water heating
system?
Water heating is responsible for up to 17% of your energy
consumption. A typical solar water heating system can save you 75% on your water
heating energy costs. This system typically will pay itself off multiple
times over its lifespan. Savings will vary based on number of people living in
the home, climate and a number of other factors.
What incentives are
available at the state level?
Solar incentives are available in many states
but differ in each. State incentives range from credits or rebates, to property
tax exemptions and utility rate discounts. Tax credits and rebates can be as
much as 50% of the systems cost. Specific details on available state
incentives can be found by visiting the website
www.dsireusa.org. In
Pennsylvania, PA Sunshine Program rebate is $2.25/watt. For example, a 3.6kw
system will qualify for a $8,100 rebate.
What federal tax credits are
available for solar panels?
The federal government offers a tax
credit equal to 30% of a solar system's cost. Home and business owners may claim
30% of the total cost, and if the credit exceeds tax liability that year, the
remainder of the credit may be carried forward until 2016.
Is there a
maximum federal tax credit amount for eligible systems?
The American Recovery
and Reinvestment Act of 2009 removed the maximum credit amount of $2,000.
Currently, there is no maximum credit amount on either solar panels or solar
thermal water heating systems.
What if the credits exceed your tax
liability?
If a tax credit exceeds your tax liability, that additional amount
can usually be carried forward to the succeeding taxable year.
Example:
you paid $28,800 for a PV solar panel system. Your maximum tax credit amount is
$6,210 or 30% of the system’s $20,700 net cost. If your tax liability is $5,000,
you can claim a maximum of $5,000 on your 2009 taxes. The additional $1,210 tax
credit can be claimed on the following year’s taxes.
Is a tax credit
the same as a tax deduction?
No. A tax credit is a dollar-for-dollar
reduction in what the taxpayer owes. That means that a taxpayer who owes $6,210
in income taxes and who receives a $6,210 tax credit would pay nothing.
Is there any way for a home buyer to access the money allocable to the credit
sooner than waiting to file their 2009 tax return?
Yes. Prospective home
buyers who will be adding either of these solar systems, and believe they will
qualify for the tax credits, are permitted to reduce their income tax
withholding. Reducing tax withholding (up to the amount of the credit) will
enable the buyer to accumulate cash by raising his/her take home pay.
Buyers can adjust their withholding amount on their W-4 via their employer or through their quarterly, estimated tax payments. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective homebuyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS on income tax and possible interest charges and penalties.
What is net metering?
Available in over 40 states, net metering is an
incentive for consumers to invest in renewable energy systems. Net metering
measures excess electricity produced through the solar system by spinning the
energy meter backwards, banking the electricity until needed. This provides the
customer with full retail value for the electricity produced. Customers receive
retail prices for excess electricity they generate through solar power.
Interconnecting with the utility is done using a standard meter.
What if your state does not have net metering?
A customer can use the
electricity they generate to offset electricity they would otherwise have to
purchase from the utility company at the retail price. Any excess electricity is
purchased at the wholesale price. To measure excess energy without net metering,
an additional (second) meter must be installed at the customer’s expense.
Will adding a solar system increase the value of your home?
The
Appraisal Institute has published articles showing a $10 to $20 increase in home
value for every $1 in reduced utility costs. Showing a potential homebuyer the
monthly energy saving from the solar system can create instant additional value
for your home. The panels are also easily recognizable, and can create added
value simply upon a potential home buyer’s first look at the home.
How can these solar systems minimize the effects of rising energy costs?
Installing a solar system is like insurance against future energy cost increases.
The more you take advantage of solar power, the less you are exposed to energy
cost increases.
What is a Renewable Energy Credit?
RECs are
environmental commodities which represent proof that 1 megawatt-hour (MWh) of
electricity was renewable (generated from an eligible renewable energy
resource). The REC certificates can be sold and traded and the owner of the REC
can claim to have purchased renewable energy. RECs can incentivize
carbon-neutral renewable resources. Note that the energy associated with a REC
is sold separately from the credits and is used by another party.