Won’t You Be My Neighbor?
Here are the no-brainer reasons homeowners should invest in solar.
Mr. Rogers was a pretty nice guy, from the various articles and movies I’ve read and seen. It’s always nice to be nice, but you might be wondering why I’m referencing a beloved (and deceased) TV star.
Well, I was going to title this blog “What You Need to Know Before You Commit to a Solar/PV System,” but that seems awfully boring. You see, electricity rates went up in my area recently. I know this because I’ve seen a sharp increase in the number of neighbors coming up to me to ask about my solar PV system.
Since I’ve been giving the same answer to each of them, and that answer might also be helpful to others experiencing the same cost increase, I thought I would consider all of you my neighbors and share these major bullet points.
Federal Tax Credit for PV
This is the most significant short-term benefit. If you get a solar PV system installed between now and December 31, 2032, then you are eligible for a federal tax credit equivalent to 30% of the cost of the system. (Thank you, Inflation Reduction Act!) Simple math: if your system costs $10,000, that means a $3,000 tax credit. However, there are two things you should understand:
Here’s how a tax credit works: You take your total tax liability, then subtract any/all tax credits (including the one mentioned above). And here’s the cool part: if your tax credit exceeds your tax liability, you can apply the remainder on your next year’s tax liability.
You have to own the system. The federal tax credit only goes to the owner of the system, so if you lease the system, you aren’t eligible. Now, leasing has its own pros and cons, but this is a big drawback, and one that catches a fair number of people by surprise.
Reduction of Electricity Bill
This is the most immediate benefit. Starting with the first month of operation, your system’s production will offset your consumption. By how much … depends on how productive your system is and how much electricity you consume. Productivity can vary for a number of reasons, including solar orientation of the system, shading from trees or other structures, location (i.e., latitude) of the system, local climate (cloudy vs. sunny locale), etc.
There is another big factor when it comes to on-bill savings: net metering. When you get a solar PV system installed, you will also get a bi-directional electric meter. This allows the meter to spin both ways, as opposed to the older models that only went forward when you used electricity. It’s this meter that allows the utility (and you) to track what your net usage is. It’s how you get credited for your production that will make a difference on your bill.
Retail Vs. Wholesale: What to Know
If your utility credits you at retail, then the math is pretty simple. Produce as much as you use? You only pay for your connection to the electrical grid*, because production is deducted from usage on a 1:1 basis.
*your electric power production will not offset any natural gas usage
If your utility credits you at wholesale, then your production will only offset a fraction of your consumption. That’s because the utility is treating you like a power plant, and is taking the perspective that they are buying power from you. Wholesale rates will vary by utility, but if your goal is to eliminate your electrical bill, you’ll need to generate a lot more energy than you typically consume.
No matter which method of credit your utility uses, one thing is certain: at the end of the first year (and every subsequent year), the utility is not going to cut you a check if you produced more electricity than you consumed. It will simply remain on your bill as a credit towards the following month(s) usage.
Other Potential Incentives
Rebates – Some utilities offer a rebate of a certain dollar amount per kilowatt installed.
SRECs – Some states help facilitate the sale of carbon offsets, and this can financially reward you via Solar Renewable Energy Credits (SRECs). Payments are issued based on the system’s production. Note: This goes to the system owner, so if you lease your system, you are ineligible for these.
Group Buys – These will typically offer customers a slightly lower upfront price, as well as an incentive on the amount of installed solar PV by the group. Depending on the incentive structure, one can enjoy a small rebate of 1, 2 or even 3% of their system’s purchase price.
PV Upsides & Tips
Should you have a roof-mounted system, the portion of the roof that is covered by solar panels will not be subjected to the usual UV and weathering. It will be imperative, though, that your installer properly flash and seal around any/all penetrations so that you don’t have any water leaking into your attic and/or ceiling.
There have been a few studies done on the solar PV’s positive effect on a property’s resale value. While it is a real thing and should not be dismissed, all real estate is local, so that “bump” will depend on who’s looking to buy your home. I will mention here the one thing I say every time someone is looking to sell a home: “You don’t have to convince the entire market of your property’s value; you only have to convince one person: the buyer.”
For those who are considering adding a solar PV system to their property, I would encourage you to get two or more bids (unless you’re going through a group buy program.) The representative you meet with should be able to talk through the financials with you, regardless of whether you’re looking to lease or buy.
At that meeting, they’ll be able to either conduct an assessment of your site, or they may have already done so prior to the visit and can then share the results with you. The rep will also want to see your past utility bills, to give them an idea of how much you consume throughout the year.
I hope this helps those of you who are considering adding a solar PV system to your property. Thanks for stopping by, neighbor.
Learn more about what smart housing should look like–from how a house should be sited to high-performance building techniques to solar PV by reading Sam Rashkin’s book, “Housing 2.0: A Disruption Survival Guide.”