Tax breaks, incentives make going solar cheaper


Installing solar panels on your roof is not just for tree-hugging environmentalists. The increasing ease of the process and the financial returns have made going solar practically mainstream.

"By the end of 2020, the amount of installed solar capacity will be 300 percent higher than today," said Dan Whitten, vice president of communications at the Solar Energy Industries Association. "Nationwide, it grew 10 times between 2008 and 2015."

Sun shining on solar panels generates electricity that goes directly into your home's breaker panel, which supplies electricity to power your appliances and devices.

The power that panels produce but don't use goes out of your meter and back into the grid for later use. A net meter — installed by your utility company in place of the standard meter — rolls backward, and at the end of the month calculates your "net" usage from the grid. This is called net metering.

Power generated from the sun is meant to offset your electric bill. How much offset you get depends on how many panels are installed and how much electricity your family uses.

Whatever the amount is, your household remains connected to the grid and you receive an electric bill from the utility.

The goal is to reduce your utility expenses as much as possible.

Eventually, the savings on the electric bill will add up to what you paid for the system, which means from then on you're basically getting free electricity. The average return on investment is 5 1 / 2 years in Washington, said JD Elkurd, executive director at Solar Solution.

Tax breaks and other incentives reduce the cost of electricity and cover a large portion of a system's cost. "That's why 90 percent of our customers are in the solar business. For financial reasons, it makes sense," said Elkurd.

Here are ways to defray the cost of your system:

• Federal tax credit: One nationwide incentive is an FTC equivalent to 30 percent of the cost. This credit was supposed to expire in December 2016 but was extended for five years.

• Solar Renewable Energy Certificates: Government policy has further incentivized solar on a state level with SRECs. SRECs are a credit homeowners get when they supply power to a brokerage market and can help offset the initial cost of the system.

Customers can sell SRECs to Solar Solution. "We'll buy — in advance — eight years worth of SRECs and apply that money to your project cost, bringing it down about 35 percent [including federal tax credits]," Elkurd said.

The average system size installed in Washington last year was five kilowatts, with 20 panels and costing $16,000, he said. After a 30 percent tax credit of $4,800 and an upfront credit of $5,500 for the SRECs, the cost would be $5,700. This size system typically provides an electric savings of $950 per year at today's rates.

• Income-based grants: The federal government sets qualifying income levels. For a household of two, the maximum annual income is $40,967; for a household of four, it's $60,245.

• Option to lease: If you don't want to buy a solar system, you can lease one for a small application fee. Solar providers own the system, so you don't pay for installation. You pay for the electricity, but at cheaper rate than the utility charges.

"We sell you back the electricity but at about 35 percent below Pepco's (the regional utility) rate," Elkurd said. "And we don't raise the rate. You lock in the cost of electricity for 15 years, which is the lease contract term. Then ownership reverts to you at no cost. So leasing is actually a delayed purchase." Electricity typically goes up about 5 percent annually.


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