HomeownerEducational: N-Z

Solar Panel Installation

Benefits of Solar Power

Solar power systems can save homeowners 20 to 100 percent on electricity costs compared to traditional power systems. How much your solar panel system can save you on energy bills depends on a number of factors, including amount of daily sunlight, system size, roof angle, and local electricity rates. Solar panel systems require little maintenance; however, most warranties last 10 to 25 years. If you aren’t purchasing a longer-lasting system, be sure it will pay back your initial investment before the warranty expires.

Incentive Programs

Net Metering (NM). At any time, your solar panel system can produce more or less energy than needed to power your home. When it produces less, the system pulls power from the grid to make up the difference. This is the electricity you pay for. When a surplus occurs, the extra electricity feeds back into the electrical grid. Net Metering, or utility buy-back, is a billing arrangement that credits homeowners for the full retail value of the extra electricity their system generates. Most states have authorized NM or similar programs. Eligible technology, capacity limits, and energy credit varies from state to state, so it is important to understand your state’s policies before installing.

Solar Renewable Energy Credits (SRECs). State and federal regulations require a clean energy quota from energy utilities, which produce most of their energy from fossil fuels. In some states, solar panel system owners receive SRECs, which are credits for producing solar energy that can be claimed by their energy utility. Homeowners earn one SREC per 1,000 kilowatt hours their system produces. Only the system’s owner can benefit from SRECs; leased systems are not eligible. Check for SRECs in your state and do research to understand the options.

Tax credits. The Investment Tax Credit (ITC) is a 30 percent federal income tax credit available to residential and commercial investors in solar energy systems. Projects that have begun construction through 2019 will stay at 30 percent. In 2020, credit dropped to 26 percent; in 2021, it is dropping to 22 percent. After 2023, credit will no longer be available to residential investors, and credit for commercial projects will drop to a permanent 10 percent. Many states offer property tax exemptions and/or waive sales and use taxes. The website for the Database of State Incentives for Renewables and Efficiency provides a list of incentives by state.

Sizing a System

Your system’s size will depend on how much energy you want to generate. Homeowners can begin with a smaller system and increase the size modularly over time. Electric utility tier rates directly affect how quickly homeowners recoup their investment. A smaller system that satisfies part of your energy needs may be more cost effective if it avoids higher-tier rates.