What Are Solar Incentives and How Do They Work?

what-are-solar-incentives

With worsening climate change and rising fossil fuel prices, governments all over the world are taking renewable energy more seriously. And one of the best ways to boost interest in cleaner power sources is by reducing investment costs for homeowners and businesses.

In the United States, these cost reductions come in the form of solar incentives that allow ordinary Americans to affordably install photovoltaic (PV) panels on their properties. After going solar, these lucky customers enjoy instant utility bill savings. So in a way, federal and local governments are giving out free money to help you save money.

Below is a breakdown of the most popular solar incentives in the US:

 

The Federal Solar Tax Credit

1. The Federal Solar Tax Credit

The federal solar tax credit (or investment tax credit) allows customers to pay off their annual IRS bills using up to 30% of their solar installation costs. If your PV system costs $10,000, for example, you can reduce your tax liability by a whopping $3,000.

Think of this solar incentive as a one-time gift card from Uncle Sam. It instantly reduces the upfront cost of your PV installation, allowing you to speed up the payback period of your investment.

To learn more, read: The Federal Solar Tax Credit.

 

The Net Metering Program

2. The Net Metering Program

Available in almost every state, the net metering program allows you to sell excess solar electricity to your local utility company at a profit (usually for credits—not cash). With this special incentive, it’s possible to receive $0 or even negative electricity bills every month. Like the tax credit above, net metering helps to speed up the payback period of your solar PV system.

Net metering also removes the need to purchase battery storage for your solar installation.

To learn more, read: How Net Metering Boosts Solar ROIs.

 

The Solar Feed-in Tariff

3. The Solar Feed-in Tariff

Like net metering, feed-in tariffs allow you to monetize your solar electricity. But under this incentive, it’s sometimes possible to receive actual cash (not just credits). And you’re allowed to sell your solar power at above-market rates, making it one of the most lucrative incentives on this list.

However, the solar feed-in tariff is not available in all states. To learn more, read: Do You Qualify for the Feed-in Tariff?

 

Solar Rebate Programs

4. Solar Rebate Programs

Solar rebates work exactly like rebates for other consumer purchases. You buy a new PV system, mail in a form, and receive cash back. It’s a very simple strategy for reducing the upfront cost of your installation by 5%, 20%, or more.

For additional information on this program, read: How Solar Rebates Save You Money.

 

Other Types of Solar Incentives

5. Other Types of Solar Incentives

In addition to the above programs, there also exist other solar incentives by state, region, and neighborhood. To learn more about local solar incentives in your state, click here. Or contact us directly to have our team walk you through available options in your area.

An Important Warning about Solar Incentives

Receiving free money to go solar is a great feeling—especially when that money comes from the government or local utility.

But this free lunch won’t last forever.

Solar incentives are designed to “incentivize” early adoption. As more people go solar, the benefits get scaled back progressively:

  • This is why the feed-in tariff isn’t available in all 50 states.
  • In some regions, solar rebates have disappeared altogether.
  • Even the federal tax credit availability will change. In December of 2015, the federal tax credit was extended and will remain at the 30% level until the end of 2019, but it will then ramp down incrementally through 2021. After 2023, the residential credit will drop to 0% while the commercial credit will drop to a permanent 10%.

In other words, now is the time to act. The sooner you take advantage of these savings, the greater your chances of enjoying:

  • Lower installation costs
  • Shorter payback periods
  • Higher solar returns

If you have questions about solar incentives in your region, contact us today for a free consultation. You pay nothing to begin exploring your options with Direct Energy Solar.

To schedule your free appointment, click here.