The renewable energy industry is booming.
Most recent estimates suggest that roughly 18% of all electricity in the United States comes from a renewable resource. A part of this renewable portfolio that is especially exciting is the ever growing solar energy share found on homes and businesses. This is because, on a smaller scale, it has been shown to have the best financial return on investment over the shortest period of time among other renewable generation sources. This is largely driven by state incentives for solar. These financial incentives or a tax credit allocation have been passed through the state legislatures as a means to speed up the adoption of solar as a renewable technology.
So, what incentives are you eligible for? We’ll take a look at the following states:
- New Mexico
Perhaps the part of our country with the best state tax incentives for renewable energy, California has set perhaps the most aggressive goal in the United States, seeking to receive 100% of their energy from renewable energy by 2045 with an intermediary goal of 60% of their energy coming from renewables by 2030. Many areas of California will offer rebates for installing solar ranging anywhere from a flat price of $500 all the way up to $0.95 per watt installed. This means that if you were to install a 5 kilowatt system, you could receive a rebate for up to $4,750. Additionally, California is one of the net metering states. This allows homeowners to produce more solar than they consume at a given time and export it to the grid. Then, this energy can be credited back to your home at the end of the month so you still receive the full benefit of it even if you don’t use it right as it is generated.
To bolster solar power government officials in Colorado have passed a variety of incentives and other energy programs. This includes a variety of rebates in the state ranging from a flat rebate of $400 all the way up to much larger rebates worth $3,000. The amount residents can receive depend largely on what utility served space they live within. Additionally, there are many tax breaks for installing a solar system in Colorado. Perhaps the most significant is the sales tax exemption. This means that zero sales tax must be paid on solar installations saving home and business owners hundreds and even thousands of dollar when making the switch to solar. Also, because solar usually raises your property value, property tax exemptions have been put into place so that homeowners won’t see these taxes raised once they make the switch. Finally, one of the more unique incentives in Colorado is the use of community solar. This type of incentive allows homeowners to buy into the use of a portion of a much larger solar system located miles away from their home. This allows them to invest in the expansion of solar energy in their state, receive renewable energy credits on their energy bills, all without having to make a large time and financial investment in installing a solar system physically on their roof.
Idaho is seeking to give incentives for homeowners to make the switch to solar by giving them income tax deductions for solar installations. This income tax deduction is equal to 40% of the total installation cost in the first year, with a maximum deduction of $5,000. Then, in each of the following 3 years, homeowners can take a deduction equal to 20% of the value. The only stipulation is that the total deduction for the full value of the system cannot exceed $20,000. Finally, Idaho is also a net metering state which makes getting credit for your generation easier than ever.
To help expand solar power government officials in Nevada have passed net metering laws that allow utilities to set their own net metering standards. NV Energy will credit customers for 95% of the value of the utility energy cost while the Valley Electric Association will credit you the full value of the electricity. Finally, NV Energy customers are also eligible for an immediate rebate equal to $0.15 per watt of installed solar. This means a 5 kilowatt system yields a rebate of $750.
New Mexico is seeking to increase its solar energy share through the use of some unique programs. This includes a sustainable building tax credit which can get homeowners up to $6.50 per square foot when utilizing solar in a certified sustainable home. Additionally, rate payers in the area served by the El Paso Electric Company can receive up to $0.02 per kilowatt-hour generated. Finally, net metering laws and property tax exemptions round out the incentives in this southwestern state.
When looking at energy incentives by state, Texas is another area of the country that has been investing heavily and trying to convince those living in the state to do the same. Energy incentives by state officials such as net metering and a variety of local rebates from specific utilities have helped build out hundreds of MW’s of solar in the state. For example, Austin energy customers can receive a $2,500 rebate in addition to being paid a guaranteed $0.097 per kilowatt hour of solar generation. Also, CPS energy customers in Texas are eligible to receive a solar rebate equal to $1.20 per watt. This means that a 5 kilowatt system will yield a rebate of $6,000. Finally, the solar rights law in this state ban Homeowners Association’s from banning solar on residential homes.
Utah has an extremely aggressive solar tax credit allocation. Utah has a policy that will give homeowners and business owners a tax credit equal to 25% of the total installed cost with a maximum credit of $1,600. This means that systems which cost, in total, up to $6,400 are fully eligible for the tax credit. Additionally, Utah is another one of the net metering states which allows solar owners to over produce power and have it credited back to their account at the end of the month.
Virginia is attempting to persuade homeowners to make the switch to solar by offering to purchase some of their electricity produced for a premium price in areas of the state that are served by the Tennessee Valley Authority. This allows the payback period to be shortened for all solar installations. In addition to this direct financial incentive, Virginia also offers a net metering program and residential property tax exemption in order to further give incentive to making the switch.
In addition to all of these state incentives for solar, there are also federal tax incentives for solar. The biggest, and most widely utilized incentive is the federal solar investment tax credit (ITC). This solar investment tax credit offers homeowners and business owners a tax credit on their following year’s taxes equal to 30% of the total installed value. So, if a 5 kilowatt system cost a homeowner $15,000 all in, they would then be eligible for a tax credit equal to $4,500. This means their total cost is now only $10,500 even before applying any state tax incentives. Additionally, many states include an energy efficiency guide. This energy efficiency guide provides additional rebates and incentives to pair solar with energy efficient appliances and lighting. By combining both federal, state and local solar tax incentives plus the already record low cost of solar, installing a system to begin receiving clean and renewable energy is more affordable than ever before.