state policies. Either the state mandates the electric utilities to meet
a minimum of renewable energy production and therefore the utility is required to help offset costs of customer-owned solar resources,
or a state public benefit fund levies a small fee on every electricity
ratepayer to create a fund for disbursing solar incentives.
In No-Incentive States, Try Selling RECs
If you install solar in a state having no RPS, however, state incentives are likely to be minimal. In that case, you can receive a production incentive by selling “green tags,” the buzzword for voluntary
RECs. Bonneville Energy Foundation will purchase the renewable
energy attributes of your system for 3 cents per kilowatt-hour. Green
tags are sold to private companies and individuals looking for green
offsets. Since green tags represent a voluntary purchase, the value of
the renewable energy attributes is much less than under mandated
renewable energy profiles.
Offset Costs with Tax Credits
The federal government and individual states also offer tax
credits to incentivize citizens and businesses to invest in solar. State
personal tax credits range from 10 percent in Utah to 35 percent in
Hawaii and 50 percent in Oregon. Large state tax credits function
much like the state rebates described earlier. These tax credits may
apply only to the equipment costs or toward the total cost of the
system. Many state solar tax credits limit the maximum amount the
solar system owner may receive and over how many years the
system owner may amortize the credit. A state corporate tax credit
is available in certain locations and is worth looking into. Many
states also offer a property tax exemption, which means that for
property tax assessment purposes, PV systems are considered to
add no value to the property.
The federal government offers one credit, the federal solar
investment tax credit. Through this incentive, an individual receives
a tax credit of 30 percent of the system cost, up to $2,000, and a
commercial entity can take 30 percent of the system cost with no
cap. Solar advocates are working hard to get the tax credit, set to
expire Dec. 31, renewed.
What Can I Expect to Pay?
Cost for Typical Solar Electric System Installation*
Cost for system smaller Cost for system larger
Item than 2 kilowatts than 2 kilowatts
Photovoltaic panels $5.00 per watt $5.00 per watt
Inverter $1.20 per watt $1.20 per watt
Installation cost $3.80 per watt $1.80 per watt
Total $10.00 per watt $8.00 per watt
Typical Out-of-Pocket Cost After Incentives
Average 2.5-kilowatt system cost, installed $24,000
Minus state rebates/incentives ($5,000–$12,500)
(average $2–$5 per watt)
Minus federal investment tax credit ($2,000)
Total out-of-pocket cost $17,000–$9,500
*Based on the nationwide average. Remember, actual costs vary considerably
depending on incentives available in your location. Find a local solar
professional at FindSolar.com to request an estimate for your specific site.
What About RECs?
Arenewable energy certificate, or REC, refers to the environmental attributes of 1 megawatt-hour of electricity
generated from an eligible renewable energy resource.
These attributes are separate from the value of the electricity itself. RECs enable these attributes to be sold and traded.
Utilities use them to comply with state-mandated renewable portfolio standards, and businesses or individuals can
buy them voluntarily to offset greenhouse gas emissions. A
solar REC (SREC) refers to a REC created by solar power and
tends to have a higher value than a REC produced by other
renewable generation such as wind or biomass.
In states with an RPS specifying a solar carve-out, utilities
help defray the cost of your solar system by buying the
RECs. Some states have fixed the price; others are experimenting with a floating, market-based REC market. For residential systems, most state rules require an upfront payment to system owners for expected lifetime production,
with New Jersey as a notable exception.
In states without a mandated solar requirement in an RPS,
the REC market is much less lucrative. Numerous companies
trade RECs on the voluntary market, but because the value
is so low and the volume so small, few conduct deals for
residential solar RECs. For more information, try the Renewable Energy Marketers Association: renewablemarketers.org.
Earn Credit on Utility Bills
Generating your own solar power greatly reduces your monthly
electricity bill — that is, it can, if your state has good net-metering
rules. Net metering is a billing arrangement by which the customer-generator receives utility bill credit for electricity generated but not
used on site. Net metering allows for unconsumed power to be sent
back to the electricity grid and “banked” for later use. During sunny
months, the PV system may generate extra credits that can be carried
over to darker months, like rollover minutes, with an annual true-up
with the utility. The rules vary by state as to how much the credits are
worth and as to whether and for how long you can bank credits, so
electricity savings also vary.
Part of getting the most value from your PV system is obtaining
an electricity rate that rewards solar energy generators that make
power during afternoon peaks. This monthly payback determines
how many years it will take to pay back your initial investment in a
To learn what incentives are available in your state, visit Find
Solar.com and the Database of State Incentives for Renewables and Efficiency at dsireusa.org.
Look for Financing Innovations Ahead
Even with incentives, the upfront investment for a PV system
can be sizable, and you may want to look at borrowing money and
paying it back in monthly payments. Some banks have begun to
recognize the value of a PV system and offer home improvement loans