Welcome to the Indiana solar power information page
Note: The numbers above are just estimates for a 5kW solar system, and your home is unique. The best way to know exactly how much money solar power can save you is to connect with one of our partners nearby. A friendly solar expert we trust will give you a buzz and help you craft a personal plan to get the absolute most out of a solar power system for your home. It's 100% free (yes, that’s right, 100% free) and you aren't obligated to buy anything.
When we last checked in with the Hoosier State, the future did not seem all that bright for solar power here. We’re happy to report that the legislature has started to make progress. The implementation of an RPS — even an optional RPS — is a solid start toward strong solar policy. There is, however, a great deal of work left to be done, and legislators are missing easy opportunities for big gains for Indiana solar panels. Let’s take a look at where solar policy here is strong, and where it still needs to be improved.
Questions? Our network of solar experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page. You can get discounted on-grid pricing as low as $3,500/kW! This is paired with the Indiana solar incentives you see below.
Your Solar Strategy in Indiana
Figuring out the best way to go solar in Indiana can be a little daunting. From loans and leases to power-purchase agreements, there are a lot of options out there. To help you pick the one that might be best, we've created the handy decision tool below.
We'll ask you a few simple questions about you and your home. Once you're done, we'll recommend a good option. Further down this page, we provide cost estimates and example return-on-investment calculations for all the various options:
Compare the Return of Different Solar Investments in Indiana
The chart above shows the 25-year returns for an investment in solar whether you choose to purchase a system with cash or pay over time with a loan. Since economic conditions in Idaho don't allow for homeowners to get solar through a third-party agreement like a lease or Power Purchase Agreement, we included two different sizes of solar loans—one for people with a lot of equity, and one for people with just a little.
As you can see, the purchase option leads to pretty high dollar-amount returns over time, but it also requires a big up-front investment. If you take a home equity line of credit (HELOC), though, your payments over 15 years will be more than your savings, but you'll still come out thousands of dollars ahead in the end.
Read on to find out more about each option.
Buying Solar in Indiana
This is the best option in Indiana if you want solar and you've got the cash to spend. An outright purchase returns the most money over time, because you own the system from day one and reap all the benefits. That 30% Federal tax credit, combined with electricity savings bring your first-year costs way down.
In our example, you put down $21,250, but by the end of year 1, incentives and energy savings will erase a bunch of it. Over 25 years, your system will have produced more than $14,000 in income.
That might sound like a great deal of savings over the years, but it pales in comparison to the potential returns from other states. That's not because Indiana lacks sun—it's because the state has cheap electricity prices and no statewide incentives for solar. Still, the internal rate of return on a solar investment here is 5.6%, which is actually not too bad, compared to alternative investments.
Here’s how the numbers pencil out for an Indiana solar purchase with a 5-kW rooftop solar system:
- Installing a typical 5kW solar system should start at about $21,250. Don’t worry – even without state incentives, you can still knock a big chunk off the price right off the bat.
- Since the Feds calculate their incentive based on actual out of pocket costs, no state incentives means a bigger federal solar tax credit. Subtract $6,375 (30% of $21,250) for a new price of $14,875.
- Don't forget your first year’s energy savings, which we estimate to be about $749. That brings your cost after the first year to $14,126.
- By the time your system pays itself back in year 15, you’ll be seeing over $1,250 per year in savings until the end of your system’s life.
- When all is said and done, our 25-year estimate shows a total net profit of $14,291, with an internal rate of return of 5.6%. Not bad!
- On top of those returns, your home's value just increased by just about $15,000, too (your expected annual electricity savings over 20 years)!
- In addition to all that cash (and home value), you’ve created some green for the earth as well by not using electricity from fossil-fuels. In fact, the energy you’re not using has the carbon equivalent of planting 113 trees a year, every year your solar power system is humming.
Keep in mind, the numbers above are based on an average home in Indiana. If you're ready for a custom quote for a solar panel system, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Solar Loans in Indiana
Usually this is the place where we tell you that taking a loan to pay for solar is a great idea. That's because it's usually true. High electricity prices around the country make a solar panel system into an income-generating asset.
The returns in Indiana are still pretty good, but they miss the excellence of the best solar states by a wide margin. The state enjoys some of the lowest electricity prices in the nation, and that means savings are a little slimmer.
Still, as you can see from the chart above, you'll start out with a big windfall, because even though you're not putting any money down, you get the Federal 30% tax credit for the whole installed cost of your system. Then, over the 15-year life of your loan, you'll be spending more than you're saving in electricity costs, essentially investing a total of about $9,400 until you pay the loan off.
But from there, it's up-up-up! After your loan is paid off, you'll be saving $1,255 per year in electricity costs from your fully-owned solar panels. You'll end up over $5,200 to the good after 25 years, which is great for an investment where you put nothing down!
A solar purchase like this will make sense for you if the following is true about you and your current situation:
- You can get a home-equity line of credit (HELOC) for $21,250, with a fixed rate of 5% or lower and a 15-year repayment period.
- You have an appetite for making money with a long-term investment, while also producing benefits for the environment.
Here’s how the numbers pencil out for an Idaho solar purchase with a HELOC:
- Installing a typical 5-kW solar system should start at about $21,250. That's how big your loan will need to be to cover it.
- The electricity you'll save in the first year of operation would have cost $749, but your loan payments will total $2,017, for a difference of $1,268, or about $106 per month.
- That's not so bad when you consider your tax savings for the year will be $6,375! You'll come out over $5,100 ahead in year 1, which should help ease the burden of loan payments for a few years, at least.
- When your loan’s paid off in year 15, you’ll start see over $1,250 per year in savings until the end of your system’s life.
- For our 25-year estimate, you'll see some great returns, to the tune of $5,293, even after all the payments. The system will likely keep working for long into the future, but we stop at 25 years, which is the warranty term for the panels.
- And the future is going to look a little brighter, since your system will mean green for the environment. It'll be like planting 113 trees every year!
Keep in mind, the numbers above are based on an average home in Indiana. If you're ready for a custom quote for a solar loan, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Small Rooftop Systems in Indiana
Let's say you don't have a ton of extra cash laying around, but you do have a bit of equity in your home. Can you get solar panels? YES! Is it a good idea in Indiana? Probably!
Here's the thing: electricity in Indiana is priced close to the cheapest in the nation. The way solar saves you money is by producing energy that you would have paid for. Trouble is, paying for solar with a loan costs just a little less than paying for electricity.
That means solar isn't the brilliant investment it can be in other states with high energy prices and cash-back incentives, but it might still be a good idea for you if you really, really want solar for environmental reasons. And it means a big windfall in year 1, because of tax savings.
Here are the factors we'll look at for this example:
- A 2-kW rooftop system that will cost around $9,563 installed.
- A HELOC for that amount with a 15-year payback at 5% interest.
Just like with the big system, you don’t have to put any money down, but you still get the big federal tax credit for buying solar. You'll get the 30% of your solar costs back as a tax credit and the energy bill savings will start right away. Your loan payments will be about $76 per month while your energy bill savings will be about $25—a difference of $51. Basically, for the cost of monthly internet service, you do your part to save the planet from carbon pollution, and make a little money later in your life, too.
Here’s how the numbers pencil out for an Indiana solar purchase with a small rooftop solar system:
- Installing a typical 2-kW solar system should cost about $9,563. Your loan should be for this amount.
- The electricity you'll save in the first year of operation would have cost $250, while your loan payments will cost $907.
- At the end of the year, the federal government will give you a $2,869 tax credit (30% of the up-front cost of your system). You can take the Federal credit over two years if you don't owe that much in federal taxes this year.
- When your loan’s paid off in year 15, you’ll have invested a little over $4,200, but then you'll start to see over $500 per year in savings until the end of your system’s warranty.
- For our 25-year estimate, you'll actually end up with some decent savings! We're talking $1,672 after 25 years, which will help your old, wiser self appreciate your young, forward-thinking self.
- Your system will remove as much carbon from the air as planting 45 trees per year, which is a pretty great thing, we'd say.
Keep in mind, the numbers above are based on an average home in Indiana. If you're ready for a custom quote for a solar loan, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Indiana Solar Policy Information
Ever wonder why solar seems to be everywhere in some states, but not in others? We did too.
State legislatures and public utilities commissions can enact rules to make solar power accessible for everyone. Favorable rules explain why some of the cloudiest states—New York, New Jersey, and Connecticut, are doing so well with solar, and yet some of those with the most natural solar resources—like Alabama, Mississippi, and Florida—are doing so poorly.
Below is important information about the public policy, rules, and economic reasons that affect your ability to go solar here in Indiana:
10% by 2025 (voluntary)
A Renewables Portfolio Standard (“RPS”) requires utilities in the state to eventually source at least a certain percentage of their electricity from clean, renewable sources like solar panels.
Indiana unfortunately lacks a true RPS, but legislators have recently started at least moving in the right direction. In May 2011, Indiana passed the Comprehensive Hoosier Option to Incentivize Cleaner Energy (“CHOICE”) program. CHOICE sets a voluntary goal of 10% clean energy by 2025 (based on 2010 production levels). Utilities that elect to participate in CHOICE are eligible to receive incentives from the state to help pay for the cost of CHOICE-compliant projects like Indiana solar panels. The program could be even better if it actually, y’know… REQUIRED utilities to participate—something most other states have done.
The program launched in January 2012. No reports on utilities opting into the program or their progress have been reported as of yet. Utilities that do opt in are expected to meet the CHOICE goals in 3 stages: an average of 4% qualifying clean energy between 2013 and 2018; 7% between 2019 and 2024; and finally 10% by 2025.
A mandatory Indiana RPS would be critical to strong renewable energy policy. Utility companies aren't really all that gung-ho about you producing your own power. After all, it costs them money when you use less of their electricity. They also don’t naturally want to give you big payments for energy you're feeding back into the grid. The main reason the utilities are aiding your transition to lower electric bills and offering you incentives to put solar on your roof is because the state forces them to. If the utilities don't hit their RPS numbers, they have to pay large fees back to the state.
What's an RPS? Your state legislature paves the way for strong solar energy incentives to flourish by setting standards for renewable energy generation within their territories. Those standards are called the state’s renewable portfolio standard (RPS). If utility companies do not meet these standards, they must pay alternative compliance fees directly to the state. Many utilities then determine the best ways to source their energy from renewable sources that are less expensive than this fee.
An RPS is a mandate that says "Hey utilities! Y'all now have to make a certain percentage of your electricity from renewable sources. If not, you'll have to pay us huge fines." The consequences are good, because utilities usually try to meet these RPS standards by creating solar power incentives for you, the homeowner.
RPS solar carve out
The best states for solar mandate that a certain percentage of the RPS comes directly from solar energy. Without a mandatory RPS in Indiana, this is another area that falls short. If an RPS contains specific carve-outs for clean and efficient technologies like solar panels, or mandates for the environmentally necessary increases in distributed generation, you see even stronger incentives for residential solar power.
What's a solar set aside? A solar set aside guarantees a specific portion of the overall renewable energy mix generated comes from the sun. For those states with progressive standards, high alternative compliance payments, and clear solar carve outs, the faster those areas become ripe for solar.
Some states have higher alternative compliance fees than others, and some states have more progressive alternative energy standards and deadlines than others do.
For instance, New Jersey has an overall RPS of 22.5% by the year 2021. That requires local utilities to source 22.5% of their energy mix from renewable sources by the year 2021. Pretty good. However, New Jersey also has a specific solar set aside of 4.1% by 2028. That’s the type of firm commitment which really gets the industry rolling forward. No wonder why New Jersey is one of the hottest solar markets right now!
Indiana Electricity Prices
Indiana pays an average of 12 cents/kWh of electricity; about a penny less than the national average. That’s cheap! Too cheap.
Why is energy still so cheap? Only because most of our electricity still comes from burning millions of tons of fossil fuels. The cost of those fossil fuels in dollars and cents may be low (for now), but the environmental costs are astronomically high. New regulations on carbon emissions and dwindling supplies will likely drive the cost up over the next few decades. But while everyone else is paying through the nose for the fuels of the past, you’ll be rocking that sweet, shiny solar power system on your roof, and making money! Just remember to thank us.
Why are electricity prices so important? Because that is what solar power is directly competing against. The cost to produce power with solar is relatively constant (of course how much sun hits your area has an effect), so if you are paying $0.40 per watt for power, then you make FOUR TIMES AS MUCH as the guy or girl paying $0.10 per watt electricity.
The caveat here is that if the $0.10 per watt person has a HUGE rebate, they may be better off than the $0.40 per watt person. Because of that, states without any renewable standards tend to be heavily reliant on cheap coal for electricity, and also have very low electricity prices. When electricity prices are artificially low, that hinders the ability of solar energy to achieve meaningful payback in the state.
Indiana Net Metering
Net Metering requires your utility to monitor how much energy your solar power system produces and how much energy you actually consume, and make sure you get credit for the surplus.
Indiana net metering standards call for surplus energy production to be applied as a credit on your next monthly bill. Credits can be carried over indefinitely, but there are no provisions forcing the utility to cut you a check if you continually run a surplus.
Overall we gave net metering in Indiana a B because of system size caps that may prevent larger customers from meeting all of their on-site energy needs, and aggregate circuit capacity limits that may prevent everyone who wants to take advantage of net metering from doing so. That said, net metering is fairly strong for residential customers, and with 40% of current net metering capacity reserved for residential use, you shouldn’t have any problems getting into the program.
What is net metering? Net metering is the billing arrangement where you can sell excess electricity back to your utility for equal the amount you are charged to consume it. The more customer friendly net metering policies, the higher the grade.
The grade here specifically reflects individual solar system capacity, caps on program capacity limits, restrictions on “rollover” of kWh from one month to the next (yep just like cell phone minutes), metering issues (like charges for new meters), Renewable Energy Credit (REC) ownership, eligible customers and technology (the more renewables the better), being able to aggregate meters across the property for net metering, and safe harbor provisions to protect customers from solar tariff changes.
Indiana Interconnection Rules
Interconnection standards are strong in Indiana as well. Systems under 10 kW (i.e. most residential systems) fall into Level 1 of the tiered system. Level 1 systems do not pay any fees for application or interconnection review, and utilities may not specify any additional requirements for you to get onto the grid. The only thing we’d like to see changed for Level 1 standards is a prohibition on the requirement of a redundant external disconnect switch. Currently that requirement is at the utility’s discretion.
Interconnection rules are a little technical, but they basically allow you to “plug in” to the electric grid with solar panels on your roof. The more complex, out of date, or nonsensical the state rules are for plugging into the grid, the lower the grade.
Specifically, the grade reflects what technologies are eligible, individual system capacity, removing interconnection process complexity for smaller systems, interconnection timelines and charges, engineering charges, prohibiting the requirement of unnecessary external disconnects, certification, spot interconnection vs. wide area interconnection, technical screens, friendliness of legalese, insurance requirements, dispute resolution, and rule coverage.
Solar Incentives in Indiana
Indiana Solar Power Rebates
Indiana solar panel rebates are extremely limited as well. In fact, in the entire state only IP&L offers a rebate on the installation of a residential solar power system, and the rebate program is set to expire at the end of 2014. If you’re an IP&L customer, you are eligible for a solar power rebate of $1,000/kW, up to $4,000.
How do solar rebates work? Similar to getting a rebate card from your local big box store for a dishwasher purchase, state legislatures also provide rebates for solar panel purchases to spur on investment and create new jobs. If you purchase the solar panel system yourself, you qualify for this free cash, which many times is a lump payment back to you. Some solar installers like to take this amount directly off the total installed price, and they'll handle the paperwork for you to make things a lot less complex.
The availability of state and utility rebates were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The better the rebates, the higher the grade.
Indiana Solar Power Tax Credits
There is currently no tax credit for Indiana solar panels. Legislators are missing an easy and essential opportunity to incentivize clean energy. This is especially true given the bleak solar rebate and performance payment pictures.
About state solar tax credits: State tax credits are not technically free money. However, they are 'credits' and not 'deductions' which means that if you have the tax appetite to take advantage of them, then they can be a 1-to-1 dollar amount off your taxes instead of a fraction of the cost of the system. So that means they can be an important factor to consider. In certain circumstances, state tax credits can provide a very powerful incentive for people to go solar.
(Keep in mind, we are not tax professionals and give no tax advice so please consult a professional before acting on anything we say related to taxes)
The availability of personal tax credits for solar energy were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the tax credit amount, the higher the grade.
Solar Power Performance Payments
NIPSCO only $0.17/kWh
Performance payments are limited for Indiana solar panels. In fact, customers of only one Indiana utility are eligible: Northern Indiana Public Service Corporation (“NIPSCO”). NIPSCO offers a feed-in tariff (i.e. “what they pay you for your energy”) of $0.17/kilowatt-hour (“kWh”) of solar energy produced. The tariff is a good deal for homeowners with solar, considering you pay about two-thirds of that price for electricity from NIPSCO in the first place.
In essence, you'll be getting paid 5 cents per kWh on top of saving the money on electricity generated by the system. How much difference does that make? Well, it'll put about $312 in your pocket every year on top of the usual savings with solar, which reduces your system's payback timeframe by 3 years. That's pretty swell, so thanks, NIPSCO!
The contract agreement with NIPSCO can last up to 15 years.
Explanation of performance payments: Performance payments represent a big chunk of the financial rationale for going solar, and in many instances they make your decision a wise one. For certain states, if you’ve got solar panels on your roof, not only will you be cutting your electric bill down to size, but you'll be getting paid additional cash from your utility company. Pretty awesome, huh? Not only are you generating electricity for yourself, freezing your own popsicles with sun, and feeling like you’re doing something smart for your children or any of the other 4 reasons people go solar, but you are getting PAID!
Utility companies are paying people with solar panels on their roofs because their states say they have to, otherwise they will pay a fee. Therefore, the payment amount to homeowners is typically a little bit less than the amount they would be billed for by the state. For states with these alternative compliance fees, Solar Renewable Energy Credit (SREC) exchanges have popped up. In the above chart, we outlined an estimate of yearly payments a homeowner might expect from the utility company for the SREC credits from their solar energy system.
Expected SREC payments were calculated by using the latest trade values in the SRECtrade database. The availability of feed-in tariffs were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the expected monthly payments, the higher the grade.
If you don’t know what an SREC is, or how they work, check out this great SREC video
Property Tax Exemption
Thankfully Indiana does offer tax exemptions to help make solar power more attractive. First up, you are 100% exempt from all property taxes associated with the increase in home value caused by installing a solar power system. And there is an increase. That’s going to save you a pretty nice chunk of change every year.
About solar property tax exemptions: Property tax exemption status is a pretty big factor when putting together your investment considerations. Many argue that solar power adds approximately 20 times your annual electricity bill savings (if you are owning the system and not leasing. Leasing still has a positive impact on the ability to sell your home though, in our opinion).
For many average-sized solar power systems on a house, that can mean $20,000 to your home value. (Edit April, 2014: Some companies, like Solar Mosaic, are starting to offer traditional style equity-based home loans for such a thing). An additional $20,000 in property tax basis in many states amounts to a big chunk of change owed back to the state. However, many states have complete exemptions from added taxes when you install solar on your home!
The availability of a property tax exemption for solar energy was also sourced from the Database of State Incentives for Renewables and Energy Efficiency. The stronger the tax exemption, the higher the grade.
Sales Tax Exemption
You also are exempt from all sales tax (that’s 7% here) on the purchase of your solar power system, which is a really nice benefit in a state without much going for it in terms of solar policy. If all this is sounding complicated and discouraging, don’t worry – the solar installers we partner with can take care of all these details for you and make sure you save the most money possible.
What's the deal with solar power sales tax exemptions? When states give you a sales tax break on solar, we notice. You should too. State sales tax exemption status for the purchase of solar energy systems were sourced from the Database of State Incentives for Renewables and Energy Efficiency. Sales tax exemptions, if present, were all 100%. A handful of states are completely exempt from sales tax regardless, and therefore received ‘A’ grades by default (OR, DE, MT, AK, and NH).
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The consensus on Indiana solar power rebates and incentives
Indiana has a lot of work to break into the list of the top states for solar. But we know you can do it, Hoosiers! Do we have to start throwing chairs around here!? As we said up front, there is still a lot of work to be done, but progress is progress, even if it’s only minimal. To make more progress, legislators should start with a stronger, mandatory RPS. If you add in a statewide rebate program for Indiana solar panels and/or a really good feed-in-tariff like NIPSCO offers, that’d really improve payback timeframes statewide. Until those or other improvements happen, however, we still have Indiana rated as a “C.”
Again, if you are confused about how these numbers work and would like some personalized assistance or a quote of your own, simply connect with our network of solar experts. They’ll help sort out all the pricing, get you access to special deals, and they’re super friendly to boot!