2012 Indiana Solar Power Update
When we last check 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.
Indiana’s Renewable Portfolio Standard
A Renewables Portfolio Standard is a law or other piece of regulation that mandates that a certain percentage of at state’s energy production comes from renewable resources by specified target dates. A strong RPS is the backbone of strong solar policy and almost always motivates the utilities incentivizing small-scale renewable energy like residential solar panel systems.
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 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.
Indiana Solar Panel Performance Payments
Performance payments are limited for Indiana solar panels. In fact, only customers of two utilities are eligible: Northern Indiana Public Service Corporation (“NIPSCO”) and Indianapolis Power & Light (“IP&L”).
NIPSCO offers a feed-in tariff of $0.30/kilowatt-hour (“kwh”) of solar energy produced. Unlike a lot of other feed-in tariffs we’ve seen, NIPSCO also allows you to hold back up to 1 MW of energy for on-site use (i.e., to power your home), and will still pay you at $0.30/kwh for any surplus.
IP&L also offers a feed-in tariff through its Rate REP program. Rate REP only offers payments starting at a minimum system size of 20kw; while residential systems are eligible, that size requirement probably excludes most single-family homeowners. If you do have a system over 20kw, you are eligible for payments of $0.24/kwh.
Indiana Solar Panel 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. If you’re an IP&L customer you are eligible for a solar power rebate of $2.00/watt ($2,000/kw). The maximum rebate is $4,000.
Solar Tax Credits in Indiana
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.
Indiana Solar Panel Tax Exemptions
Thankfully Indiana does offer tax exemptions to help make solar power even 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 (twenty times your annual electricity savings – covered in more detail later). That’s going to save you a pretty nice chunk of change every year. You also are likely exempt from all sales tax (that’s 7% here) on the purchase of your solar power system. We say “likely” because the exemption has not yet been officially determined to cover solar energy production. However, the wording of the statute and the recent ruling determining wind energy production to be eligible both strongly suggest your solar power system qualifies as well. 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.
Utility Prices in Indiana
Indiana pays an average of 10.71 cents/kwh of electricity. That’s cheap! More than half a cent cheaper than the national average of 11.43 cents/kwh in fact.
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. Switching to solar power now saves you money (and helps save the planet); when scarcity and environmental costs drive up the monetary costs of fossil-fuel based energy, the early switch to solar power is going to be saving you piles and piles of money. Just remember to thank us.
Indiana Net Metering and Interconnection
Net metering requires your utility to monitor how much energy your solar power system produces and how much energy you actually consume. If you produce a surplus, you get credit for it in payment or bill credits (or both).
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.
Interconnection standards are strong in Indiana as well. Systems under 10kw (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 disconnection switch. Currently that requirement is at the utility’s discretion.
5kW Example Return on Investment in Indiana
What do all the numbers add up to for you? Let’s take a look at a typical 5 kilowatt installation in the Indianpolis area.
Installing a typical 5kW solar system should start at about $25,000. Don’t worry, that’s going to come down a lot in year 1.
- First we subtract the solar power rebate available from IP&L straight from the top. Your 5kw system will get the full $4,000 back, dropping your costs to $21,000 already.
- The federal government calculates the 30% federal solar tax credit based on out of pocket costs, i.e. after the IP&L rebate. Subtract $6,300 for a new price of $14,700.
- After the tax credit we subtract your first year’s energy savings, which we estimate to be about $627. That brings your cost to $14,073, a price drop of nearly eleven thousand already.
- With a conservative estimate for the future rise of electricity prices, you can expect your new solar power system to pay for itself in about 15 years. After that you’ll be turning a profit (yes, a profit) for the rest of the life of your solar panels (typically about 25 years). We estimate that profit to be about $16,000 through 2037.
- In addition to all that money directly in your wallet, that new solar power system also increases your home value by $12,531, all of it tax free.
- Not to be forgotten, you’re also pumping out a bunch of green for the environment. Tree green that is. The fossil-fuel energy you’re not using is the carbon-saving equivalent of planting 103 trees a year, every year your solar power system is humming.
These numbers are estimates. Your home is unique and how much power you generate and how much money you save depends on that uniqueness. The best way to find out how much cash switching to solar can save you is to get one of our free quotes, and an expert installer in your area can draw up a home-specific estimate for you. Your quote is 100% free (yes, that’s right, 100% free) and you can get as many of them as that smart shopper in you desires!
Indiana Solar Consensus
Overall things are trending in the right direction 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, that’d really be something. In Indianapolis for instance, even the moderate $4,000 offered by IP&L is enough to bring payback timeframes to a high, but not off-the-charts bad 15 years. A larger state solar power rebate program could instantly improve payback timeframes statewide. Until those or other improvements happen, however, we still have Indiana rated as a “D.”