Electric Bill Before Solar
Electric Bill After Solar
Est. Solar Payment
Here's a typical electric bill before even considering solar panels. That's a nasty outlay of cash. Imagine what you could do with all that immediate savings above every month.
Doesn't this look a little better? Yes, of course it does. Imagine getting this bill in the mail instead. Whew!
Now, while you have a drastically cut back power bill, you now have a solar lease payment. Essentially, you're renting out your rooftop to a company who then pimps it out with solar panels. Then, you pay a lease payment to them for the power it produces. In each case, this payment added to your existing power bill will be lower than your previous bill, netting you instant savings with nothing down out of pocket! How awesome is that?!
Leasing vs. Investing in Home Solar
To lease, or not to lease? Willsolar Shakespanels would be proud we're discussing this. Here's the basic deal. If you choose to lease your panels, you benefit from no out of pocket costs and an immediately reduced total electricity payment. Because of this, many regard this option as a no-brainer, since there isn't any downside to think of. The only hiccup you'll start to experience is when you consider the long term financial benefit of owning the solar panel system yourself.
In many situations, if you can afford the outlay or can easily secure financing, the cost of the install becomes an investment with a return outpacing even the strongest performing mutual funds. In addition, there's significantly less principal risk, since the energy credits you will be producing are tied to the sun coming up in the morning instead of our financial markets!
Additionally, if you go the leasing route, you must forfeit all the credits and performance payments you would receive by owning the system yourself to the solar leasing company (after all, that's how they can afford to give you such a no-brainer proposition in the first place). A discussion of the performance payments follows.
10% by 2015 (voluntary)
What's an RPS you ask? State legislatures pave the way for strong solar energy incentives to flourish. How? By stipulating 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.
RPS solar carve out
A solar “set aside” is a mandate the state sets in its RPS. This 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 as you can see above, 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 2020. That requires local utilities to source 22.5% of their energy mix from renewable sources by the year 2020. Pretty good. However, New Jersey also has a specific solar set aside of 2% by 2021. That’s the type of firm commitment which really gets the industry rolling forward. No wonder why New Jersey is the hottest solar market right now!
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.
The 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.
State Solar Rebates
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.
State Solar Tax Credits
While state tax credits are not technically free money, they can be an important factor consider, especially if you have some personal tax liability. In certain circumstances, state tax credits can provide a very powerful incentive for people to go solar.
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.
State Solar Property Tax Exemption
$50,000 or 70% of the assessed value of eligible property, whichever is greater
Property tax exemption status is a pretty big factor when putting together your investment considerations. Solar will add approximately twenty times your annual electricity bill savings immediately to the value of your home upon installation. for many 5kW systems, that amounts to about $20,000. 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 sourced from the Database of State Incentives for Renewables and Energy Efficiency. The stronger the tax exemption, the higher the grade
State Solar Sales Tax Exemption
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).
State 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.
Solar 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 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
5kw Solar System Purchase Payback Time
If you decide not to go with the leasing option, we've calculated the amount of time it would take for your home solar panel system to pay for itself if you put up the cost of the install out of pocket or financed it yourself. This calculation takes into account all the rest of the incentives below, and assumes you meet all the criteria to take advantage of them (e.g. - having a tax appetite, south facing roof with limited shade, etc.)
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With Mount Rushmore, the Crazy Horse Memorial, the Badlands, and the Black Hills, who wouldn’t want to be out in the sun in South Dakota. Oh yeah, it’s the home of the Sturgis Harley rally too. With people coming from all around the world to visit, South Dakota should use renewable energy to keep powered up while protecting its great natural environment. Here’s what the state legislature has done to promote clean solar energy so far…
South Dakota’s Renewables Portfolio Standard
A Renewables Portfolio Standard (“RPS”) 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 important because it forces utility companies to promote conversion to renewable energy. That generally means free money for you in the form of rebates and performance payments when you switch to solar power.
South Dakota has set a voluntary goal of 10% renewable energy by 2015. That’s right, voluntary; there are no penalties or other sanctions for utility companies that do not meet the 10% goal.
Unfortunately the patterns we’ve seen elsewhere is repeated here: A voluntary RPS simply is not enough to spark meaningful incentives for solar power. For instance …
South Dakota Power Solar Performance Payments and Rebates
South Dakota lacks any performance payments or utility rebates for solar power. If the RPS set mandatory levels of renewable energy production, we can guarantee the utility companies would offer incentives to help you make the switch to solar. How do we know? It’s worked everywhere that a real RPS has been implemented!
South Dakota Solar Power Tax Credits
The legislature isn’t picking up the slack either; there are no tax credits for installing a solar power system here.
While you won’t save money on your state income taxes, you will save bags and bags of cash with South Dakota’s property tax exemption. All solar power systems less than 5 megawatts (all but the very largest solar power systems), are assessed in the same manner as a conventional energy system (even though the solar power system is actually worth significantly more because of long-term savings on your electric bill). That’s what we’re used to seeing in a property tax exemption. South Dakota then takes it one dramatic step farther: The first $50,000 or 70% of the assessed value of the property used for producing solar power (i.e., your home), whichever is greater, is exempt from property taxes for four years. That may well be the strongest property tax exemption we’ve seen in the country.
It may seem like nit-picking given the thousands the property tax exemption is going to save you, but we’d like to see lawmakers add a sales tax exemption as well. Especially because the lack of utility rebates, that 4-6% a sales tax exemption would save you can really add up, typically to savings of more than $1,000 on the typical residential solar power system.
South Dakota pays an average of 10.47 cents per kilowatt-hour (“kwh”) of electricity, almost a full cent below the national average of 11.43 cents/kwh. We know you like lower bills now, but here at SPR we actually think electricity is far too cheap. That’s right, too cheap! Electricity prices are kept low by burning millions and millions of tons of earth-killing fossil fuels. When the environmental costs of burning all that oil and coal really start to take their toll, we’re going to pay for all of the cheap electricity in ways much more important than monthly bills (though monthly electricity bills will inevitably rise as well …) Of course, you’ll be looking like a genius to all your friends, because you made the early switch to producing your own cheap, reliable solar power!
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, and make sure you get credit for any surplus. South Dakota currently lacks any statewide regulations governing net metering, or (more importantly) ensuring that utilities offer net metering in the first place.
Curiously for a state without standard net metering South Dakota does have statewide interconnection standards governing how you get tied onto the grid. The standards are solid overall, adopting the same 4-tiered system we’ve seen in other states. There is, of course, always room for improvement. First we’d like to see requirements for a redundant external disconnect switch prohibited. Currently that decision is left to the utility. We’d also like to see insurance requirements eliminated for residential systems. Currently a tier 1 system (those under 10 kw, which covers most residential systems) require only “proof of adequate homeowners, general liability or commercial liability insurance sufficient to insure against all reasonably foreseeable direct liabilities given the size of the small generator facility.” While that requirement is certainly less onerous than others we’ve seen, we think that any insurance requirement is unnecessarily constraining on small systems and their very low risk of accident or injury.
Example 5kW (5000 Watt DC STC) Solar System Return on Investment in South Dakota
Installing a typical 5kW solar system should start at about $25,000. Don’t worry – even without state incentives, you can still knock a big chunk off the price.
- Since the feds calculate their incentive based on actual out of pocket costs, no state incentives means a bigger federal tax credit. Subtract $7,500 (30% of $25,000) for a new price of $17,500.
- After the tax credit we subtract your first year’s energy savings, which we estimate to be about $694. That brings your cost after the first year to $16,806.
- 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 16 years. Even with that somewhat slower payback time frame, you can still expect to get about 9 years of profits (yes, profits) out of your solar power system. We estimate those profits to be $16,708 through 2036.
- In addition to those direct wallet-fattening savings, you also increased your home value by $13,883; and don’t forget about those property tax benefits we talked about above!
- In addition to all that cash (and home value), you’ve created some green for the earth as well by not using all that fossil-fuel backed electricity. In fact, the fossil-fuel energy you’re not using is the carbon-saving equivalent of planting 117 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!
The consensus on South Dakota solar power rebates and incentives
Despite our reputation for cold weather, we actually get a lot of sun here. As much as most parts of Florida in fact. Unfortunately that tremendous solar power potential is being squandered. The lack of state or utility backed incentives is keeping costs high (compared to solar-friendly states) for homeowners like you to make the switch, and keeping payback time frames slow. Even without any incentives, solar power is an excellent investment, but the legislature should be harnessing our natural solar resources to help bring down initial costs. That property tax exemption is tremendous, but without any mandatory renewables standards, or any state incentives in place, we can’t give South Dakota anything but an “F” at the moment.
Our older archived South Dakota Solar Power costs and savings breakdown images for reference: