Your 2019 guide to getting solar panels for your home in Alaska
This page is a complete guide to the complicated and sometimes confusing process of installing solar panels on your Alaska home. Since there's a lot to consider, we've separated the page into sections to help you find what you are looking for. If you find this page useful, please share it with someone who might also find it interesting!
** What's new for 2019 **
State legislators here have kept a pretty low profile on renewable policy, particularly with regard to solar power. Alaska is the final frontier and remote settlements mean many homes are built off-grid, i.e. ideal for self-sustaining renewables like small-scale solar. This, along with rising fuel costs, makes Alaska an ideal candidate for solar power, and the legislature should adopt aggressive measures to promote solar use by its residents. Unfortunately, the legislature has failed to provide strong solar power rebates and other incentives as of yet, and in the Land of the Midnight Sun no less! Oh, the irony.
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!
The Solar Strategy section is focused on the 3 ways of paying for solar in Alaska, so you can decide which is best for you. We've created a tool that asks you a few questions and recommends whether you should pursue a solar lease, loan, or outright purchase. Then, we provide detailed analysis of how each works.
The Policy Information section contains all our latest research on the rules set by lawmakers and the Public Utilities Commission, which determine how easy it is to go solar in Alaska. These policies and rules govern everything from renewable energy mandates to interconnection, and have a huge effect on the viability of solar.
Finally, the Solar Incentives section includes information about money-back rebates and grants, tax credits, and tax exemptions for going solar in Alaska.
Click any of the boxes below to go to that section of the page, or scroll down to read the page in order.
|Your Alaska Solar Strategy|
|Comparing Solar Investment Options|
|Paying Cash for Solar in Alaska|
|Solar Loans in Alaska|
|Solar PPAs in Alaska|
|Solar Purchase Payback Time in Alaska|
|Alaska Solar Policy Information|
|Renewable Portfolio Standard (RPS)|
|RPS Solar Carve-Out|
Your Solar Strategy in Alaska
Figuring out the best way to go solar in Alaska 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:
How to pay for solar panels in Alaska
The average homeowner in Alaska uses just over 7,000 kilowatt-hours (kWh) of electricity every year, and spends around $1,550 for it. Alaska has some of the highest electricity costs in the nation, so every kWh you can save with solar goes further here than in other places where electricity is cheaper.
To make enough electricity to offset most of your annual bill, we estimate you'd need an 8.5-kW solar system, consisting of 26 standard 325-watt panels. Our calculations assume a cost-per-watt of $3.85, which is quite a bit higher than most places in the lower 48, but that's how the ball bounces for folks up in the tundra. If you can find an installer who offers costs lowaer than $3.85/W, your numbers will be better than our estaimates below.
The chart above shows the 25-year returns for an investment in the average home solar system, whether you choose to purchase the system with cash or pay over time with a loan. As you can see, the purchase option leads to the highest 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 a little more than your savings, and you won't quite come out ahead in the end. Such are the vagaries of a home solar system in Alaska.
Read on to find out more about each option.
Option 1: Paying cash for solar
So you’ve got some cash and you’re ready to buy. 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 and electricity savings bring your first-year costs way down.
In our example, you put down $32,725, 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 almost $9,900 in income.
But even though that sounds huge, look into the solar loan option below, because taking a loan to buy an income-generating asset means you'll be making money as you pay for it.
Here’s how the numbers pencil out for an Alaska solar purchase with a 8.5-kW rooftop solar system:
- Installing a typical 8.5kW solar system should start at about $32,725. 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 $9,818 (30% of $32,725) for a new price of $22,908.
- After the tax credit we subtract your first year’s energy savings, which we estimate to be about $1,004. That brings your cost after the first year to $21,904.
- By the time your system pays itself back in year 19, you’ll be seeing over $1,500 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 $9,846.
- And don't forget... your home's value just increased by almost $23,000, too (your cost after the tax credit)!
- 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 121 trees a year, every year your solar power system is humming.
Keep in mind, the numbers above are based on an average home in Alaska. 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.
Option 2: Using a loan to pay for solar
The chart above might look a little funky, but considering the tax credit in year 1, it might actually be a better option than cash. That’s because a solar investment with a loan relies on using someone else’s money for the purchase price, while earning you a tax credit in year 1. The cost is similar to a new car loan, but because solar makes you money, it's a tremendous investment. 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 $33,000, with a fixed rate of 5% or lower and a 15-year repayment period.
- You love making money without much risk
The reason this works so well is that you don’t have to put any money down, but you still get all of the incentives that go along with buying solar. You'll get the 30% federal tax credit and the energy bill savings will start right away. The bad news is your loan payments will be higher than those energy bill savings, so you'll end up spending about $167/month for solar in the first year. That difference will come down each year as electricity prices rise, but your system will keep on producing about the same amount of electricity.
Here’s how the numbers pencil out for an Alaska solar purchase with a HELOC:
- Installing a typical 8.5-kW solar system should start at about $32,725. 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 $1,004, but your loan payments will total $3,004, for a difference of $2,000, or about $167 per month.
- That's not so bad when you consider your tax savings for the year will be $9,818! You'll come out over $7,800 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 19, you’ll start see over $1,500 per year in savings until the end of your system’s life.
- For our 25-year estimate, you'll see a total net cost of around $2,500, but the early windfall still might make it worthwhile.
- Your system will also be good for the environment. Operating it will be like planting 121 trees, every year for 25 years!
Keep in mind, the numbers above are based on an average home in Alaska. 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.
Option 3: Buying the electricity, not the panels with a Power Purchase Agreement (PPA)
Alaska does not offer solar Power Purchase Agreements or leases. Perhaps it would be a good idea to contact a solar advocacy organization and ask them to fight for solar in your state!
Alaska 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 Georgia—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 Alaska:
A Renewables Portfolio Standard ("RPS") is a law or other piece of regulation that mandates that a certain percentage of a 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 solar power rebates and performance payments when you make the switch.
Unfortunately Alaska lacks any state or local Renewables Portfolio Standards. As we’ve seen in other states that lack an RPS, no targets (and no penalties for missing targets, i.e. compliance fees) for renewable energy production has translated into very little being done to promote solar power here.
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. Read more about Renewable Portfolio Standards.
RPS solar carve out
No RPS means no solar carve out.
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!
Alaska Electricity Prices
Alaskans pay quite a bit more than the national average for electricity, and those rates are rising. Alaska’s average electricity price is 22 cents/kWh; well above the national average of 13.6 cents/kWh. That means while you currently see larger bills, you could be seeing bigger savings!
Higher electricity prices means greater opportunity to save money by producing your own clean, earth-friendly solar power. Not to mention the fact that the rising environmental costs and dwindling supplies of fossil fuels is going to lead to even faster rises in energy prices, likely sooner rather than later. When energy prices start going up and up (and up), you’re going to be saving more and more (and more) money for making the switch to solar now.
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.
Alaska Net Metering
Net metering requires your utility to monitor how much energy your solar power system produces and how much energy you actually consume to make sure you get credit for the surplus.
Unlike many states, Alaska has statewide net metering standards in place. Utilities are required to offer net metering to all systems up to 25 kW. All surplus energy is credited to your next month’s bill at the retail rate, and all credits may be carried over indefinitely.
That’s a pretty great net metering law for residential customers. We gave net metering a “C” overall only because of the system size limit. We’d like to see that 25 kW cap raised significantly to allow commercial, industrial and other high-demand customers to meet all on-site electricity generation needs through solar power.
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.
Alaska Interconnection Rules
In 2011, the Regulatory Commission of Alaska (RCA) passed uniform guidelines to connect your solar panels to the grid. While the RCA’s standards are not the fullest we’ve seen, they do lay a foundation for getting you onto the grid.
Each utility is required to draft a standard interconnection agreement of no more than two pages. A utility may require a customer to have liability insurance if the insurance is easily available at a reasonable cost, but the utilities can not require you to install an external disconnect switch. Here again we’d like to see the 25 kW system size limit raised to allow for larger customers to take advantage of net metering savings.
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 Alaska
Next to high electricity prices and net metering, solar incentives have traditionally been the most important factor for whether home solar power makes financial sense in a state. In the past, some states with otherwise lousy policy had tremendous incentives that drove down the up-front cost of going solar so much that homeowners could save oodles of money even without net metering or a good RPS.
These days, the big incentive most people can get is the Federal Solar Tax Credit that earns you 30% of your costs back after just 1 year. State incentives play less of a role than in the past, but some really good ones are still out there, ready to help homeowners go solar and save money before you know it.
Let's see how Alaska measures up:
Alaska Solar Power Rebates
Without a Renewables Portfolio Standard, little has been done by the utilities companies to promote solar power and other renewable energy alternatives. The consequences of this legislative inaction can be seen in Alaska’s lack of rebates, tax credits, and widespread performance payments.
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.
Alaska Solar Power Tax Credits
No State Income Tax
Since Alaska doesn’t have any income tax, there aren’t any solar tax credits to redeem! Luckily, you will still benefit from the 30% Federal Solar Tax Credit. There's no cap on the federal tax credit and fortunately for Alaska, having no state rebate to deduct means a larger tax credit coming your way. Sample calculations follow below -- keep scrolling!
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
Varies, $1.50/kWh maximum
In 2005, the Golden Valley Electric Association (GVEA) launched a program to connect local patrons and producers of renewable energy called Sustainable Natural Alternative Power (Oh, SNAP). This program incentivizes local producers on a per kilowatt-hour basis up to 25kW. The exact rate of compensation varies with the amount of funds contributed by GVEA supporters, however, and has a maximum payout of $1.50/kWh, which would be HUGE, but in reality, the program is funded by contributions to GVEA, and right now, the incentive is just $0.09.
SNAP producers can do one of two things with their almighty power: sell all produced energy to the utility or integrate their setup with net metering to sell only surplus electricity (after home usage) back to GVEA. Either way, producers will be expected to pay some upfront fees amounting to about $110 and an ongoing monthly meter fee of $3.65.
Unfortunately the SNAP program is the only performance payment available in Alaska. Even worse, as you are about to see, the GVEA SNAP program is almost the only incentive available to promote residential solar power here, period.
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.
We've got a great article if you like to read more about what SRECs are and how to earn them.
Property Tax Exemption
Amid the cold empty plain of (missing) solar power incentives, there is one lonely piece of legislation that authorizes municipalities to exempt residential solar power systems from taxation, i.e. exempts the value the solar power system adds to your home from being counted in property tax calculations. Note that we said the state legislation authorizes municipalities to exempt your solar power system from property taxes. The law does not require that municipalities do so. Be sure to ask the expert installer we partner you with about whether or not your town offers such an exemption.
About solar property tax exemptions: Property tax exemption status is a pretty big factor when putting together your investment considerations. Some argue that solar power adds approximately 20 times your annual electricity bill savings (if you own the system and are not leasing). Other studies seem to indicate a home price premium about equal to solar panel cost, minus any incentives like the federal solar tax credit.
For many average-sized solar power systems on a house, that can mean adding $20,000 to your home value. And if you don't believe us, believe the bean counters: Many banks and solar financing companies now offer traditional style equity-based home loans for installing solar. 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. Grades in this category are basically all-or-nothing. Either you got it or you don't. Thankfully, many states have "got it.".
Sales Tax Exemption
No State Sales Tax
One of the simplest ways for state legislature to encourage small scale clean energy adoption is to declare solar panel equipment exempt from state sales taxes as many other progressive states have done. Fortunately for Alaska, there is no sales tax to begin with. Party on!
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).
The consensus on Alaska solar power rebates and incentives
Despite high electricity costs nearly screaming for an efficient (and clean) option like solar power, solar policy here is sadly lacking. It all starts with the RPS, and just like every other state we’ve seen without minimum targets for renewable energy production, Alaska has done little to nothing to promote solar power. With payback timeframes and year 1 discounts lagging, the best Alaska can pull is a C grade.