At Solar Power Rocks, our dream is to turn your thoughts of solar power for your home into reality
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.
The Land of Lincoln is the 5th most populous state in the nation, and has the 5th largest state economy. With all those people and all that business going on, it'd be a shame if there weren't some extensive incentive programs for residential solar power in place. The good news is strong solar power rebates help push the payback timeframe on a solar power system to a respectable 9 or fewer years. And with the Illinois Solar Energy Association gearing up to offer performance payments to solar generators, now is a great time to get into the solar game. Take a good look at our rundown of Illinois solar power incentives below.
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 Illinois solar incentives you see below.
Your guide to going solar in Illinois
We've designed this page to be a complete guide to the complicated and sometimes confusing process of installing solar panels on a home in Illinois. Since there's a lot of important information 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!
The Solar Strategy section is all about the various financial options you have in Illinois. We've created a tool that asks you a few questions about what you hope to get out of a solar purchase and recommends whether you should pursue a solar lease, loan, or outright purchase. Then, we give you a detailed picture of how each could work for you.
The Policy Information section contains all of our latest research on the rules set by the state legislature and public utilities commission that determines how easy it is to go solar in Illinois. These policies and rules govern everything from renewable energy mandates to whether you get paid retail or wholesale rates for the extra energy your system produces, and can have a huge effect on the viability of solar.
Finally, the Solar Incentives section lists all of the available financial benefits available to homeowners who go solar. This section includes information about money-back rebates and grants, tax credits, and tax exemptions. If you're looking for what Illinois is doing to make solar more affordable for its citizens, you'll find it here.
We hope you find our work useful. If so, please help us keep our research and advocacy as strong as possible by sharing it with someone who might also find it interesting, contributing any amount you can, and by getting yourself personalized savings estimates from our trusted partner network.
Click any of the boxes below to go to that section of the page, or scroll down to read the page in order.
|Your Illinois Solar Strategy|
|Comparing Solar Investment Options|
|Solar PPAs in Illinois|
|Solar Loans in Illinois|
|Buying Solar in Illinois|
|Solar Purchase Payback Time in Illinois|
|Illinois Solar Policy Information|
|Renewable Portfolio Standard (RPS)|
|RPS Solar Carve-Out|
Your Solar Strategy in Illinois
Figuring out the best way to go solar in Illinois 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 Illinois
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 or Power-Purchase Agreement (PPA). One thing it's important to note is: solar makes you a lot of money in Illinois. Yes, we said "makes!" You see, even though the state's electricity prices are pretty low, the state gets enough sun that solar saves you big money from day 1. And solar is cheaper than ever before, which, combined with the the Feds' 30% solar tax credit, means a solar panel system pays itself back quickly and makes you lots of money over its 25-year warrantied life!
Now let's discuss that chart above. We've examined three scenarios for going solar in Illinois, including a solar PPA, buying solar with a solar loan or home equity line of credit (HELOC), or buying solar with cash. As you can see, the cash purchase option leads to the highest dollar-amount returns over time, but look a little closer. Taking a HELOC and paying for the system over time (the orange bars) means you'll spend thousands of dollars less over time, while reaping a big financial benefit in year 1.
That's because you take a loan for the system, but you still get all the benefits of paying up front. In Illinois, that means the Federal tax credit, SREC sales, and big annual energy savings. With those incentives, you'll actually come out way ahead after the first year. And even though you'll be making loan payments for 15 years, the first-year windfall is so big, you'll never actually spend any of your own money.
Finally, take a look at the blue bars. They represent a solar Power-Purchase Agreement (PPA), which is also called third-party ownership. With a PPA, the solar installation company puts panels on your roof at no cost to you, and you by the eletrciity for a little bit less then you had been paying the utility company for their dirty energy. PPAs in Illinois are awesome, because all that sunshine means you start saving money right away. Your savings may start small, but they'll finish big, because the lease cost will rise by less than the electric company's annual rate hikes. Third-party ownership is an excellent option even if you have equity or cash to put down, because it can save you tons of money!
Read more below about each of three very good options for solar in Illinois.
Net Present Value of Solar in Illinois
“Net Present What?!” Don’t panic, this isn’t an economics test. NPV is just a tool used to compare investments. Basically, it asks, “if you had X dollars to invest, which investment would get you the best return?” It relies on the idea that getting a return on your investment sooner is better than later, because you can reinvest your early profits and keep the gain train going.
We compare an investment in solar to a “what-if” investment in a Standard & Poor’s (S&P) 500 stock index fund, which has seen growth of about 7% per year over the past 25 years. We use the cost of solar in Illinois and ask “how much better or worse (in 2018 dollars) is an investment in solar than stocks?” Here's what we found for the three different ways of going solar in Illinois:
Look at all that green! A solar investment in Illinois should provide a better return than the stock market if you choose a PPA or a loan, but paying up front doesn't have the same advantage. Here's some more about how we got these numbers:
Solar PPA NPV: $1,735
Saving money without having to put anything down is always going to have a positive NPV. In Illinois, you’ll save $3,648 by paying for electricity under a solar PPA for 20 years, which is worth $1,735 in today’s dollars. Read more about PPAs in Illinois below.
Solar Loan NPV: $3,023
As we’re fond of saying, taking a loan for solar is a no-brainer, because it means paying over time for something that is also making you money, plus you get 30% of the loan value as a tax credit (cash in your pocket) after the 1st year. In Illinois, that tax credit windfall helps push the NPV of a solar loan to $3,023 better than a similar investment in the stock market. That's a huge amount of upside for a $0-down investment! Read more about solar loans below
Solar Purchase NPV: -$1,047
Want proof that a loan is the best way to go? Look at what happens if you put a huge chunk of cash down on a solar system. Don't get us wrong, a solar purchase in Illinois is still nearly as good as investing in the stock market, but you can see above what happens to NPV if you choose a solar loan instead. Unless you need to put cash into an asset, a loan is a much smarter way to pay for solar panels. Read more about solar purchases below.
Solar Power-Purchase Agreements in Illinois
A Power-Purchase Agreement (PPA) is a great way to go solar if you haven't got stacks of cash or oodles of equity in your home. With a PPA, it's possible to get solar panels for $0 down and see big savings over 20 years!
As for PPAs in Illinois: the electricity costs here aren't very high—we're at almost exactly the national average—but the solar is cheap enough that the Illinois sunshine is enough to make solar power really profitable! That means a PPA saves you money starting on day 1. For now, the payments on a 5-kW solar system should be around $617 per year, but the energy the panels generate will save you $725 per year. That's $108 you get to keep in your pocket this year, just for saying yes to solar!
And those savings will only get larger over time. As the utility company raises rates, your PPA costs will go up by a smaller amount, meaning you'll see greater annual savings. Over 20 years, our estimate shows a total savings of $3,648. And the best part is the panels will be owned and maintained by the installation company, so all you have to do is brag to the Joneses down the street about your green habits!
Here's a little more about how a Illinois solar PPA works:
Example savings in Illinois
Annual Electric Bill Before Solar
Annual Electric Bill After Solar
Est. Annual Solar Payments
Average Annual Savings
Annual Electric Bill Before Solar
Annual Electric Bill After Solar
Est. Annual Solar Payments
Average Annual Savings
Power-Purchase Agreements (PPAs) are the most popular form of what's called "third-party solar." A PPA just means your solar company owns the panels on your roof, and you pay for the electricity they produce. The numbers above show the savings with a solar PPA for an average home in Illinois. The typical electric bill before solar power is super expensive, but with a PPA, your monthly expenses will be lower. You'll be saving money and saving the planet all at the same time!
Here's an estimate of the monthly savings for a solar PPA in Illinois:
With a PPA, your solar company essentially becomes a second utility provider, only the solar electricity is sold to you at a lower rate than the fossil fuel electricity you've been buying from the electric company! Note: your PPA won't eliminate your power bill from your regular electric provider, because you'll still need energy from the grid when the sun isn't shining. But it will save you money!
The less-popular cousin of the third-party solar family is the solar lease. It's basically like renting your panels for a set monthly payment, and getting all the energy they produce—however much it is. Don't get spooked by that language, though. A typical solar lease comes with energy production guarantees that will make sure you're getting what you paid for. In fact, if you're not offered a production guarantee with a solar lease, walk away.
Here's the best part of third-party solar: whether you end up with a lease or a PPA, the installation company owns the panels and will do all the maintenance for you. Usually that means just a good cleaning every year, but if any part of that system fails, you're off the hook! That can be a great benefit to homeowners who are risk averse.
Keep in mind, the numbers above are based on an average home in Illinois. If you're ready for a custom quote for a solar lease or PPA, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Home Solar Power: PPA vs. Purchasing
To PPA, or not to PPA? 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 PPA route, you must forfeit all the credits and performance payments you would receive by owning the system yourself to the solar PPA company (after all, that's how they can afford to give you such a no-brainer proposition in the first place).
Solar Loans in Illinois
You don't need thousands of dollars sitting around to pay for solar. If you finance a solar purchase with a loan or home equity, you can still own solar panels and reap all the benefits. Heck, even if you do have the cash, getting a loan to pay for solar is by far the best option when it comes to percentage return on investment.
That’s because, in Illinois, using a loan to pay for solar is like investing in a business that's sure to succeed, and also earns you a tax break!. You'll come out thousands ahead this year, and you'll see a spectacular profit over the 25-year life of your system. The reason this works so well is that you're paying over time, but reaping all the benefits now.
In Illinois, those benefits include energy savings, SREC sales, and a big Federal tax credit. Your energy savings will offset most of the cost of the loan payments, too, which might sound like it's too good to be true... so let's take a look at the numbers.
A solar purchase like this will make sense for you if the following is true about you and your current situation:
- You have good eneough credit to qualify for a solar loan or get a home-equity line of credit (HELOC) for $21,250, with a fixed rate of 4.5% or lower and a 15-year repayment period. Don't be put off if you're offered a higher rate. It just means a tiny bit less of the thousands of dollars you'll make with solar.
- You love making money without much risk.
Here’s how the numbers pencil out for a Illinois homeowner who makes a solar purchase with a loan:
- 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 the system cost.
- The electricity you'll save in the first year of operation would have cost $725, but your annual loan payments will be $1,886, meaning you would spend $1,161 on solar this year, but...
- You'll get a huge tax break! Uncle Sam will give you 30% of the cost of your system back as an income tax credit, which in this case means $6,375 you won't be paying the Feds this year, and on top of that, the state enables you to sell your SRECs to the utility companies, netting an extra $1,016 in solar income this year.
- All those incentives mean you'll come out $6,229 ahead after year 1, and it's smooth sailing from then on out. You'll be able to sell SRECs and keep turning a profit until 2021, after which your yearly net cost (electricity savings minus loan payments) for solar will be $1,089 (about $91 per month). The difference between payments and savings will shrink as the cost of electricity rises but your loan payments don't.
- By the time you've paid off your loan in 2031, you'll see yearly savings of over $1,000. After 25 years, your total profit will be $6,430! Really awesome for a $0-down investment.
- On top of the green that will stay in your pocket, your system will mean green for the environment, too—101 trees-worth, every year!
Keep in mind, the numbers above are based on an average home in Illinois. 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.
Buying Solar in Illinois
An outright purchase used to be the only way to get solar, and it's still the option that provides the "biggest" financial returns. The reason we put "biggest" in quotes here is because it's technically true—with lower equipment costs, the big Federal tax credits, and the Illinois Solar Renewable Energy Credit (SREC) market, solar costs less than ever before, and a solar installation pays itself off in 8 years. But if you're interested in solar as an investment, taking a loan to pay for the system is a better option.
With a loan, you can make monthly payments instead of putting $21,250 down on a solar system, which means you save money on electricity as you pay down the cost of your panels. If you have good credit or equity in your home, and you can secure an interest rate of 4.5% or less, a loan is the option to go with. It's like being able to start a business that is sure to succeed, just by having a roof. Read about loans below.
If you've got cash and you prefer to pay up front, you'll have to plunk down $21,250, but tax breaks and energy savings will erase a bunch of that after just 1 year. Over 25 years, your system will have produced almost $13,500 in income, after your system cost is paid back. The reason this works is that solar offsets your electricity costs—enough to save you $725 in year 1—and it just goes up from there. As the electric company raises rates, you save more and more, and more...
Here’s how the numbers work for a 5-kW rooftop solar system in Illinois:
- Installing a typical 5-kW solar system should start at about $21,250. That's cheaper than solar has ever been, but it's still a big investment. Don’t worry, because after tax breaks and energy savings, your first-year costs will be considerably less than that.
- Next, the Federal government offers a great income tax credit of 30% of post-rebate system costs. That's $6,375 you won't be paying to Uncle Sam this year, and it brings your first-year investment down to $14,875.
- And during the year, your system will generate enough electricity to offset $725 of your bill. But Illinois law also enables you to sell your SRECs, at a price of about $168 a piece. That's another $1,016 in income when all is said and done, and that means a final first-year cost of just $13,134 for solar.
- You'll be able to keep selling SRECs until 2021, and your electricity savings will quickly pile up, meaning your system will pay for itself in just 13 years. But your panels carry 25-year warranties, and they'll likely keep on kicking out kilowatts for a few decades or more. You'll see a total net profit of $13,473 by the end of that warranty. The internal rate of return for this investment is a solid 7.4%.
- And here's a nice bonus to consider: your home's value just increased by over $17,000, too—your expected 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. It's like planting 106 trees a year, every year your solar power system is humming.
Keep in mind, the numbers above are based on an average home in Illinois. 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.
Illinois 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 Illinois:
25% by 2025
A Renewables Portfolio Standard (“RPS”) basically requires utilities in the state to source a percentage of energy from renewable sources by a given date. 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 switch to solar.
Illinois has a solid goal of having 25% of its energy needs met by renewable energy sources by 2025. While this is by no means the most aggressive RPS in the country, it’s a really good way of getting electric utility companies to help the little guy (that means you!) get into the solar game.
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
1.5% by 2025
Illinois mandates that 6% of its RPS (1.5% of total electricity) come from solar power. That’s a decent, but not spectacular number, but it means that the big utilities have an extra incentive to purchase generation from smart homeowners like you who produce their own power from solar panels.
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!
Illinois Electricity Prices
The average price of electricity in Illinois is 13 cents per kilowatt-hour (kWh), about half a penny less than the national average. But everyone expects the price of electricity to rise dramatically very soon because of the EPA regulating the emissions of CO2 from power plants.
Whether you believe that’s a good idea or not, the bottom line is that electricity costs are going up for people that don’t produce their own electricity. This is how solar saves you money, today and long into the future.
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.
Illinois Net Metering
With net metering in place, your utility is required to track your renewable energy production and consumption during each monthly billing cycle. Any surplus you produce is carried over as a credit onto your future bills. Net metering is required to be available for you under Illinois law, unless your electricity is supplied by a cooperative or municipal cooperation. So far so good.
Illinois’ net metering policy would be just about perfect, if those credits hung around indefinitely, but they don’t. At the end of every annual period all remaining credits expire and revert back to the utility without compensation. You may select an annual period that ends with last day of either their April or October billing period, so at least you have a bit of flexibility to maximize your credit usage. What this means is that you need to make sure your solar system isn’t so big that you generate more electricity in a year than you use, not that you would want to anyway.
Note: Illinois is studying whether changes should be made to the net metering program. If the program is changed or done away with, it could have serious negative consequences for the financial returns of a solar installation here. Check here for updates.
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.
Illinois Interconnection Rules
Illinois makes it pretty easy as a homeowner to connect to the grid with solar panels. Your residential system using certified equipment (our on-the-ground partners have still got that covered!) qualifies for Illinois’ simplified interconnection procedures, and it should be pretty easy for you to get on the grid and start taking advantage of net metering. Your connection also will not be required to carry additional liability insurance; such safeguards are limited only to very large projects where mandatory insurance coverage makes more sense.
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 Illinois
Illinois Solar Power Rebates
Chicago and Springfield only
Up until this year, Illinois had offered a rebate for all customers of investor-owned utilities (ComEd and Ameren). The rebate amounted to $1,500/kW back on solar systems, up to 25% of project costs or $10,000, whichever was less.
Sadly, the rebate is now closed, and it looks like it ain't coming back. That makes a typical 5-kW solar system in Illinois abot $5,300 more expensive than last year. Boo, Illinois.
There is still hope for residents of Springfield and Chicago, which each have their own solar grant programs. Your installer (click here to see what you can save with solar power on your home) will give you all the details on those and any other grants and rebates you may qualify for.
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.
Illinois Solar Power Tax Credits
Illinois doesn’t offer any tax credits for solar power installations. This is a tried-and-true way other states use to encourage homeowners to go solar. Come on, Springfield! The good news is you’ll still qualify for the full 30% Federal tax credit.
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
Solar Renewable Energy Credits (SRECs) are generated when electricity is created from clean sources, like solar panels on your rooftop. What makes them valuable though are the hungry eyes of your utility company, who will pay you straight up cash for the SRECs you produce, just to be able to say they are meeting their RPS targets and avoiding higher alternative compliance fees to Springfield.
Solar Power Performance Payments are just extra money you get for feeding solar powered electricity into the grid. The utilities would rather reimburse you for producing solar powered electricity than make the investments in land, labor and equipment themselves. You just get more money, on top of the electricity savings! That’s the good news. The bad news is Illinois currently doesn’t have SRECs, for all practical purposes. However, $30,000,000 has been provided to fund SRECs in Illinois in 2015. Hopefully this will all come together and you will be getting a check, in addition to your savings on your electric bill. There’s no way to know for sure in advance how much you will get, but it’s expected to be as much or more money than you were spending on electricity! Get the electricity savings and tax credits now, get the SRECs in the future!
The price of SRECs in Illinois is expected to average $168 in 2016. As one installer we spoke to put it “the real goal of your system is to pay for itself via your electric bill savings, SRECs now are just the bonus on top.” To be sure, the $168 per SREC isn’t going to make you rich. But money is money, and SRECs may still get you a nice weekend on the lake! And you'll sign a contract to sell your SRECs at that price for 5 years, so it's a way to have stable, regular solar income on top of electricity savings.
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
Illinois has a property tax incentive to encourage solar power use. When you register your solar system with the chief county assessment officer (again, our partners on the ground will take care of all of this for you (click here to see what you can save with solar power on your home), your solar equipment will be valued at no more than the value that would be given to a conventional energy system. That’s not as clear-cut as the 100% property tax exemption that we’ve seen in a lot of states, but money saved is money saved, right?
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
Illinois offers no sales tax exemption up front, meaning you’ll pay between 6.25% to 10% of the installed costs. Other states do offer a 100% sales tax exemption, and Illinois even offers the exemption for wind energy installations, so the legislature needs to catch up here.
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 Illinois solar power rebates and incentives
It was a close call, but we just can’t give Illinois an A in solar policy. While a 9 year payback time-frame is pretty strong, it’s just a bit short of our target of 8 years or less in every state and if you don’t get a grant from the state or other agency then you are looking at a 9 year payback. On the other hand, if you get a state grant AND a local grant, you could be looking at a payback of 5 years or less!
Without strong statewide incentives, the future of solar in Illinois is uncertain, at best. With the solid but not spectacular payback time-frame, the chance of a REC and one of the nation’s few solar-specific carve-outs, Illinois is inconsistent enough to earn only a C+. With a few tweaks to existing legislation or a strong statewide tax credit, Illinois could take a place among the top states for solar.