Your 2020 guide to getting solar panels for your home in Texas
This page is a complete guide to the complicated and sometimes confusing process of installing solar panels on your Texas 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 2020 **
It's 2020, and your prospects for powering your home with solar energy in Texas are great! That's especially the case in cities like San Antonio and Austin, which have municipal utility companies with rebates and other incentives available.The average cost of solar panels in Texas in 2020 is $3.20 per watt of generating power, and the average cost of a 9.8-kilowatt (thousand watts) home solar panel installation is $23,000 after incentives. At that price, the initial cost of the system will be paid back by electricity bill savings in about 11 years, while the panels will keep working until they're at least 25 years old, saving you a total of nearly $40,000 over the long run.
Read more below about how much solar you need for your home and how your solar panels pay you back.
In addition to the cities we metioned above, we've also got special pages dedicated to home solar in Dallas and any place else served by Oncor Energy, which offers incentives that can reduce the cost of going solar by over 50%. Houston residents, and others served by CenterPoint Energy, can expect excellent lifetime savings of $21,500 over the life of your solar panels, after they've paid their cost back.
If you're thinking about how you can take advantage of solar energy in Texas, the possibilities are better than ever before. Connect with a Texas solar expert to take advantage of current rates and get solar installed for as little as $0 down.
What you'll find on this page:
The Solar Strategy section is focused on the 3 ways of paying for solar in Texas, 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 Texas. 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 Texas.
Click any of the boxes below to go to that section of the page, or scroll down to read the page in order.
|Your Texas Solar Strategy|
|Comparing Solar Investment Options|
|Paying Cash for Solar in Texas|
|Solar Loans in Texas|
|Solar PPAs in Texas|
|Solar Purchase Payback Time in Texas|
|Texas Solar Policy Information|
|Renewable Portfolio Standard (RPS)|
|RPS Solar Carve-Out|
Your Solar Strategy in Texas
Figuring out the best way to go solar in Texas 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 Texas
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 lease. One thing it's important to note is: solar makes you a lot of money in Texas. Yes, we said "makes!" You see, Texas gets so much sun, its relatively low electricity prices are no match for the awesome energy-generating ability of solar panels. Going solar in Texas starts paying off right away, and with some locally-available incentives and the 26% Federal solar tax credit in effect until the end of 2020, solar has never been cheaper.
Now, because of the state's deregulated energy marketplace, it's a little more difficult to write this kind of one-size-fits-all review of the potential for solar. For one thing, there are some places where you can buy electricity from one of two dozen different companies, and some places where you have to purchase it from your city's municipal energy company. That means you might get a better deal per kilowatt-hour (kWh) on home solar panels in Dallas, but you might get a bigger rebate if you go solar in Austin or San Antonio.
Because Texas is so different from end-to-end, we decided to use an example that covers the most people. Most people in the state who are served by a transmission/distribution utility (TDU) like Encor, CPS, or CenterPoint Energy can most likely sign up for special solar "buy back" program with a REP like Green Mountain Energy, who will give you full credit for all the excess energy your system generates. Our estimates in Texas assume you'll be eligible for this program. If you live in Lazbuddie or Muleshoe, you're out of luck, but most Texans live within the service area of the big three utility companies.
What the numbers mean
Now let's discuss that chart above. We've examined three scenarios for going solar in Texas, including paying cash for solar, buying solar with a solar loan or home equity line of credit (HELOC), or signing up for a Power Purchase Agreement (PPA). As you can see, the cash purchase option leads to the highest dollar-amount returns over time, but look a little closer. Taking a loan 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 Texas, that means a 26% federal tax credit, and big annual energy savings. If you're lucky, you live in a place like San Antonio, which has solar rebates that can further reduce that cost. 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 only begin spending your own money in year 8.
Finally, take a look at the blue bars. They represent a solar lease or Power-Purchase Agreement (PPA), which are also called third-party ownership. These are very rare in Texas, but possible. With a lease or PPA, the solar installation company puts panels on your roof at no cost to you, and you make monthly payments that save you about $28 per month from what you had been paying the utility company for their dirty energy. Leases in Texas are awesome, because the state's high electricity prices mean you start saving money right away. Your savings will start small but finish big, because the lease cost will rise by less than the electric company's annual rate hikes. Third-party ownership can be a good option if you don't have equity or cash to put down, because it can still save you money!
Read more below about each of three very good options for solar in Texas.
Option 1: Paying cash for solar
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 and that big Federal tax credit, solar costs less than ever before, and a solar installation pays itself off in 13 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 $31,000 down on a solar system, which means you save money on electricity as you pay down the cost of your panels. If you have equity in your home or can get a large loan with an interest rate of 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 $31,360, but tax breaks and energy savings will erase a bunch of that after just 1 year. Over 25 years, your system will have produced over $40,000 in income, after your system cost is paid back. The reason this works is that solar offsets your electricity costs—enough to save you $1,726 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 9.8-kW rooftop solar system in Texas:
- Installing a typical 9.8-kW solar system should start at about $31,360. That's cheaper than solar has ever been, but it still might seem like a big investment. Don’t worry, because after tax breaks and energy savings, your first-year costs will be considerably less than that.
- The Feds calculate their incentive based on actual out of pocket costs, so take 26% of $31,360, for a tax credit of $8,154. Your total investment is now down to just $23,206.
- After the tax credit we subtract your first year’s energy savings, which we estimate to be $1,726. That reduces your cost after the first year to only $21,481.
- Your system will pay for itself in just 6 years, and over its 25-year life, you'll see a total net profit of $39,561. The internal rate of return for this investment is a stupendous 9.3%!
- And don't forget... your home's value just increased by around $21,500, too (the net present value of 20 years of energy bill savings)!
- 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 340 trees a year, every year your solar power system is humming.
Keep in mind, the numbers above are based on an average home in Texas. 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
You don't need $32,000 sitting around to pay for solar. As long as you have equity in your home, 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 Texas, 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. Your yearly energy savings will offset over half 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 can get a home-equity line of credit (HELOC) for $31,360, 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 Texas homeowner who makes a solar purchase with a loan or HELOC:
- Installing a typical 9.8-kW solar system should start at about $31,360. 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 $1,726, but your annual loan payments will be $2,879, meaning you would spend $1,153 on solar this year, but...
- You'll also see a huge tax break. The Feds give you 26% of the cost of your system back as a tax credit, which in this case is $8,154. You'll be paying over time but getting all the benefits up front!
- The electricity savings will continue for 25 years, while your loan payments will last only 15. By the end of the 25-year life of your panels, you'll come out $27,739 ahead.
- On top of the green that will stay in your pocket, your system will mean green for the environment, too. 340 trees-worth, every year!
Keep in mind, the numbers above are based on an average home in Texas. 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)
PPAs are a great way to go solar if you haven't got stacks of cash or oodles of equity in your home. It's possible to get solar panels for $0 down and see big savings over 20 years!
As for PPAs in Texas: the electricity costs here aren't very high—we're actually a bit lower than the national average—but the sun shines brighter here than almost anywhere else in the country! That means a lease saves you money starting on day 1. For now, the cost of the electricity generated by a 9.8-kW solar system should be around $1,387 per year, but the cost you would have paid to your Retail Electric Provider would be over $1,726, meaning the panels will save you $339 in the first year. That's cash 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 lease costs will go up by a smaller amount, meaning you'll see greater annual savings. Over 25 years, our estimate shows a total savings of almost $12,500. 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!
How Home Solar PPAs work
PPAs work because the solar installer gets to keep all the available incentives. That means their costs are lower, and they can afford to take payments from you over time to recoup their initial cost and make a little profit. You benefit because you get clean solar energy at low rates, and the savings add up without you having to lift a finger! With a 25-year PPA contract in Texas, you can rest assured that you'll be in cheap solar electricity for the long run.
Only trouble is, you might have a hard time finding a PPA where you live. As you can tell the from the "C" grade we awarded the Lone Star State for solar policy, Texas doesn't have the surest long-term prospects for the solar industry. That means any PPA provider will want to be sure they're getting a fair shake from the utility company, which means you'll find Texas home solar PPAs in places like San Antonio, whose CPS Energy has shown a long commitment to doing right by solar owners. If you're looking for a Texas solar PPA, reach out to our solar experts to find out your options.
Keep in mind, the numbers above are based on an average home in Texas. If you're ready for a custom quote for a solar PPA, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Texas 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 Texas:
Texas's Renewable Portfolio Standard
3% by 2015 (exceeded)
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.
Normally an RPS sets targets for a certain percentage of total energy generation to come from renewables, but in Texas, the targets are amounts of electricity produced, measured in megawatts (MW). The Texas RPS was first passed in 1999 with a target of 2,000 MW of energy from renewable resources. In 2005, the legislature increased the requirement to 5,880 MW by 2015 and set a voluntary goal of growing this capacity to 10,000 MW by 2025.
But wind power in Texas is hugely profitable, and by 2009, Texas had already surpassed their 2025 goal. As of 2015, the state has 15,635 MW of installed wind capacity. Despite wildly exceeding even their voluntary "pie-in-the-sky" 2025 goal, the state has yet to increase their RPS targets.
and while 15,635 MW of wind capacity may seem like a lot, it actually accounted for only 10.6% of total electricity generated in the state. In fact, Texas leads the country in total energy consumption, which may seem unsurprising given its size. Yet, the Lone Star State still ranks in the top five for energy consumption when distributed per capita.
For any state—especially one that is as power hungry as Texas—10.6% is far too low of a goal for renewable generation. We’ve seen other high-population, high-energy demand states like New York (30% by 2015) and California (33% by 2022) set much loftier goals, and there are even states (Hawaii) taking aim at 100% renewables by mid-century.
Texas’s RPS is 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.
Texas's Solar carve-out and SRECs
Though Texas requires at least 500 MW of their 2015 goal come from renewable resources other than wind (since about 96% of their renewable energy was sourced from wind in 2015), they do not specify that it must come from solar and this target remains largely voluntary. If the RPS contained specific carve-outs for clean and efficient technologies like solar panels, or mandates for the environmentally necessary increases in distributed generation, you’d see even stronger incentives for residential solar power.
Texas Electricity Prices
Electricity runs about 11 cents per kilowatt-hour (kWh) here, but you might pay more or less than that, because you might live in a city like San Antonio or Austin, which have their own municipal electic companies, or you might be a customer of a Retail Electric Provider who sells plans within Texas's deregulated market. As you probably know, if you want to pay cheaper per-kWh costs for electrciity, you have to sign up for special plans full of confusing restrictions on how much electricity you can use and when. It's usually just easier to pick the company that promises a set price and sticks to it.
If you're lucky enough to pay 11 cents per kWh, you should know that's quite a bit lower than the national average of 13.6 cents/kWh, but by our standards that national average is far too cheap. Energy is cheap because it’s generated from dirty-burning fossil fuels, at giant power plants that emit greenhouse gases by the billions of tons. Texas has great REP companies like Green Mountain Power who are willing to both sell you electricity and buy back any extra energy your solar panels make. So why not ditch the hassle, and get solar information from experts in your area.
Texas Net Metering
Many utilities offer
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.
Net metering in Texas is… lacking. There is no statewide net metering law here. That said, in most populated places in the state, you can find either a municipal electic company that offers net metering, or a Retail Electic Provider (REP) like Green Mountain Energy, that will buy your extra solar output for retail price, or close to it.
The "C" grade we give Texas on Net Metering reflects the uncertainty of that arrangement. If Green Mountain Energy decided they no longer wanted to buy back your excees kWh, you'd be left with a solar system that would save you less moey in the long run. Not a ton less, but enough that it might extend the payback time of your system for a few years.
Long story short, whether you're looking to install solar panels in Houston, or sign up for some Dallas solar power, you're covered for now. Green Mountain Energy offers full reatil-rate credit for excess solar energy, rolled over to your next month's bill. Furthermore, the cities of Austin, Brenham, El Paso (El Paso Electric), and San Antonio (CPS Energy), all have some form of net metering available to residential solar power systems, and some of them even offer rebates, to boot.
Texas Interconnection Rules
Statewide with caveats
While most of Texas does not ensure that you can have your energy consumption and production monitored for potential surplus, the state does have regulations designed to help ensure that you can get connected to the grid. Texas provides for standard interconnection procedures for all systems up to 10 MW. The regulations prohibit the utilities from requiring pre-interconnection studies, set 4-6 week time limits on how long the utilities can take to consider your application for interconnection, and offers fast-track pre-certification procedures to speed up the interconnection process.
That’s not too shabby. We’d like to see a prohibition on the requirement of redundant external disconnect switches and separate liability insurance, but compared to the rest of the state’s legislation, interconnection is a big step in the right direction.
Texas Solar Incentives
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 26% of your total system 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 Texas measures up:
The availability of state solar incentives for residential solar systems was sourced from the Database of State Incentives for Renewables and Efficiency, utility company websites, and the state public utility commission.
Texas Solar Power Rebates
As we mentioned earlier, Texas lacks any statewide rebate program. Given that most folks outside of big cities have their choice of electric company through the state's open energy marketplace.
Those of you lucky enough to live in a place with a municipal electric company may have good options. For example, San Antonio's CPS Energy has good solar rebates. Here's a run-down of all the solar rebates we've found in the Lone Star state:
|AEP Texas Central Company||$500/kW, up to $5,000||Subject to additional requirements|
|AEP Texas North Company||$500/kW, up to $5,000||Subject to additional requirements|
|Austin Energy||$2,500 per installation greater than 3-kW||Rebate earned by taking and passing online solar class. More about Austin Energy Solar rebates|
|City of Denton||$800/kW AC, $1,200/kW with batteries||Maximum of $30,000, not to exceed 50% of total costs. Additional $750/kW available if installation includes battery storage|
|City of San Marcos||$1,000/kW, $2,500 max.||Subject to additional requirements.|
|City of Sunset Valley||$1,000/kW, $3,000 max||Must be eligible for Austin Energy rebate. Sunset Valley rebate offered in addition to Austin Energy rebate.|
|CoServ Electric Cooperative||$310/kW, $3,100 max||Subject to additional requirements.|
|CPS Energy in San Antonio||$2,500 per project||Read more about CPS Energy solar rebates|
|Farmer's Electric Co-op||$500 max||Must meet all program criteria.|
|Oncor Electric Delivery||$538.53/kW + $0.2519/kWh in 1 year||Subject to additional requirements. Calculations for kWh per year are based on expected production. For example, a 5-kW array might produce 7,020 kWh in one year, and its owner would therefore be awarded $1,768.34 in addition to the initial $2,692.65 rebate.|
Since our last update, many rebates have come and gone, but there is still a lot of opportunity for solar savings in Texas thanks to these utility-based incentives. You can check your utility’s website for the most recent information on program status and application procedures. Or you can relax and connect with our expert partner installers in Texas, who'll make sure you get all the rebates and savings available.
Texas Solar Tax Credits
No State Income Tax
Since Texas doesn’t have any income tax, there aren’t any solar tax credits to redeem! Luckily, you will still benefit from the Federal Solar Tax Credit.
Property Tax Exemption
Finally! Score one for the Texas lawmakers -- coming through with a solid property tax exemption. When you install that shiny new solar power system, the resulting increase in home value (details on how much later) is exempt from 100% of the resulting property tax increase.
Sales Tax Exemption
Now if only we could get a matching sales tax exemption. Sales tax ranges from 6.25% to 8.25% here, depending on the local tax rate. You may not notice it in small purchases, but that sales tax adds up for big-ticket items. A sales tax exemption is a simple and efficient way to save you a couple thousand bucks on those solar panels. No checks, no mess. Just discounts for you right off the top. Let’s get on that, lawmakers!
Low-income Solar Programs
As you might imagine in a state without a renewable portfolio starndard, Texas doesn't have any laws or incentives meant to specificailly help low- and middle-income people get solar for their homes. We hope that some day this will change, but for now, it's where we're at.
The consensus on Texas solar power rebates and incentives
Are solar panels worth it in Texas? Yes, but it depends on a few factors. If you live in the right area and can choose a Retail Electric Provider like Green Mountain Energy, you can get solar rebates and send all your excess electricity back to the grid for full credit. In those situations, installing a home solar system in Texas is a no-brainer.
But for many people who live outside of the major metropolitan areas, going solar doesn’t always pencil out, financially-speaking. Texas could go a long way toward fixing that by passing a statewide net metering law, and adding a solid Renewable Portfolio Standard with a solar carve out would bring Texas’s solar policy grade from a D up to a B.
With the right mix of policy and the ever-decreasing cost of solar, we could see Texas solar as an A+ investment in short order.