Want to go solar in Texas? Here's your guide.
Getting solar panels for your home means you get to take part in two great things: helping the environment and saving money! But there are so many questions!
Does solar make sense for you? How much do solar panels cost in Texas and how much money can you save? Are there rebates and tax credits to help lower the cost? Has the state legislature passed any laws that will protect your solar investment?
This page will help answer all those questions and more! We're dedicated to giving you a clear, unbiased guide to getting solar panels for your Texas home. Here's what we'll cover on the page below:
- The cost of going solar in Texas
- The best way to pay for solar panels
- How much money you can save with Texas solar
- Texas Solar Laws
- Texas Solar Incentives
** Why solar panels are great in Texas in 2019 **
It's 2019, 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 2019 is $3.40 per watt of generating power, and the average cost of a 9.8-kilowatt (thousand watts) home solar panel installation is $21,800 after incentives. At that price, the initial cost of the system will be paid back by electricity bill savings in about 12 years, while the panels will keep working until they're at least 25 years old, saving you a total of nearly $32,000 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.
The cost of the solar panels in Texas
Every home and family is unique, and the cost of solar panels for your home is based on a few factors that have everything to do with that uniqueness. It all gets quite complicated, and while we can guide you to finding out your own needs, connect with a solar expert in your area if you'd like to have someone do all the hard work for you.
What we can provide is a picture of the average cost for home solar in Texas. We do that by looking at the average electric bill in Texas, then determining how much energy each kilowatt of solar panels generates. Finally, we multiply system size in watts by the average cost per watt of solar panels, which gives us the final cost before incentives.
The U.S. Energy Information Administration (EIA) shows the average Texas household needs nearly 14,000 kWh per year. To make that much electricity from your roof, you'd need a 9.8-kW solar system.
Take that number, multiplied by an average cost of $3.40 per watt, and the average cost before incentives of a home solar system in Texas is $33,000.
Now, that might seem like a lot of money, but keep in mind, this is an investment that pays back its cost quickly, because of incentives like the 30% Federal Solar Tax Credit and Texas solar rebates.
And these days, you don't even need that money up front, because banks realized what a good investment solar is and now offer solar loans to help you pay for them.
How to Pay for Home Solar 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:
Now of course, the reason you'd want to pay all this money is solar panels back their cost and save you thousands of dollars over the long-term. To learn just how much money you can save with Texas solar panels, read on!
How much you can save with 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 30% Federal solar tax credit in effect until the end of 2019, 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. No matter who your REP is, anyone in the state who is served by 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 30% 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 $11 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 $33,000 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 $33,000, 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 $31,000 in income, after your system cost is paid back. The reason this works is that solar offsets your electricity costs—enough to save you $1,550 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 $33,000. That's cheaper than solar has ever been, but you probably still have some sticker shock. Don’t worry, because after tax breaks and energy savings, your first-year costs will be considerably less than that.
- The Federal government offers a great income tax credit of 30% of system costs. That's $9,900 you won't be paying to Uncle Sam this year, and it brings your first-year investment down to $23,100
- After that tax credit, we subtract your first year’s energy savings, which we estimate to be $1,550. That reduces your cost after the first year to only $21,550—a savings of about 35% off the cost of your system. That's a huge cost reduction!
- Those electricity savings will quickly pile up, and your system will pay for itself in year 13. 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 nearly $32,000 by the end of that warranty. The internal rate of return for this investment is an amazing 7.8%. That's about the long-term return of an investment in index funds, and it's more reliable, too!
- And here's a nice bonus to consider: your home's value just increased by $22,000, too—your expected costs after tax incentives—and thanks to Texas's property tax exemption for solar, none of that is subject to taxation!.
- 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 235 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 $33,000 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 $33,000, 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 $33,000. 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 $1,550, but your annual loan payments will be $3,050, meaning you would spend about $1,500 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 $9,900 you won't be paying the Feds this year.
- Getting that tax credit means you'll come out about $8,500 ahead after year 1, and it's pretty smooth sailing from then on out. Your yearly net cost (electricity savings minus loan payments) for solar will be $1,460 in year 2, and will shrink as the cost of electricity rises but your loan payments don't.
- By the time you've paid off your loan in 2033, you'll see yearly savings of about $2,350. After 25 years, your total profit will be $19,187! 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—235 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 $1,275 per year, but the cost you would have paid to your Retail Electric Provider would be over $1,550, meaning the panels will save you $283 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 $10,500. 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.
Is solar right for your Texas home?
If you answer “yes” to each of the following questions, you’re probably a good candidate for solar.
- Do you own your home?
- Does your roof get direct sun for most of the day?
- Does your electricity bill bother you (specifically how much you have to pay)?
The ideal home for solar has a south- or west-facing roof that gets little to no shade throughout the day. The roof can be covered with anything from asphalt shingles to clay or slate tiles, but the easiest roofs to work with are asphalt and standing-seam metal roofs.
Even if your home does not completely meet these conditions, you may still see huge savings from going solar. Your installer will take everything into account when providing you with a savings estimate.
We get more in-depth with roof shape, covering, and orientation in two useful articles:
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.
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.
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
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.
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!
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.
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.
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.
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.
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.
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 Texas
Solar incentives are monetary ways to encourage people to add solar power to their homes and businesses. They come in four flavors: rebates, tax credits, performance payments, and tax exemptions. For tax credits and exemptions, the funds come from the state budget. Rebates and performance payments are covered by all utility ratepayers in a state through small on-bill charges.
Read on to find out more about solar incentives in Texas!
Texas Solar 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||$600/kW, up to $6,000||Subject to additional requirements|
|AEP Texas North Company||$600/kW, up to $6,000||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||$750/kW AC||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||$2 per watt, up to $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.
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.
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 30% Federal Solar Tax Credit. 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
Texas lacks any performance payments for residential solar power systems. Not even individual utilities are offering them, as we’ve seen in some other states that lack a uniform system. See what we were saying about that weak RPS? If the target were increased to 30% or more of annual production, you can bet some of those utilities, maybe even the state, would start offering cash payments for renewable energy production.
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
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.
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
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!
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 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.