Cost of Solar, Financing, Lease Options
How much does solar energy cost?
An average residential solar system costs between $15,000-$25,000 after solar rebates and solar incentives. Considering that you will probably spend over $72,000 in electrical bills over the next 25 years, this can be a small price to pay. Some companies even offer solar lease options in which you pay no out-of-pocket expenses for the installation.
The exact cost of your solar system will depend on the applicable Massachusetts solar state rebates and utility incentives available in your area and the type of solar installation you chose. Using a qualified installer who is familiar with the local incentives and permitting process will ensure that you get the most from your investment.
Are there any government tax incentives or rebates?
One of the great elements of solar power in the U.S. is that there are large number of tax incentives and rebate programs that exist to make it easier to afford solar power for your home. The solar installer that you select will be up to date on all of the applicable incentives based on where you live but below are some of the basics:
- Federal Tax Credit: Investment Tax Credit (ITC) allows individuals to deduct 30% of the cost of a solar system from individual federal income taxes;
- Individual State Rebates: Many states offer cash rebates that are either flat amount or are based on the size of your solar power system – check out the U.S. governments Database of State Incentives for Renewables & Efficiency for more information on the rebates in your particular area;
- Property Tax Exemptions: Many states also specifically exclude the value a solar energy system from your your annual property taxes… for example, if a new solar power system adds $30,000 to the value of your home, that $30,000 will be exempted from the total assessed value and your property taxes will not increase as a result of the new system.
- Municipal and Utility Rebates: In addition to the federal and state incentives, many local municipalities and utilities will offer rebates on top of everything else…please check out Database of State Incentives for Renewables & Efficiency for any incentives in your specific area.
What are the current Massachusetts solar incentives and how do they work?
Massachusetts currently offers two rebate programs: the Solar Stimulus program for large commercial projects and the Commonwealth Solar II program. Commercial solar systems larger than 5 kW receive rebates from the Solar Stimulus program, which is partly funded by federal funds. The Commonwealth Solar II rebates are available to all types of customers (commercial, residential, non-profit, government…) served by the four major Massachusetts investor owned utilities —National Grid, NSTAR, Western Mass Electric and Fitchburg Gas & Electric — and some of the municipal ones. Rebates for residential consumers are based on the system’s first 5 kW (the average system size for a family home), but the maximum rebate value is not limited- an awesome change to previous policy. Up until December 2010, the available rebate per watt was higher, but the maximum rebate size, for any system, was limited to $10,500. Here’s a brief rundown of the incentive structure:
- Systems must be at least 1 kW in size
- There is no max system size limit, but the maximum rebate amount is calculated on the basis of a 5 kW
- The per-watt rebate amount varies — the maximum residential rebate amount is $4.40/watt
- Maximum residential solar rebate is $10,500
Massachusetts solar rebate calculations are a little complicated as they factor in your home value and your personal income. So depending on your estimated home value and income, you will receive approximately $0.75 to $1.70 per watt rebate on your solar energy system under the new rebate pricing levels. With the Commonwealth Solar II incentive, the base rate is $0.75 per watt. However, if your solar equipment in manufactured within Massachusetts, you will receive an additional $.10 per watt. For residential solar systems, add another $.85 per watt for a moderate home value and another $.85 per watt for a moderate income.
As opposed to the majority of states within the U.S., Massachusetts’ Commonwealth Solar II program releases solar rebates a little bit differently. Instead of having all of their funds available to the public until the money allocated to them is completely exhausted, Commonwealth Solar II offers solar rebates and incentives on a “Block system”. What this means is that there is a set amount of money available for only a certain amount of time (usually every quarter, )and these funds are available until either they are used up by the public, or the time frame for taking advantage of these rebates closes. This is done in an effort to try and implement a “checks and balances” system in a sense, so that it is offered at a first come first serve, non-competitive application process, rather than limiting certain households from using these rebates if they were unable to take advantage of them before the funds ran out. In the example of the 2nd and 3rd blocks being released, the Massachusetts government announced when they would be released ahead of time in an effort to prompt consumers the be prepared to take advantage of these blocks. The effect worked, and both blocks sold out within hours of being made available. Applicants that are not approved or accepted for one block period are encouraged to reapply for the next and a way to make this process easier is to get in contact with a local solar installer so that there is more pressure on them to get this process rolling for you. As of July 9th, 2012 Block 11 was made available to the public with a funding of $1,500,000, and it is expected that this will be the same amount available for the next block. For more information on the Commonwealth Solar II program, and how to keep up to date on each quarter’s blocks, visit their website here.
What are Massachusetts Solar Renewable Energy Credits?
What makes Massachusetts stand out nationally in 2010 is their new clearinghouse for Solar Renewable Energy Credits (SRECs). A SREC represents 1 megawatt-hour of electricity generated from an eligible renewable energy source. Just like stocks, SRECs are sold on an open market at varying prices correlated to demand. Utilities need to buy a certain amount of these credits to comply with a state’s RPS. Massachusetts Solar Credit Clearinghouse Auction is unique in that they will purchase any SRECs that cannot be sold on the open market for $300. This essentially creates a price floor.
To qualify for SRECs, the system must be less than 2 MW and net-metered. In Massachusetts, all investor owned utilities must provide net metering. Some municipal utilities choose too also. Net metering means that you only pay for the net amount of electricity that you use. With net metering, homeowners with solar installed are able to “bank” the excess electricity their solar system generates and receive credit up to 100% of their electric use bill at the full retail electricity price that they can use later.
SRECs are in very high demand so they are almost always purchased, meaning that when you install solar, you not only receive tax exemptions, negligible monthly electricity bills, an annual payment for any “banked” excess energy….but you will be paid for just having them there! For every MWh of solar electrity your panels produce, whether you use the watts or sell them back to your utility through net metering, you will receive an SREC. For the average family with a 5 kW system, an SREC is produced about every 2 months, meaning, at minimum, another $150 in your pocket every month (if you sell your SREC on the market)!
Does Massachusetts have any other tax incentives for solar?
Massachusetts also offers a number of attractive tax incentives. All residential solar systems are exempt from sales tax while commercial system expenditures are exempt from excise tax. A 15% personal tax credit, up to $1000 dollars, is given to individuals who install a solar power system. Massachusetts law also dictates a 100%, 20 year property tax exemption for all renewable energy systems. Along with the 30% federal tax credit on renewable energy equipment (or a solar energy grant in some commercial cases) and accelerated depreciation, installing a solar energy system is now a financially feasible and attractive option in Massachusetts!
If I can not afford an up front payment for a solar power system, are there financing options to help me?
Yes, our partners offer a variety of great solar financing options to help offset some of initial installation costs. In some cases, your monthly payment will be less than the amount of savings on your electric bill. Low interest rates are available and the solar system increases the value of your home. Again, the your solar installer will have all of the details on the available solar financing options but make sure you ask about the following:
- Home Equity Loans: borrowing against the equity of your home;
- Solar Lease: leasing the solar panels for a fee over a set length of time; and
- Power Purchase Agreement: an arrangement similar to a lease arrangement where the solar provider/installer secures funding on their own for the solar project, installs the solar system in your home/office building and then sells the electricity from the solar system to the home/building owner at a fixed contractual price for a set length of time.
**Interested in a $0 electrical bill? Click here to get a free Massachusetts solar assessment from pre-certified installers in your area!**