California is the leader in solar power within the United States. The high amount of sun and favorable alternative energy policies create a strong market for the solar industry to grow. To give some perspective, the solar market saw just shy of $18 billion in new investments during 2014 across the entire nation. And, in 2015 alone, California invested approximately $7.268 billion into solar alone. The 3,266 MW of solar capacity makes the state easily number one in the country for the year, and the total capacity of 15,049 MW is also the highest in the nation.
Across the state, enough solar power is created to power approximately 3,772,000 households, and it is estimated that total installations over the next five years would reach 20,487 is total capacity. But understanding those numbers alone isn't enough to make the decision of whether solar is right for you an easy one. The expenses associated with an installation can be challenging for the average household budget.
However, there are numerous incentive programs designed to make managing the expenses associated with a solar power installation easier to bear. Couple that with the savings on your monthly electric bill and it can make it even easier to make the leap.
To help you understand what it takes to jump into solar, as well as how the benefits can help you, here is an overview of what it is like to invest in solar energy in the state of California.
The state of California has favorable policies regarding the installation of solar energy systems on residential properties. Net metering policies help support growth in the industry by providing homeowners with additional incentives to support their own power needs and assist with power generation in their local area. Additionally, certain tax incentives were recently extended until January 1, 2025.
Additionally, several large retailers working in the area decided to go solar based on the positive stance taken by the local government. These include recognized giants like Campbell's Soup, Google, Johnson and Johnson, and Toyota. One of the largest installations in the state is attributed to the Intel Corporation at their location in Folsom. As of 2015, the Intel site had a capacity of 6,454 kW.
|Local Rebates||Varies by utility provider|
|Tax Credits||None :(|
|Performance Payouts||Local option|
|Property Tax Exemptions||None :(|
|Sales Tax Exemptions||None :(|
Additionally, the supportive nature of the local government helps support nearly 2,400 business operating in the solar industry. This makes it a strong part of the overall economy and creates installation opportunities to residents and businesses in almost every city.
The California Solar Initiative offers residents incentives to support solar power system installations throughout the state. Rebates vary depending on numerous factors including the location of the home, the size of the system, customer class, and performance or installation factors. That means, depending on the strength of your system, you may qualify for cash back to alleviate some of the financial strain.
These incentives are designed to help promote clean energy throughout the state. Typically, rebates are based on the number of watts of solar energy that are installed on a specific location. However, the amount of funds available is limited each year. But that doesn't mean a qualifying installation won't receive a rebate even when funds are exhausted. In many cases, IOUs can be requested. This allows a homeowner to submit the details of their installation to the program and puts them on a waiting list for funds once they become available. Homeowners need to reach out to the proper rebate program administrator for more information about applying for rebates.
Unlike some states, rebates may also be available for multifamily residences, allowing building owners to apply for rebates in exchange for supporting the clean energy goals of the state of California.
However, California does not offer any tax credits relating to solar energy installations in the area, so it is important to take that into consideration when determining the overall cost and value of an installation.
Individual cities and municipalities can also offer incentives for qualifying solar energy installations. For example, large cities like Los Angeles, Sacramento, San Diego, San Francisco and the surrounding bay area.
For example, the city of Los Angeles offers residents low-cost loans to help make the costs associated with installations, including equipment and labor, more affordable. Additionally, the funds received from state or municipality rebates can be applied to the loan to help lower the total amount paid in interest.
Individual utility companies can also offer incentives, including rebates. For example, the Riverside Public Utilities offers rebate programs for qualifying homeowners who receive their services. Their rebate is based on the AC watt, with the rate as of 2017 being $0.25 per AC watt with no cap on qualifying residential installations.
To determine which incentives may be available to you, check with your local city or municipality, as well as your specific utility company. The amounts offered can vary, so the standard set by one location or utility company does not dictate the offerings of others.
Homeowners located in any state, including California, can potentially benefit from federal incentive programs for qualifying solar power installations. Currently, these incentives are available in the form of tax rebates that can be applied to your annual federal taxes. As of 2017, the current tax incentive is equal to 30 percent of the qualified costs that are associated with the installation of a solar power system that meets the specified standards.
Expenses that can be included in the tax credit calculation include those associated with approved equipment as well as professional installation. Additionally, there is no preset maximum for the tax credit, so all expenses can be included in the 30 percent calculation as long as they would otherwise qualify.
It is important to note that the federal tax credit is only available to individuals completing installations on their primary residence. Additional properties, such as rental properties or vacation homes, are not eligible for the tax break in question.
For those who qualify and do not use the full tax credit during that specific tax year, such as is the case when your tax liability is less than the total credit awarded, the additional funds can be carried over to the following tax year. The purpose of the carrying over benefit is to increase the value to homeowners who happen to have lower tax liability during a particular tax year.
While the tax credit is equal to 30 percent for 2017, it is set to change in the near future. For example, installations completed between January 1, 2019, and December 31, 2020, the tax credit will only be 26 percent of the qualifying costs instead of 30 percent. The value falls again between January 1, 2021, and December 31, 2021, covering only 22 percent of the qualifying costs.
It is unknown if the tax credit will be available in any amount after December 31, 2021, as the information is not currently posted. That means it is not safe to assume any amount will be available beyond that date at this time. However, it is possible that will change as the date draws closer.
When most people think of benefits associated with installing a solar power system, they often consider the savings on monthly utility bills. And, since the state of California has the 7th highest electricity prices in the nation, the amount of potential savings is high. Currently, the rate per kWh is $0.17. So, the more power you can create with your solar power system, the higher monthly savings you will see.
Based on the average amount of electricity used by U.S. households in 2015 of 10,812 kWh, a household in California that uses the average amount of electricity spends over $1,838 a year just on electricity. That means, on average, the monthly bill is around $153.
Understanding the potential of solar is easy once you review the numbers. For example, if you install one 250-watt panel in a place that gets four hours of direct sunlight produces 1 kWh every day. During a 30 day month, you can save $5.10 just with one panel. That totals to $62.05 over the course of a year.
If your household chooses to install five panels, the savings during a 30 day month is $25.50 or $310.25 over the course of a year. Increase the installation to 20 panels, and you get $102 in savings in 30 days, or $1,241 every year. And, with a total of 30 panels, your savings reaches $153 every 30 days, or $1,861.50 during a year. So, if your home uses the average amount of kWh based on national usage, 30 panels will exceed your power needs.
While saving on your electric bill, or completely eliminating it, is a great benefit, it will take time to compensate for the total costs associated with the installation. Some of the costs are recovered through tax credits and rebates. However, the exact amount you receive will vary depending on your exact situation.
To determine when your installation will begin to result in profit without accounting for these incentives is fairly simple. For example, if your installation costs $15,000, and you save $1,861.50 a year, it will take approximately eight years to recoup your expenses. However, everything beyond that date can be considered profit. Generally, maintenance costs can be met through the savings alone while still living a large amount of profit available. Then, if you consider the lifespan of the system, which can range from 20 to 40 years or more, it is easy to see the potential for significant savings.
When it comes down to it, the decision to go solar is entirely yours. To help you determine your usage and potential savings, contact your utility company for average monthly usage data. Additionally, work with a local installer to get an estimate for the solar energy system that would meet those needs. Then, you can decide whether installing solar is the right move for you.
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