It’s easy to fall in love with the solar industry. As efficiency of solar panels advance and regulations expedite the growth and acceptance, one theme stays constant; solar continues to become more affordable. The idea of transforming your home into a renewable energy source that can produce power for the entire family is easy to get behind. But in the early years, the high price and lack of awareness created a lot of friction to market. Today is a much different story.
Two major contributors that are pushing the industry forward, come from the solar Investment Tax Credit (ITC), and N.E.M, net energy metering. This week we’re taking a closer look at these two cost-cutting benefits. Both policies are valuable and as awareness and acceptance grow, so will the potential to save on this emerging energy source. The solar Investment Tax Credit and N.E.M. are significant driving forces in making solar energy cost-effective. Subsequently, they have been directly responsible for the growth of solar energy in residential and commercial sectors. Read how these programs function, and how you can take advantage of them.
The Solar Tax Credit
The solar ITC is a federal tax credit aimed at reducing the initial investment cost of installing a solar system. The solar ITC has helped homeowners and business owners turn to the sun to power their buildings. Allowing both residents and small businesses to take advantage of the program has been a significant source of growth for the industry. The amount of the savings is 26% and includes everything that goes into installing a solar system. The Solar Energy Industries Association, or SEIA, advocates for solar growth and investment. The SEIA defines the ITC as, “a dollar-for-dollar reduction in the income taxes that a person or company would otherwise pay the federal government. The ITC is based on the amount of investment in solar property. Both the residential and commercial ITC are equal to 26 percent of the base invested in eligible solar property.” The ITC has added more value to solar projects, which continued to become more affordable. The cost of solar energy systems has been trending downward for years. Competition has increased parallel to high demand, while the technology and equipment continue to improve as well. Now the advantage of the ITC is becoming quite clear. The ITC has extended until the end of 2022. In 2023 the tax credit drops to 22%. Let’s take a look at how effective the ITC has been.
The ITC’s Effectiveness
It is difficult to overstate how important the ITC has been for helping people save money. Of course, solar systems’ cost has continually become more affordable, and we can’t ignore the obvious fact that solar energy will effectively and significantly reduce the property owner’s utility bills. The main selling point for going solar is that renewable energy can help people save money. It is merely an additional benefit to have the federal solar ITC available for prospective buyers. According to the SEIA, “Since the ITC was enacted in 2006, the U.S. solar industry has grown by more than 10,000% – creating hundreds of thousands of jobs and investing billions of dollars in the U.S. economy in the process.” Since the ITC was enacted, the average annual solar growth has been 52%. The solar ITC is responsible for a considerable amount of this growth. The SEIA continues that:
“The ITC has proven to be one of the most important federal policy mechanisms to incentivize clean energy in the United States. Solar deployment, at both the distributed and utility-scale levels, has increased across the country. The long-term stability of this federal policy has allowed businesses to continue driving down costs. The ITC is a clear policy success story – one that has resulted in a stronger and cleaner economy.”
Net Energy Metering
Net Energy Metering is an incentive that keeps utility costs down by transferring excess solar power to the primary electrical grid. The extra power produced is given to the customer as credits. The homeowner can then pull energy from the electrical grid later when consumption exceeds the energy their system produces, such as in winter or during the night. It’ll be at a reduced cost because of the earned credits. The credit’s value is determined by the number of kilowatt-hours given back to the grid. These credits are then used to pull the same amount of energy at a later time. Essentially, homes can be powered day or night by the solar energy that their system produces. Those over at EnergySage describe N.E.M. as “a solar incentive that allows you to store energy in the electric grid.” These policies help to put the solar investment into perspective. It can be mutually beneficial by combating climate change and helping people save money. Making solar more affordable for people only increases access and capacity. Many states take part in N.E.M. Florida is one of the states that offer Net Energy Metering. If you are interested in learning more about the benefits of installing a residential photovoltaic system, check out our blog. If you would like a free quote contact us, here.