Ok, I’m not turning my back on wind power, but, the incentives for going solar in Illinois are too good to ignore. Within the coming weeks, Sunrun will be installing a nearly 11 kW solar energy system on my roof, which will produce about 11 kWh of electricity per year. With recent home energy efficiency improvements, together with those planned over the next 6 years, this system is projected to produce more than 100 percent of my household energy needs, along with a good chunk of what I need to power my Chevy Volt. Plus, federal and utility incentives, along with the fantastic financing available, make this system a financial win from day one!
Let’s consider the federal tax incentive first. Since 2005 solar panel installations have been incentivized with a 30% non-refundable federal tax credit on the total cost of the installed system. Non-refundable means that to receive the full credit, your federal income taxes for must equal or exceed the amount of the credit. If the credit is more than you owe in the year of installation, it may be possible to carry over the excess credit to the following year’s tax bill. Regardless, your tax bill has to be greater than or equal to the credit to take advantage of the full credit. So, the credit is not fully available to everyone. For my system, which has a gross cost of $29,000 the tax credit is $8700. Since this is less than my federal taxes for this year and next, I can take advantage of the entire credit. This brings my installed cost down to $20,300. Note that this credit is being phased out starting in the year 2020. Keep that in mind if you are planning to install a solar panel system.
Next, let’s consider the utility incentives. Owners of solar energy systems in Illinois are eligible to receive solar Renewable Energy Certificates (sRECs) for the energy they produce. Renewable Energy Certificates were conceived in the 1990’s to incentivize investment in renewable energy facilities. A Renewable Energy Certificate is awarded to the owner of the renewable energy facility for every Megawatt hour of energy produced. These RECs can be sold to the utilities as part of a Renewable Portfolio Standard law in the state or they may be sold on the open market. Individuals or institutions wanting to claim that their electric energy comes from renewable energy can buy these certificates on the open market or through REC dealers in quantities to match their electricity consumption. This also is the mechanism by which green energy suppliers claim to provide you with green energy-they simply buy power from your local utility or on the open market, then add on the cost of the REC, along with their own marketing and profit charges. It is usually cheaper, by the way, to buy your own power from your local utility, then buy your RECs on the open market or from a REC dealer.
The Illinois Future Energy Jobs Act of 2016 changed the way in which solar energy system owners are compensated with sRECs bought by the utilities of the State of Illinois. As noted before, utilities must buy RECs to satisfy their Renewable Portfolio Standards obligation. The prices per sREC are set by the Illinois Commerce Commission, but now, instead of getting paid as the facility produces power, new system owners are paid up to 15 years’ worth of SRECs in advance of production in a lump sum. Since an sREC is currently worth $72.97, 15 years of SRECs is worth $1094.55. With a production estimate of 11 kWh per year, my lump sum would be 11 x $1094.55 = $12040.05. I would need to pay a 10% commission on this to sell them, so, my net lump sum would be $10836.04. My net system cost is now only $9463.96. Not down to zero cost, but, there are more incentives.
The installed system will generate electricity that will offset my actual electricity use, thereby saving me money. Since my system will be eligible for net metering, and, will be grandfathered under the net metering rules for the life of the system, ComEd will credit me for all power generated, including the delivery fee, up to the amount of energy I use. Assuming 11000 kWh at $.09 per kWh, my savings today would be about $990 per year. With inflation the savings per year will increase. Everyone would agree this income stream has value. To calculate the value, I assume a 5% discount rate and a 3% inflation rate. Using these assumptions the savings income stream is worth $22785.12. Subtracting this from the system cost calculated in the previous paragraph, on day one there is a net gain of $13321.16. Of course there will be maintenance costs. How much is the $64000 question. I doubt theses expenses will exceed $13321.16. The worst case scenario is that the roof will need replacing and all panels would need to be removed then reinstalled. Aside from that, any other expenses are fairly minimal. Currently, my roof is in great shape and I am not expecting a roof replacement for quite some time. Only time will tell, but, my guess is that the present value of expenses will not exceed the day one gain calculated above.
Basically, I am getting paid to put solar panels on my house. Not a bad deal. Not a bad deal at all.