Government Programs for Solar Panels in 2024
Any solar panel system will cost money. If you decide to install solar panels on your rooftop, you will notice that the expenses are high and that it can take anywhere between four and twelve years for the solar array to pay off through energy savings. Although this may seem like a long time, you should understand that solar panels installed on your rooftop will easily last around 25 years.
During this time, they will make more green energy than is needed to pay off the system and they will help you save month after month. This is the reason why so many US homeowners decide to install solar systems and effectively reduce the price they pay for electricity. However, there are more reasons you may decide on installing solar panels:
- Reducing the price of electricity you pay,
- Saving money month after month,
- Reducing your dependence on the grid,
- Reducing your dependence on fossil fuels,
- Reducing your carbon footprint,
- Helping mitigate climate change,
- Improving the quality of life in off-grid homes,
- Improving the quality of life in your RV,
- Having a more reliable energy supply, especially with a solar array and a solar battery.
However, although many solar companies advertise free panels, this is far from the truth. In reality, clean energy needs a lot of upfront investment, to cover the solar array prices, which are not low. Nevertheless, now is the best time to switch to green energy, as the prices of panels have dropped over 80% in the past decade or so. You should choose solar energy as the best way to secure energy independence for your home and your family.
What Does “Free Solar Panels” Really Mean?
So, what do the advertisers mean when they say ‘free solar panels’? Well, since there is no such thing, and false advertising is not allowed, they may actually be advertising different ways to finance your solar panels. There are ways to finance panels without a dime leaving your program, but a no-cost solar program simply does not exist.
Financing Options for Solar Energy
For this reason, it is necessary to understand that you can finance your solar panels in different ways. There are also financial incentives that can help you reduce your utility bills by going for green energy and solar power. Solar financing and the federal investment tax credit are just some ways you can save money in the long run by going for solar power.
Besides these, there are other ways to finance a solar energy system. Here are all of them:
- Cash purchase,
- Personal loan,
- Solar lease / PPA – Power Purchase Agreement,
- Home Equity Loan,
- Home Equity Line of Credit, and
- Solar loan.
|Ways to Finance Solar Energy System
|Rebates, Incentives, and Federal ITC Eligibility
|None to Low
|Solar Lease / PPA
|No, since you do not own the system, the solar company does
|Home Equity Loan
|None - Low
|Home Equity Line of Credit
|None - Low
|None - Low
|Depends on the arrangements with the Bank
When you buy a rooftop solar array outright, you are usually making the best financial decision for the long term. Even though the initial cost of the system may be high, you will eventually recoup that cost through savings on your energy bill, as well as any incentives or tax credits that may be available. In the end, you will end up saving money by going solar, and you will also be doing your part to help the environment.
Although a cash purchase will cost you the most, it will enable you to save the most as well. This is solely due to the fact that you will own your solar power system and all the savings will be yours. This will, in turn, put extra money in your pocket month in and month out, up to the total energy bill you pay in a month. Another way to save is by oversizing your solar array and using excess electricity during winter to power a heat pump – this way, you will also see a reduction in your natural gas bill.
While the initial cost of a solar loan may be $0, the interest payments on the loan will reduce the energy savings for the first seven years until the loan is paid off. The payback period will ultimately depend on factors such as the upfront cost, size, energy efficiency, and interest rates associated with your solar photovoltaic system. However, after the loan is paid off, you will keep 100% of your energy savings.
However, sometimes high-interest rates (as they did increase in the past two or so years) will also mean that you need to pay a fraction of the total expenses for the bank itself. For this reason, going for a specialized solar loan may be a better option. Some states even allow a zero-interest solar loan option for the residents. When it comes to ROI, solar loans are the next best thing to outright purchase. The initial cost is $0, but over the course of the loan (usually 7 years) interest payments will eat into your energy savings.
There are a few things to consider when deciding whether or not to go with a lease or solar PPA. The biggest selling point of a lease or PPA is that there is no upfront cost. However, the value of the lease or PPA is dampened by the solar company who takes out their cut of your savings through your monthly payments. By the end of your warranty period, the lease or PPA will have taken up more than half of your potential savings as profits for the solar company.
On the other hand, you may be able to purchase electricity at a very low price. This price is much lower than purchasing electricity right from your utility company. However, the dynamics of payments will be different: while most US households pay most for the electricity they use during the winter, with a solar PPA, you will have to purchase the electricity when it is produced – and this will typically be the most during the summer. However, some households may cherish this, as it is a great way to reduce overall energy bills in the winter.
Also, at the end of a solar PPA or a solar lease, you do not own the panels, although you will be able to purchase them from the company at a highly discounted price. This way, your solar panels will be producing electricity for you only, but their reduced generation efficiency and rate, as well as the fact that you may have to wait for the duration of the whole term length to finish (sometimes up to 25 years), will be an off-putting way to get solar panels for many.
Home Equity Loan
A home equity loan is a form of a second mortgage. With a loan like this, you can finance panels for your entire home. Since home equity loans are considered a secured form of loan, you will be paying a lower interest rate than with a traditional or a personal loan. However, you will still be paying the interest, although a lower electric bill will be more than enough to cover the expenses.
If you want to get free solar panels, this is the best option in many cases. When you finance your solar system through a home equity loan, you will be paying fixed monthly installments. Considering that it takes on average 7 years to pay off a loan like this, your energy savings through solar production will be equal to or even higher than the installment, making this a way to get solar panels for free, at least virtually.
Home Equity Line Of Credit [HELOC]
HELOC or home equity line of credit is another great way to finance your panels. However, unlike a home equity loan, a HELOC is not tied to any particular use and you can borrow as much as you want, for as long as you do not overdo your limits. You can even borrow more money if the project costs increase and your solar tax credit can help offset some of that borrowed money.
A home equity line of credit is also secured. This means that you will be paying a lower interest rate. These credits are a great way to avoid power purchase agreements (PPAs), and can help deliver clean power to your home with virtually free panels. This type of credit is great if it is paid off through savings – the money you save every month can be sent back to the bank until the principal amount and the interest are paid off. With a HELOC, you are still eligible to apply for government incentives. The system ownership is on you, so you can also apply for federal and local government tax credits.
Many US homeowners try to avoid solar leases for the simple reason that the panels do not belong to them. Many instead decide to go with loans to avoid having to pay off panels once the contract term is done. But what exactly is a solar loan?
A solar loan is a form of loan that you would typically take from your bank. Unlike solar leases, at the end of the payoff period, the panels will be yours. Some states allow you to take out a solar loan with no interest rate, and you will still be eligible for the solar tax credit. This way, you can save both on your taxes and the interest rate. These loans can be combined with all bodies that offer direct rebates as well. Although you do not get panels for free, your upfront cost will be very low and will enable you to reap both the financial and environmental benefits of your panels.
Solar Panel Incentives
Once you have your energy needs and the financing option that works for you figured out, it may be time to look at some solar incentives, rebates, and all other incentives that may help bring down the installation costs. We will cover the most common types, although you should know that single-time solar incentives may be available in your area, or under the utility company incentives:
- Federal tax credit,
- SRECs – Solar Renewable Energy Credit / Certificate,
- Solar Rebates,
- Net-metering, and
- State and local incentives.
Federal Tax Credit
The Federal Tax Credit or Federal ITC (investment tax credit), is a great way to reduce the initial costs. The Federal ITC does not provide you with any money, but it allows you to deduct a portion of your investments from the total taxes you owe. In case you owe less in taxes than the credit you can receive, you can roll over the remaining credits to another year. The total roll over period is 10 years, after which, you will lose the remaining credits.
The Federal Tax Credit changes the percentage of the investment that you can deduct from the taxes owed. The Biden Administration has announced it will be changing the project deadlines eligible for tax credits to 2032 – in an unexpected turn of events. This means that you are now eligible for 30% back for any solar installation and any other solar equipment. Here is the equipment you can use to cut your taxes by 2032:
- Solar panels,
- Solar inverters,
- Solar charge controllers,
- Solar installation work,
- Solar batteries,
- Solar-powered generators, and
- Much more.
As a homeowner with a solar panel system, you may be eligible to earn income from Solar Renewable Energy Certificates (SRECs). SRECs are performance-based incentives that are available in states with Renewable Portfolio Standards (RPS) regulations. These regulations require utilities to produce a specific percentage of their electricity from renewable resources. In order to meet these requirements, utilities purchase RECs, which serve as proof that the utility has either produced renewable electricity themselves, or paid someone who is producing renewable electricity, for the right to “count” that green electricity as their own generation.
For every megawatt hour (MWh) or 1,000 kilowatt hours (kWhs) of electricity that your solar panel system generates, you may earn one SREC. These SRECs are what you can sell on the SREC market available in your state. Each SREC costs, and the good news is that their prices are likely to go up, as more companies need to purchase them to ensure their operations align with their climate targets.
Here are some US states that have a SREC market and the price of a single SREC in 2023:
- Ohio – $4 per SREC,
- Delaware – $30.24 per SREC,
- Pennsylvania – $44.50 per SREC,
- Maryland – $59 per SREC,
- New Jersey – $220 per SREC,
- Massachusetts – $276 per SREC, and
- Washington DC – $360 per SREC.
Solar rebates are not tied to the income tax, but they can help reduce the initial costs. Solar rebates are mostly given out as a fixed amount, or a fixed amount per kW of solar installation. These financial benefits can be combined with other forms of solar incentives and can be used usually a single time. Solar rebates are usually a part of an incentive program, and can be offered:
- On the federal level,
- On a state level,
- On a local municipality level, or even by
- The local utility company.
Always ask around and receive as much cash and incentives as you can.
Net-metering, on the other hand, is a special non-monetary, non-financial form of a solar incentive. Unlike federal or state incentives, net metering allows you to fully utilize your solar array without overpaying for a solar battery. In a system like this, your utility company acts as a battery and enables you to use your solar power even when the sun is not shining.
The way it works is that you use a smart meter (ask your utility company to install one if you do not already have it) to both receive and send electricity from and to the grid. During the day, when your panels produce more power than you actually need, the excess solar electricity is sent to the grid. Once the sun is down, the sky is overcast or during the winter, you draw power back from the grid. At the end of the period (usually April every year), you only pay for the difference between the total energy generated and total energy consumed in the previous 12-month period.
Here are the states with the best net-metering policies in place:
- New Hampshire,
- New Jersey,
- New York,
- Vermont, and
- West Virginia.
State & Local Incentives
The State and local incentives are monetary or financial incentives. They are usually awarded on smaller sums, with a limit to how large the solar project can actually be. Let’s say that the limit is 5 kW or even 7 kWh – this is just enough power for a home, but not enough for a large-scale solar farm. This way, the states ensure that households can use as much of their own power, reduce the strain on the grid and reduce the load difference between the day and the night. Local incentives can also be awarded by the utility company, as many of them welcome more renewable energy into their energy portfolio.
Here are the top US states offering solar incentives to their residents:
- New Hampshire,
- New Jersey,
- New Mexico,
- New York, and
- Rhode Island.
Are Solar Panels Worth the Debt?
Solar panels are not cheap and getting free panels is not easy. For this reason, many decide to take out a solar loan, which may be a lot to pay off. For this reason, you should only take solar loans if you plan on purchasing a solar panel system that can offset a significant portion of your power bill.
Is it Better to Pay Cash or Finance Solar Panels?
While some people prefer to pay cash, others prefer to finance their solar array. In reality, financing may be a better option, especially if you plan on installing a larger system with a high initial price and if the interest rate you get is lower than or equal to the inflation in your state.
In general, you can contact a financial advisor for advice and the local municipality office to see whether you would be eligible for rebates, solar incentives, or even an interest-free loan.
Is it Harder to Sell a House with Solar Panels?
Selling a house with panels may be a bit more difficult, especially if you have a PPA (Power Purchase Agreement), or if the panels have not been paid off. However, if you own the panels, you may sell your house even faster, because these homes are worth more than a regular home.
Can Solar Panels Power a House During a Power Outage?
In most cases, your panels will not power your home during a power outage. The reason for this is that your solar array will automatically switch itself off when it detects a power outage. This is to prevent the solar power from running back into the grid, potentially endangering utility company workers and linemen. A lot of power outages happen when these teams shut down electricity to do maintenance work.
Whatever the reason you may want to install panels, it is good to know that you can significantly reduce the upfront costs and that there are several ways to do that. Personal home equity loans, or a solar loan are all available to those who want to make the switch to renewable energy and reduce their carbon footprint. With a solution like this, and the ability to generate your own electricity, you will be able to improve your energy independence and reduce your utility bill.