by Sarah Bergen, Blogger/Publicist, Exact Solar
There’s a new light on Pennsylvania’s horizon. A sky that has long been clouded by the darkening dust of burning coal is brightening with the dawn of the state’s solar energy industry. With the cost of going solar at an all-time low that continues to plummet, even in PA, a state with few solar incentives, solar is now a low-risk, financially attractive option.
Utility bills are a monthly reality for most and, if we don’t do anything differently, we’ll pay the utility company month after month, ever-increasing prices for the electricity we use, for the rest of our lives. Many are realizing that there is a way out – and an increasing number of PA residents are choosing to go solar.
Home and business owners have two options when considering going solar: to lease or purchase. The cost of purchasing a system has dropped 70% since 2009. By purchasing a system, home and business owners acquire an asset (their own power plant that will produce electricity for 30 to 40 years) with much less money than they would have spent on their monthly electric bills and pocket the savings.
There is a 30% federal tax credit, available in every state, that all home and business owners can take advantage of when purchasing a solar energy system. The credit is deducted from the amount owed in federal taxes that year. For example, if the cost of a solar energy system is $10,000, the purchaser would receive a $3,000 tax credit for the year during which their system was installed.
Note that, for business owners, the systems are also eligible for accelerated depreciation, providing further, large tax savings in the first five years of the system’s life. Owners of solar energy systems also accumulate Solar Renewable Energy Credits (SRECs), a commodity that can be likened to stocks being sold on the stock market.
When a solar energy system produces 1,000kwh, the owner of the system receives one SREC. These credits are unrelated to PECO, and can be sold on the SREC market for additional income. Who buys these SRECs? Utility companies, which are required to produce a certain amount of energy from renewable energy sources.
If a utility doesn’t meet government regulations by producing their own renewable energy, it can purchase SRECs from home and business owners who have gone solar to fulfill their requirements. Each SREC is currently worth about $15 in Pennsylvania, but there is potential for that price to rise in the future if the state’s legislature moves to support renewable energy, which may be more likely as Clean Power Plan requirements start to kick in.
Home and business owners can pay for a solar energy system with a home equity or low-interest solar loan (with $0 down). By wiping out a monthly electric bill and replacing it with a consistent, and often lower, loan payment, the owner is insulated from rising electricity costs.
When the loan is paid off, the solar energy system will produce free, renewable energy for decades to come. It is also important to note that purchasing a solar energy system increases the value of a home and will entice future buyers – because who would not want a home without an electric bill?
The second option when going solar is to lease a system, which can be a good choice for some. For example, if a homeowner has a low credit score and cannot qualify for a home equity or solar loan, a lease might be a good fit.
Another instance in which a lease may make more financial sense than purchasing is if a homeowner does not have a tax appetite and therefore cannot take advantage of the federal tax credit.
Many large companies, such as SolarCity and Vivint, have begun leasing solar energy systems in Pennsylvania. These companies finance the installation of the systems without the homeowner paying upfront costs.
The energy produced by these third-party owned solar panels is sold back to the homeowner at slightly lower rates than what the utility company charges which slightly decreases the homeowner’s monthly electric bill.
Contracts are generally for 20-25 years and often include a yearly escalator on the rate per kwh paid. It should be noted that if the homeowner wishes to sell their home before the contract’s end, the lease typically must be transferred to the buyer. When leasing, the homeowner does not receive the 30% federal tax credit or any SREC income produced by the system.
With a lease, the system also is not part of the home so it does not increase the value of the home either. When considering going solar, there is a lot of information to consider and questions to be answered.
Exact Solar, in business since 2005, is here to honestly provide information to anyone interested in learning about or harnessing solar energy.