Solar Saves on Energy Costs
When we talk solar savings we are talking avoided cost. That is, the amount you would have spent on utility electricity had you not installed a solar power system on your home to provide the same power. And yes....these savings are very real. In fact, the extremely high likelihood that you will continue to need to consume electricity at your house means that solar savings are considered a very bankable investment return. However, the first step to working out solar savings is to first understand how much electricity you use now, how much that costs you and how much electricity you are likely to use in the future.
Here is a list of the average saving that are likely to be achieved by an average US homeowner in each of the top 50 solar cities in America if they installed a 6kW solar power system on their home (a typical size of residential solar energy system in 2020.
Residential Renewable Energy Tax Credit
A taxpayer may claim a credit of 26% of qualified expenditures for a system that serves a dwelling unit located in the United States that is owned and used as a residence by the taxpayer. Expenditures with respect to the equipment are treated as made when the installation is completed. If the installation is at a new home, the "placed in service" date is the date of occupancy by the homeowner. Expenditures include labor costs for on-site preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year. The maximum allowable credit, equipment requirements and other details vary by technology, as outlined below.
- 26% for systems placed in service after 12/31/2019 and before 01/01/2021
- 22% for systems placed in service after 12/31/2020 and before 01/01/2022
- There is no maximum credit for systems placed in service after 2008.
- Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2021.
- The home served by the system does not have to be the taxpayer’s principal residence.
Net excess generation (NEG) is carried forward to a customer's next bill. Under prior law, any NEG remaining at the end of each 12-month period was granted to the customer's utility. AB 920 of 2009 gave customers two additional options for the NEG remaining after a 12 month period. Customers have the option of rolling over any remaining NEG from month-to-month indefinitely, or they can receive financial compensation from their utility for the remaining NEG. The CPUC set the compensation rate at the 12-month average spot market price for the hours of 7 am to 5 pm for the year in which the surplus power was generated. The rate making authorities of municipal utilities must develop their own compensation method for the remaining NEG through a public proceeding.
To learn more about public incentives available for homeowners and businesses click here.
Going Solar Protects the Environment
Many homeowners, businesses and non-profits go solar because they are focused on minimizing environmental issues like climate change and health problems related to carbon emissions. According to the U.S. Environmental Protection Agency, the average household emits approximately 20 metric tons of carbon pollution each year. By installing a solar power system, a typical two-person household reduces their carbon emissions by three to four tons annually. When burned, fossil fuels release the following chemicals into the atmosphere, increasing global warming. The following metrics are in tons:
Distributed (Peer-to-Peer) Power
It’s no surprise that the energy industry is undergoing unprecedented change today. Driven by a number of factors, including innovations in renewable energy generation, the emergence of new entrants into the energy industry and the proliferation of smart meters (to name a few), utilities are transitioning from transactional, commodity-based business models to improving the customer experience similar to familiar brands like Amazon and Netflix.
This shift necessitates a dramatically new way of thinking about customers. The era of consumers just mailing in a paper bill and then disengaging until the next month is declining rapidly. Today, business changes brought about by digitalization and personalization are no more avoidable for electricity providers than they are for other consumer-facing companies, like banks and insurers.