Solar Panel Finance Facts and Busted Myths

No matter where you live, you’ve probably noticed a new trend in your neighborhood the last few years  – everyone is installing solar panels!

Why are all your neighbors going solar?

Not only is installing solar a move forward in terms of sustainability, or “going green”, but it is also becoming a popular way to gain financial security.

Right now you’re paying the utility company for all the power you consume in your home. If they raise their rates, your bills go up, even if you don’t consume more power! The cost of fossil fuel electricity is constantly on the rise with a limited global supply, and expensive extraction processes. Large scale utilities know that burning fossil fuels is not a sustainable long term solution to meeting our energy needs, and even the coal industry has succumbed to admitting that solar is the future. Knowing that we need a clean energy future, the federal government and states have created incentive programs to encourage more clean energy as part of the existing electricity grid. These incentives in RI are part of what is called a “Renewable Portfolio Standard” (RPS) which requires National Grid to dedicate a specific percentage of all energy on the grid to energy procured from renewable sources, and a “solar carve-out” is part of the RPS assigned specifically for solar. In January of 2020 Gov. Raimondo signed an executive order setting a goal of 100% renewable energy sources powering RI by 2030! With such an aggressive goal and so many incentives, it’s no wonder folks in RI are making the switch to solar.

How does going solar create financial security for you and help you build equity? 

Remember those rising electricity rates? The average rate of electricity rate hikes year over year is 4% nationally. Solar companies use this metric to predict your savings and avoided cost of having to pay for fossil fuel energy. Over 25 years of home ownership, most folks will see their electricity bills more than double. For example, an annual electricity cost of $1,727 ($143/mo.) will end up being $4,168 annually, costing the homeowner close to $70,000 over 25 years. That’s a huge amount of “debt” to the utility company that is never paid off, and never goes away.

By investing in a solar purchase, the homeowner is now able to make their own electricity, and no longer has to pay an unending “debt” to the utility company for power. With no up-front investment required in most cases, a fixed-term solar loan agreement will typically be equal to or less than your average monthly electricity bill. Once you finish paying the solar loan, you’re free and clear of any financial responsibilities for your power production! The idea that “solar is free” is a misleading myth that needs to be debunked, Solar panels do require a financial investment, BUT, the energy you produce with the solar panels you’ve purchased is owned by you and thus, the energy you make with the solar panels you’ve purchased is technically “free”.

Fast forward 10 years, the homeowner has paid off their solar loan and is able to make 100% of their own clean energy. They have no bill from the utility company, and when they sell in 5 years, they will be able to add solar panels to the value of their home. A real estate professional who understands the benefits of solar will be able to help a seller find an appropriate buyer for the home, who appreciates the value of having free energy and being sustainable.

So, how do facts about solar get misconstrued? Why are there so many solar myths out there? 

First, it is crucial to understand the difference between a payment option and an incentive program. Solar companies offer installation services and payment options ONLY. Solar companies do not offer “incentives” for going solar. Solar incentives are only offered either by the utility company, the state, or the federal government. In RI we have all 3 kinds of incentives available. Federal tax incentives are available to anyone in all 50 states. All the solar incentives the state offers are available to anyone who wants to go solar. However, certain conditions may be required for you to qualify to receive a specific state incentive. The solar installer you choose cannot control which incentives you are eligible to receive, and should inform you of all of your options. Anyone installing solar panels must choose ONE of the state incentives to enroll in, as they are not able to be combined. If you have a municipal utility provider that is not National Grid, Unitil, or Eversource, your individual utility may offer incentives that are unique to the municipal provider.

One answer as to why there is misinformation about the cost of solar is that there are many different solar companies out there who offer different financial options. You may have heard of a solar “lease” or a “PPA/Power Purchase Agreement”. Both of these options are still available in the market for solar, but they are not purchase options. Each of these programs is a way of borrowing solar panels, or borrowing the energy they produce from the solar company offering the program. With both a lease and a PPA, the homeowner does not actually own the solar panels, but may have an option to buy out the lease or PPA after a certain time limit. Instead, the company offering the lease or PPA actually owns the system, so there is no up-front payment, which is why oftentimes solar is misunderstood as being “free”. The problem with the solar company owning the solar system, is that they will then be able to take the tax credits and incentives associated with the purchase of the solar system. While leasing and PPA options may be appropriate for some folks in certain situations, at NEC Solar we think empowering our customers to purchase solar and enjoy their own tax credit and incentive benefits is the best option for the customer.

Another reason there are so many solar myths out there is that some myths used to be truths, and these are mostly related to incentive programs. Incentive programs for solar are offered by the utility, the state, or the federal government. These incentives are created by lawmakers or the utility in response to local mandates for Renewable Portfolio Standards. The rub is that incentives change over time. So, when someone says, “my buddy is getting paid for all his solar production and they send him free ice cream every week,” that person is very likely telling the truth, but the incentive program their “buddy” enrolled in was something offered 5 years ago that is no longer available to someone who wishes to install solar panels today. Even though solar incentives change, there are still GREAT incentives available right now, and RI is actually in the Top 5 States with the best solar incentives in the country according to SolarPowerRocks.com and their annual solar report card.

How do I get reliable information about financial incentives available to me with my solar purchase? 

An easy incentive to remember is the Federal Investment Tax Credit or ITC, which is available to anyone in all 50 states who purchases a solar system. The Federal ITC is 26% of the purchase price of the solar system, and this incentive is available in 2021 and 2022. After 2022 it will decrease to 22%. The Federal ITC is signed into law by Congress, and cannot be affected by state incentives. You can always discuss your eligibility for the Federal ITC with your tax professional. Solar companies cannot provide tax advice, but they can provide you with an estimate of your tax credit amount.

RI.gov offers unbiased resources explaining the different state incentives for going solar. Some state incentives have specific requirements for eligibility. You can start your research with this link: http://www.energy.ri.gov/renewable-energy/solar/

Of course, consulting with a solar provider will help you evaluate design options, panel options, and financial options. You’ll want to make sure that you have good sunlight, a healthy roof, and enough space on your roof to install solar panels. Not everyone can offset exactly 100% of their energy needs, but even making a fraction of your power with solar panels can make a huge impact on your finances by avoiding fossil fuel costs, not to mention the environmental benefits. Now that you’ve learned about the financial benefits of solar and have busted the biggest solar myths, you’re in a great position to enjoy the same benefits your neighbors have by getting some solar panels of your own.

At NEC Solar we’ve noticed that the biggest obstacle to creating a clean energy future is simply a lack of confidence in the information folks receive about going solar. This is why we have offered FREE Solar Info Workshops for over 2 years, and why we continue to make an effort to connect with our local community gathering spaces to provide free solar information. Our next workshop is a virtual event hosted by Harmony Library on May 4th at 7pm. If you’d like to join us for more details on solar science, technology and incentives, please register on Eventbrite: https://www.eventbrite.com/e/empower-yourself-solar-energy-literacy-wnecsolar-apple-valley-insurance-tickets-148797993805?aff=erelexpmlt 

We hope to see you there!

Dana Goodman 

NEC Solar

Start a Quote

Are you ready to save time, aggravation, and money? The team at Apple Valley Insurance is here and ready to make the process as painless as possible. We look forward to meeting you!

Call Email Claims Payments
Skip to content