How homeowners can make sense of the climate finance

When Josh Hurwitz decided to install solar power in his Connecticut home, he had three big reasons. Reducing our carbon footprint, ultimately storing power in solar cells in the event of a power outage, and importantly, saving money.

Now, he plans to pay for the system in six years and save tens of thousands of dollars over the next 15 years while hedging against utility inflation. It’s working very well and he’s adding Tesla batteries ready to store the electricity he generates. , he says.

“You have to make money work.

Hurwitz’s experience shows one advantage of the anti-inflation law passed in August. Extension and expansion of tax credits to promote the spread of home solar power systems. According to a report by the Wood Mackenzie and Solar Energy Industry Association, from 2024 he expects adoption to be 26% faster due to legislation extending tax credits that were due to expire by 2035.

These credits cover 30% of the cost of the system. Also, for the first time, there is a 30% credit to the battery that can store newly generated power for use when needed.

Warren Leon, executive director of the Clean Energy States Alliance, a bipartisan coalition, said: “The main thing the law will do is give industry and consumers assurance that the tax credits will last today, tomorrow and for the next decade. That’s it,” he said. of the State Government Energy Agency. “Rooftop solar is still too expensive to be subsidized.”

California Solar Energy Net Metering Decision

As one industry executive put it, frequent policy changes are making the market a ‘sun coaster’. Just as the federal tax credit expansion went into effect, California dropped another big incentive on December 15, allowing homeowners to sell excess solar energy generated by the system to the grid at attractive rates. We’ve made it possible and disrupted the calculations with the largest US states and their new states. Largest photovoltaic market — but changes won’t take effect until next April.

Putting together state and federal changes, Wood Mackenzie believes the California solar market will actually shrink by a whopping 39% in 2024. Before the Containment of Inflation Act incentives were considered, the consulting firm predicted a 50% decline for him due to California’s shift in policy. Residential solar is out of a historic quarter, according to Wood Mackenzie, with 1.57 GW installed, up 43% year-over-year, with California just over a third of his total. .

For potential switchers, tax credits can quickly recoup some of the initial cost of going green. Hurwitz received a federal tax credit when he installed the system in 2020. And now that tax credits are available, he’s preparing to add batteries. Some contractors offer contracts to cover initial costs and claim credit in exchange for a contract to lease back the system.

Coupled with savings in electricity homeowners don’t buy from utilities, tax credits allow rooftop solar systems to pay for themselves in just five years, and more than $25,000 within 20 years after recovering their initial investment. can save

“Will this growth stretch? Absolutely,” said Veronica Zhang, portfolio manager at the Van Eck Environmental Sustainability Fund, a non-solar-focused green fund. “Utilities are going up, so if you’ve been thinking about it from the beginning, it’s a good time to move.”

Installation cost and effect calculation method

This is how numbers work.

Nationally, the cost of solar power in 2022 ranges from $16,870 to $23,170 for a 10-kilowatt system, after tax credits, most frequently on EnergySage, a Boston-based solar panel quote comparison site. The size for which a quote is requested. battery. EnergySage spokesman Nick Liberati said most homes could use a 6- to 7-kilowatt system for him. A 10- to 12-kilowatt battery costs about $13,000 more, he added.

According to EnergySage CEO Vikram Aggarwal, these numbers vary greatly by region, home size and other factors. For example, in New Jersey, a 7-kilowatt system costs an average of $20,510 before credit and $15,177 after credit. In Houston, it’s about $1,000 cheaper. In Chicago, the system costs him nearly $2,000 more than in New Jersey. A more robust 10-kilowatt system costs more than $31,000 around Chicago before credit, but $26,500 in Tampa, Florida. All these average prices are quoted by EnergySage.

The effectiveness of the system may also vary depending on the specifics of the home, such as the placement of trees on or near the property, as we discovered when we asked EnergySage’s online bid solicitation system to survey a specific home. I have.

The bid price for a Chicago suburban home was as low as $19,096 and as high as $30,676 after federal credit.

Offsetting these costs are power savings and state tax cuts, the tender will pay for the system in just 4.5 years. The contractor claimed that electricity savings and state incentives would save an additional $27,625 over 20 years, on top of capital costs.

Alternatively, the consumer can fund the system, but still own it. While this eliminates upfront costs for consumers, it also translates into savings as some of the avoided utility bills go toward interest payments, he said.

The key to maximizing your savings is knowing your state’s specific regulations. And getting help understanding the often complicated contracts.

Energy storage and surplus power

Subsidies are more generous in some states than others, and utilities pay more for the surplus power that home solar systems generate during peak production or extract from homeowners’ batteries. Consumer protection regulations are getting tougher, mandating higher fees to be paid.

California had the most lenient rules until this week. But the state’s utility regulator, after arguing that the utility was charging too high and raising the price of electricity for other customers, made it significantly less likely that the utility would pay for the excess power it would have to buy. I agreed to reduce it.

Wood Mackenzie said that looking at the details of California’s decision, it appears to be a lighter burden than the company expected. EnergySage says the payback period for battery-less California systems will be 10 years, not 6, after the new rules take effect in April. The company estimates that the savings over the next few years will be about 60% less. According to EnergySage, the battery-powered system will pay off in 10 years, so it will be largely unaffected.

“new [California rules] In a December 16 report, Wood Mackenzie said: “By 2024, the real impact of the IRA will come to fruition.”

Home solar power makes more sense when the more expensive electricity comes from local utilities. Some contractors also back up their power savings claims with contracts that pay a portion of your utility bills if your system doesn’t produce as much energy as promised.

“I have to do my homework before I sign,” Hurwitz said. “But energy costs always go up. This is another hidden incentive for him.”