The 2020 Federal Solar Tax Credit Explained

It’s finally 2020, and the esteemed 30% Federal Solar Tax Credit, the Income Tax Credit that homeowners can get for installing solar, has come and gone. While many solar companies have been claiming that the Solar Tax Credit is “going away”, this only partially true: the 30% credit has gone away, but the Solar Tax Credit itself is still around. Let’s take a look at what the Solar Tax Credit is, what it has done for the solar industry, and what remains in 2020. The History of the Solar Tax Credit The Federal Solar Tax Credit, or the Solar Investment Tax Credit, was implemented in 2006 in the Energy Policy Act to promote the growth of solar installations on home and businesses in the US. It was extended twice, then in 2015, through the Omnibus Appropriations Act, was extended through 2023, putting it at the state that it is today. The Tax Credit begins slowly phasing out this year.  The Impact Since the implementation of the Solar ITC, the solar industry has grown by more than 10,000%, flourishing into an industry that is now healthy and sustainable. By keeping costs down for the consumer by providing a financial incentive to go solar, the Federal government has allowed solar installation businesses to and drive down the costs of installing solar to the point of sustainability.  The impressive results of the impact of the Solar ITC can be clearly seen in the numbers. A 10,000% increase in solar capacity, a quarter of a million new jobs, and $140 billion in investment have all been recorded. What’s not recorded is the massive positive impact on the environment, the massive savings homeowners have seen on their electric bills, and the quality of jobs created by the flourishing solar industry.How the Solar Tax Credit Works The way the Federal Solar Tax Credit works is that homeowners or business owners who install solar receive a federal income tax credit worth a certain percentage of the cost of their solar installation. They have to own the solar system, which means that they have to either buy it with cash or finance it. It cannot be a leased system.  What this does is bring down the total cost of the solar installation, which makes it within reach of a much larger percentage of the population. This has proven to be a successful model, based on the results of its implementation over the last 12 years. So let’s look at an example of how this would work with an average sized solar system. Let’s look at a $20,000 dollar system.  Since its original implementation, the Solar Tax Credit has been at 30%. So what we do is multiply that percentage by the total cost of the installation ($20,000) $20,000 X 30% = $6,000 So that $6,000 is what the home or business owners would receive as an income tax credit. So if the homeowner owes $12,000 on their federal income taxes, that amount would be reduced to $6,000.  That takes the full price of the system down to: $20,000 - $6,000 = $14,000 So the final cost would be $14,000 with the Tax Credit included. If the home or business owner doesn’t owe that much on their taxes, the credit can be rolled over to following years. So even if what you owe isn’t that much every year, the tax credit could reduce what you owe for years to come. This formula has been the driver for solar’s success. This massive Tax Credit has served as an extremely effective incentive as it has stood so far. Now, in 2020, the Tax Credit is scheduled to reduce, but not by much. What is the Solar Tax Credit for 2020? In 2020, the Federal Solar Tax Credit is scheduled to reduce to 26%, down 4% from previous years. This has been planned since the extension in 2015, so homeowners have known it was coming for years. The Tax Credit is scheduled to continue to decrease over the next two years, down to 22% in 2021, then down to 0% by 2022 for residential installations, leaving a 10% credit for commercial installations only. So for the next two years, there’s still substantial savings to be gained by installing solar. So let’s do that same math in the example earlier, but with the 2020 26% Tax Credit instead of the full 30%. So that same $20,000 system will now be reduced by 26%. $20,000 X 26% = $5,200 So instead of a $6,000 Tax Credit, you will receive a $5,200 Tax Credit.  $20,000 - $5,200 = $14,800  That makes the total price of installation $14,800. So only $800 more than the total price with the 30% Tax Credit. While that $800 is 4% of the total, it’s still not a huge loss, especially compared to the $5,200 you can get off with the credit. So if you’ve been deterred from going solar because the Solar Tax Credit has decreased, you may want to rethink your decision. The truth is, the Solar Tax Credit is still very substantial, and will be for two more years. If you let the slight decrease completely deter you from going solar, you will be missing out on huge savings.Why Now is the Best Time to Go Solar Besides the still substantial 26% Solar Tax Credit there are several other reasons that right now is the best time to go solar. What we mean by “the best time” is that, by going solar as soon as possible, you will get the best deal and save the most money. So let’s look at the other reasons why right now is the best time to go solar. Lowest Costs Ever As a result of the amazing work the Solar Tax Credit has done, the actual cost to install solar, even without the Tax Credit, is lower than it has ever been, due purely to the volume of installations the the industry has reached. These combined low costs, combined with the Tax Credit, make solar much cheaper than it was in previous years. Sure, they will likely keep going down, but you may as well take advantage now while the Tax Credit is still substantial.  Electricity Prices will Continue to Go Up It is inevitable that the prices that the utility charges for power will continue to go up. In SDG&E for example, is looking for a 4.5% increase this year. That means that the sooner you go solar, the more you will save, as you will not have to pay for power when those rates go up.  Interest Rates are Very Low Many homeowners who go solar choose to finance their systems, which is a great option because they can make monthly payments that are less than their power bill was before going solar. It just so happens that right now, because interest rates happen to be lower than they’ve been in years, is one of the best times to finance solar. If you go solar now you can lock in those low rates, which will save you a ton of money in the long run. So as you can see, the Solar Tax Credit is still around, and at 26%, it is still very substantial. So homeowners who are deterred from going solar because they think the best deal has passed should know that the 4% difference is not much. The Tax Credit combined with lowering costs, low interest rates, and increasing electricity rates makes it so that there will never be a better time to go solar than now.

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Learn the Basics of Solar at altE’s 9th Annual Solar Installer Conference

It’s no secret that the altE Solar Installer Conference is a destination event for, well, solar installers, from around the world. Did you know it’s also a great place to learn the basics of solar? Each year altE hosts  two...
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4 Reasons to Install a Solar Battery in San Diego

Solar batteries are all the rage lately, and homeowners with and without solar are looking to them as a way to store extra power created by solar. While the excitement about batteries seems to be following the recent rolling blackouts implemented by California utilities, there are many benefits to solar batteries that homeowners in San Diego should be aware of. Let’s look at 4 of those reasons, so you can see just how beneficial installing a solar battery can be to San Diego homeowners. 1. Offset Time-of-Use Charges In SDG&E, Net Metering has always been the billing system that homeowners are entered into once they install solar. The way Net Metering worked originally, for those that don’t know, is that during the day, when the solar was producing more power than the home was using, the excess power was sold back to SDG&E. At night, when the solar was not producing power, the home pulled power back from the grid, utilizing those credits earned during the day to purchase the power back from SDG&E. This crediting and buying back system allowed solar homeowners to “zero out” their electric bill, an incentive which was attractive enough to allow the solar industry to get its footing and skyrocket in the San Diego area. Over time, Net Metering rules were changed so that the value of the electricity changed depending on when it was used, also known as “time of use” billing. The concept behind Time-of-Use charges is that electricity costs more or less based on what time of day it is being used. According to SDG&E, this is based on demand at different times of day, so when more people are using more power, the power becomes more expensive and vice versa. This plays out in the following way: during the day, when everyone is at work or out doing things, the general population is using less power - in the Time-of-Use model, this is referred to as “Off-Peak”. That’s when power is less expensive, because there is less demand. Come 4pm, to around 9pm, when everyone is getting home, cooking dinner, watching TV and using the computer, electricity demand goes up, and thus, so does the price of electricity. As the night goes on, prices go back down, until they are again “Off-peak” at night. As a result of these TOU charges, solar power produced from 6am - 4pm was worth a little less, and after 4pm (when solar output goes down) electricity prices went up quite a bit. There are ways around this, for example by adding more panels to create more credits, but in general it did reduce the value of solar power a bit in San Diego. In comes solar batteries. With solar batteries, solar homeowners can store the extra power created during the day, and use it later at night when electricity prices are higher under Time-of-Use. So instead of selling the extra power during the day for a lower valued credit, that power is stored to be used when you would be buying the expensive On-peak power. This allows the solar homeowner to do an offset on their own. So installing a solar battery can help you get around Time-of-Use charges, keeping your power when it’s cheap to be used when it’s expensive. 2. Protection Against Blackouts / Outages Nothing has sparked interest in solar battery storage like the recent planned power outages in California. It all started with the Northern California utility PG&E being blamed and sued for the large “Camp Fire” that killed 86 people in 2018. The claims were that PG&E had failed to maintain power lines and wires, and that those power lines were responsible for the deadliest fire in CA history. As a result of these lawsuits, which ended up with the utility dealing with an estimated $30 billion in liabilities, PG&E filed for bankruptcy this year, marking the largest utility bankruptcy case in US history. As a result of this massive lawsuit, and to remove any liability, PG&E implemented what they referred to as “public safety planned power shutoffs” this year when the fire danger was rated at high levels. Essentially what this means is that, when Santa Ana winds were high across California recently, conditions which are known to be highly susceptible to fires, PG&E shut down power to around 2 million of their customers to prevent potential fires caused by downed power lines.  This was a highly controversial decision, but it was done essentially to protect themselves from further lawsuits. SDG&E, seeing what PG&E went through with their lawsuits, followed suit with their own public safety planned power shut offs this year. On October 29, 2019, SDG&E announced that, in lieu of Santa Ana winds 41,000 customers would potentially lose power over the next few days. For many homeowners this announcement was completely unexpected and out of the blue, so needless to say, panic ensued in many areas. So many homeowners have tried to figure out ways to protect themselves from these unexpected blackouts. Of course there are generators, but the more economical and environmentally friendly option is to install solar + battery storage. That way, no matter what happens with SDG&E, as long as there’s Sun, which typically there is on those high fire-risk days, you’ll be able to keep the power on. During the day, when the solar is producing, your power will be kept on from that, all the while charging the battery for backup power at night. Your appliances, your computer, your medical equipment will stay when you really need them, and you’ll save money on your power bills for years to come.3. Charge Your Electric Vehicle Another great use of a home solar battery is using it to aid in the charging electric vehicles. While you can charge electric vehicle without a solar battery, utilizing a battery can make charging more economical. That’s because during the day, when you are at work and driving you car, the battery stores the extra power being created instead of sending it back to the grid. Then in the late afternoon, when you come home from work and charge your vehicle, instead of having to buy power back from SDG&E, when it is at “on-peak” at times, you use the power you created during the day. So instead of having to buy the most expensive power back from the utility in that 4-9pm slot, you use the free power you already created. This can help save a ton of money by allowing you to charge at a much lower price than you would without a battery. 4. Increase Your Home Value It has been shown that installing solar panels increase home values in California between 3-4.5%. Throw a battery on top of that, and you are sure to get a hefty home value increase between the solar and a solar battery. Think about it: if you’re a homebuyer in San Diego, and you are aware of recent rolling blackouts as well as increasing electricity prices, what will be more attractive to you, a house with solar and battery storage already installed, that is blackout proof and comes with no electric bills, or just a normal house? You’re going to go for the house with solar + battery storage first, and will definitely be willing to pay a 3-4.5% premium for both. So if you install battery storage, you will certainly add to your home’s value, and if you go to sell it, it will almost certainly sell faster. So as you can see, there are many reasons to install a solar battery in San Diego, including offsetting Time-of-Use charges, protecting yourself from blackouts, charging EV’s, and increasing home values. The thing is, in the future, as electricity prices go up and rolling blackouts increase in frequency, these reasons will become increasingly relevant. So to get ahead of the curve and prepare yourself for the future, consider installing solar + battery storage to prepare your home for the future.  

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