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Economic Benefits of Solar
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As global demand for energy grows, and the supplies of the fossil fuels used to generate much of it shrink, the cost of energy is increasing worldwide. A growing proportion of total energy generated globally is shifting to renewable energy forms. Photovoltaic solar enjoys growing deployment for electricity generation, due in part to the economic benefits associated with it.
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| Cost of Energy is Increasing |
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Photovoltaic (PV) solar energy allows users to generate their own electricity and thus approach energy independence. In a growing number of regions across the United States, net-metering programs are in place. This allows business and homeowners sell electricity back to utility companies, essentially freezing electric rates for the PV system owner. As electric rates climb, the economic returns on installed systems increase proportionately. Within the U.S., economic incentives, including solar rebate programs, vary by region. Around the world, many countries offer tax incentives, rebates, and regional tariffs for generators of PV solar electricity.
Installing a PV solar system is an investment that can increase the property values of homes and businesses alike. A photovoltaic solar electric system increases home value by $20,000 for each $1,000 in annual reduced operating costs, according to The Appraisal Institute.
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| Incentive Programs |
In an effort to stimulate demand for solar PV systems, some governments (at both the federal and state levels) have adopted renewable energy programs employing various financial incentives. Incentive programs consist of the following types:
- Feed-In Tariff – The price that a utility company must pay private generators of electricity.
- Net Metering – When your PV system generates more power than you need, the excess goes into the utility grid and your meter runs backward, producing credits on your electric bill.
- Solar Rebate Programs – Some regions offer a payment or rebate based on the size of your system.
- Tax Credits – Specific federal and state laws allow the price of your solar system to be deducted from your taxes.
Federal tax incentives favor commercial-scale installations: Federal incentives come in two flavors: (1) accelerated depreciation, and (2) a 30% investment tax credit. The accelerated depreciation schedule allows depreciation of the solar PV system over a five year period, helping to reduce taxable income over that period. The 30% business energy tax credit for solar PV systems is an upfront 30% tax benefit applied against the cost of the system. These federal tax incentives make large, commercial-scale systems very attractive for profitable entities.
State level incentives vary widely: At the State level, incentives are typically based on rebates that offset the cost of the installation. Rebates typically range between $2/Watt to $4/Watt, accounting for roughly 30% of the total installed system cost. However, state level incentives vary widely and sometimes differ within each state (e.g. by county). A good reference for a state by state summary of incentives can be found at www.dsireusa.org.
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