Solar power is gaining a serious foothold in the American psyche as a viable alternative to dirty energy from oil, coal-fired electric plants and hydroelectric plants that damage fragile river ecosystems. But… is solar actually affordable for the average homeowner? The great news is that the cost of solar is going down every year, and you can take advantage of several ways that the government can help you go solar.

Governments offer solar tax breaks but if those aren’t available, some utilities offer financial incentives to make solar power more accessible for the homeowner. The estimated savings as a result of these incentives is anywhere from 26 to 50 percent on the cost of the panels.

The Catch

You have to own the system in order to take full advantage of government incentives. If you purchase your system, you are the one who gets the tax credits, rebates, and other incentives. However, if you lease your solar system, the third-party owner of the system receives the incentives.

This doesn’t mean that you don’t benefit from solar if you opt for a lease. A solar lease can make sense if:

• You want to use electricity generated from a renewable source, rather than relying solely on the grid
• You want to start cutting your energy costs right away
• You want guaranteed performance without dealing with maintenance or repairs
• You don’t qualify for federal or state investment tax credits for a solar system purchase

The biggest advantage of solar leases is that you don’t have to pay back 26% of the loan by month 18 (the tax credit) like you do with a traditional solar loan. This is great if you don’t qualify for the tax credit. With a traditional loan, even if you don’t qualify for the tax credit you still have to pay the amount of that tax credit back into the loan by month 18 or your payment goes up for the rest of the loan life, throwing off the savings aspect of going solar! With a lease, you don’t have to do that so the payment stays the same.

However, the greatest savings ultimately come from purchasing a solar system because you are the one who benefits from the government incentives, as well as incentives from utilities.

Government Solar Incentives for Homeowners 

Government incentives such as tax credits add up and can put a significant dent into the cost of your solar system.

Federal Solar Tax Credits

The federal government offers a solar tax credit (also known as an investment tax credit or ITC) that lets you deduct a portion of your solar costs from your federal taxes. Originally established by the Energy Policy Act of 2005, this program was initially slated to expire just two years later. But its popularity led Congress to extend the expiration date several times; the current ITC is available through 2021, although the original 30 percent tax credit has now dropped to 26 percent, and will drop again to 22 percent in 2021. There will be no federal credit for residential solar installations after the program expires at the end of 2021. If it is renewed as it has been in the past, and based on the trend of this program, the tax benefits will likely continue to drop.

Your eligibility to receive the tax credit depends on your taxable income and tax liability. Please consult a tax professional to confirm your eligibility and if you’re eligible, use IRS form 5695 to receive your ITC.

What this means for you: get it while you can. On average, solar customers save approximately $9,000 off the cost of going solar.

Texas State Tax Credits 

Texas does not offer a tax credit or property tax rebates for going solar (flood your representatives with calls and emails to get them onboard with solar).

What this means for you: flood your representatives with calls and emails to encourage them to offer solar tax credits!

Why Stop There? Take Advantage of Utility Solar Incentives

Some local utilities offer solar incentives that may involve solar rebates or net metering (selling your overproduced energy back to the grid, which is a great incentive in sunny Texas).

Here’s a list of Texas utilities currently offering residential solar incentives. If your utility is not on the list, it means they don’t offer solar rebates, or those incentives haven’t been published as of this writing. However, most utilities offer some types of incentives for energy-saving home improvements. Please contact your utility provider for additional information.

Texas utilities offering rebates for installing solar systems, and/or net metering:

• American Electric Power (AEP)
• Austin Energy
• CoServ Electric
• CPS Energy
• Denton Municipal Electric
• Farmers Electric Cooperative
• Garland Power & Light
• Guadalupe Valley Electric Cooperative (GVEC)
• Heart of Texas Electric Cooperative
• HILCO Electric Cooperative
• Mid-South Synergy
• New Braunfels Utility (NBU)
• Oncor Electric Delivery

What this means for you: take advantage of incentives and contact your utility to encourage them toward adopting a solar rebate program.

Okay, So What’s the Bottom Line? 

As of March 2020, the average cost to install a residential solar system is $13,850. Based on this average, here’s what a solar system in Texas could actually cost you if you deduct your 26 percent Federal ITC: $10,249.

• Save $2,161 on a system that costs $8,310 to install after local rebates (with the ITC applied, the cost would drop to $6,149)
• Save $7,202 on a system that costs $27,700 after local rebates (with the ITC applied, the cost would drop to $20,498)

With net metering, the savings will vary depending on your current energy bill, how much your system generates, and your utility’s rate of buyback. But, to give you a rough idea, here are a few examples:

• If your monthly electric bill is around $133 (the Texas average) and you use 1174 kWh/month (about 11 cents per kWh), you could save over $91 per month, or nearly $1100 annually.

Good financing options as well as solar company rebates can knock your cost down even more. So to answer the question, “is solar affordable”… the answer is a resounding yes. The Federal ITC itself is reason enough; not to mention the increased value of your home after you’ve installed a solar system!