In the last few years, utilities in Arizona have been slowly reducing the buyback credits they pay homeowners with solar panels who “sell” their excess power back to the utility. With these changes, many predicted that sales of solar systems would drop dramatically.
Despite all that, solar is flourishing, according to Kyle Ritland, VP of Marketing at Sun Valley Solar Solutions in Chandler. Here are some of the possible reasons why:
1 | An important federal tax credit is about to be reduced
This solar tax credit, also known as the investment tax credit, currently allows homeowners to deduct 30 percent of the cost of installing a rooftop solar energy system from your federal taxes. But the tax credit will drop at the end of the year to 26 percent and then to 22 percent in 2021. After that, it is scheduled to disappear entirely for homeowners. The rush to install solar before this lucrative credit expires is pushing installation timelines from weeks to months in some areas.
Ritland suggests that those interested in getting the maximum credit should move forward as soon as possible, “because the rush to install solar before the tax credit expires is already pushing installation timelines from weeks to months, in some areas.” That’s because it is recommended that the system be installed and commissioned by the utility before the end of the year in order to qualify. The federal tax credit is only available to homeowners who buy their systems, not to homeowners who lease their systems.
“Even though you might have to hurry, you want to be sure to book with a reputable firm rather than with those who farm out their installation work to a third party. Timelines are critical right now, so choose someone who will manage the entirety of your job from sale through design, installation and commissioning,” Ritland said.
2 | Arizona is still one of the best places in America to install solar
That’s because our state receives the highest amount of solar irradiation in the United States. A solar system installed here will produce 60 to 70 percent more electricity than a rooftop system in most other places in America, according to the U.S. Department of Energy.
In addition, our state has a residential solar tax credit that reimburses 25 percent of the cost of your solar panels up to $1,000 — if you buy them outright. There are other financial benefits as well: Arizona doesn’t charge sales tax on solar equipment, and you will not pay more property taxes because of any value that a solar system might add to your house.
3 | Remember that a rooftop solar system will only produce a portion of your overall electricity
It will not produce electricity at night, so you’re probably going to remain connected to the utility grid and buy some percentage of your nighttime electricity. This is where the buyback rate helps. You can offset your purchased energy by selling your excess solar energy during the day and banking credits to offset the kilowatt hours that you otherwise need to purchase.
“The buyback rates for rooftop solar systems still work out for most homeowners, but the amount that utilities pay for your excess energy will probably keep dropping over time,” Ritland said.
Buyback rates are the credits that utilities pay to customers who export excess solar power back into the grid, and they are traditionally an import variable to help offset purchased energy and reduce a monthly power bill.
“Even though buyback rates are dropping over time, Arizona utilities generally honor solar agreements for 10-20 years. With that said, locking in and being grandfathered into one of our current rate plans for the next decade or two is another good reason to go solar now, rather than waiting,” Ritland said.
4 | Batteries are a game changer
Adding a battery to a solar energy system will help to further reduce reliance on grid power. In short, batteries allow solar customers to store their own excess solar energy for use during higher cost on-peak hours, or at night when the solar panels stop producing. What’s more, less energy is sold back to the power utility with a battery, so the diminishing buyback credits become less of a concern.
Ritland told us that SRP is currently offering a very compelling battery incentive that allows homeowners to get up to $3,600 back from SRP for adding a battery storage system to their home. If the battery is combined with solar, homeowners can also apply the 30 percent federal tax credit to the battery add-on. The 30 percent tax credit drops at the end of 2019, and the SRP incentive is available for the first 4,500 customers on a first come first served basis.
5 | Technology keeps evolving, and solar panels keep getting more efficient
Panels are getting better at producing more energy from the same space. This generally means that it takes fewer modern panels to produce the same amount of energy that required many more panels ten years ago. This is good news for people with limited roof space or who simply like the aesthetic of a smaller system.