Homeowners debating switching their electricity to solar power could soon find greater support from Washington. How much of a boost remains tied up in the closely contested infrastructure and budget bills still under consideration in Congress.
There’s little doubt, however, that a future mix of cleaner energy in the U.S. means that solar can only grow.
Consumers now more than ever can take advantage of competitive quotes from dealers, and overall, lower installation prices in regions that are well-supplied. Consumers can also rely on steady or expanding tax incentives and conditional rebates to help cover the upfront costs, although the future of these programs also depends on final legislation, say industry analysts.
While it’s true that ambitious national solar plans require more company, hospital and school installations of panels, as well as large solar farms for “distributed solar,” household panels, including those that feed energy back to the grid, are a major part of hitting renewables targets.
All told, consumers should do their homework, asking questions about shipping availability, projected cost and savings, warranties, tax programs and lending or lease options. We talked to residential solar experts about forecasts, navigating incentive plans and current market conditions.
The big picture: Solar panels are falling in cost
U.S. solar installations hit a record high in 2020 as falling costs and supportive policies boosted demand, and the industry is expected to post another banner year in 2021. The solar sector is now a $25 billion industry that employs over 231,000 people.
A September report produced by the Department of Energy argued that solar panels had fallen so much in cost that they could produce 40% of the country’s electricity by 2035 — enough to power all American homes at least in part — and produce 45% of electricity by 2050, compared to less than 4% today. President Biden detailed these projections in a September pledge to grow U.S. solar.
But the electric grid — built for coal power, and then for natural gas and nuclear plants — would have to be almost completely remade with the addition of storage batteries, and transmission lines to send power around the country. For now, this helps drive the push for home installations.
The Solar Energy Industries Association trade group and other energy-industry allies have their own data: solar energy will comprise 30% of all U.S. electricity generation by 2030, they say, including home installations and broader, distributed solar energy. Reaching this target for generation from solar will result in hundreds of thousands of new U.S. jobs, more than 14 million solar rooftops and 500 million metric tons of CO2 emissions offset each year, the group says. This shift is in line with what most climate scientists say is needed to help the nation get ahead of the effects of global warming.
What’s on the line in Washington? Solar tax credits and rebates
Under the proposed Build Back Better Act, tax incentives for wind and solar, energy efficiency and electric vehicles would be updated and extended through the end of the decade.
For solar in particular, Congress is mulling a long-term extension of the solar Investment Tax Credit (ITC). Also up for consideration: direct pay, in which households that don’t qualify for the tax credit receive a rebate, and a separate solar storage ITC, plus a renewed focus on equity and access to clean solar energy in typically underserved communities.
“I consider this the single biggest bill in our professional lifetimes as industry financiers,” said Eric White, CEO of Dividend Finance, a major lender for U.S. residential solar and home energy markets.
At least one observer thinks this incentive needs to evolve to help more homeowners. “Solar tax credits should have a refundable cash value, like the child tax credit, that converts to cash if the recipients don’t owe enough taxes to use the credit,” said Joshua Rhodes, an energy research associate at the University of Texas at Austin, in a commentary. “Lower-income households who install solar or buy into community solar projects could use this cash value to take immediate advantage of the credits, regardless of their tax bills.”
How does the solar power tax credit work?
The ITC is a 26% tax credit for solar systems on residential (under Section 25D of the tax code) and commercial properties (under Section 48). The Section 48 commercial credit can be applied to both customer-sited commercial solar systems and large-scale utility solar farms.
Congress passed a two-year delay of the ITC phasedown in 2020.
Some states go beyond the federal help, so consumers should research offerings closer to home. California, for instance, offers a property tax exemption for a solar system. This means that property taxes won’t go up even though the value of your home could go up as much as 4.1% when you install solar.
Incentives have driven sales. “The recent two-year extension of the investment tax credit will drive greater solar adoption through 2025,” said Michelle Davis, Wood Mackenzie senior analyst, in a solar-industry report. The report said the credit’s two-year extension at the current level will lead to a 17% increase in solar deployment between 2021 and 2025.
Solar can offer protection from grid-power blackouts and price increases
High-profile power outages in California and Texas could inspire more households to generate their own electricity via solar, especially if battery storage is added.
“Because of weather events related to climate change, people are increasingly adopting solar and storage as a way to achieve a level of independence from the grid, especially in the many areas that are seeing hurricanes and wildfires and flooding and extreme heat,” said Dan Whitten, vice president of public affairs at SEIA.
Suzanne Leta, head of policy and strategy for SunPower, which sells and installs residential and commercial solar, said market trends indicate traditional-grid electricity prices are not going down as they’ve been rising historically year after year in almost every major market.
Solar, she suggests, is a “way for the individual homeowner to take control over power and have a choice. They can get direct electricity bill savings from making an investment and they can hedge against future price increases.”
How much does solar power cost and what’s required for installation?
A quality system will include solar panels and mounting frames, all required wiring, an inverter, a charge controller, and if homeowners choose, a solar battery bank.
Battery storage, which allows power for a house even when it’s not optimum sunshine and can limit the need to use traditional grid backup, presents extra upfront costs (it will vary by provider, but should be sought in any estimate).
“When combined with battery storage, solar results in a holy grail of resiliency,” Leta suggests.
One solar panel typically produces about one kilowatt-hour (kWh) per day, so if your daily kWh usage is 30, you would need 30 solar panels to generate all of your energy needs. But here’s more on how to estimate your needs.
Households may also have to purchase installation permits as well as have an official inspection completed before they are able to install and use the system. Homeowners should always discuss any required permits or inspections with your installer in advance.
3 questions to ask before installing solar power
An installer should provide a free evaluation that includes looking at your electricity bill to find out how many kilowatt hours of electricity your household typically uses and evaluating your roof ‘s condition as well as tree canopy or nearby building shading, to determine how many panels you’ll need. Get up to three bids, say the experts.
After solar tax credits, the cost for a solar panel system on an average-size house in the U.S. ranges from $11,144 to $14,696, according to EnergySage. But it varies by state. The battery addition will tack on more upfront costs.
The top three questions according to Leta: upfront costs and how you’ll pay for it (cash, loan or lease); how much savings can be expected in the first year; and how much savings is anticipated over the life of the contract.
What to know about solar loans and warranties
While the addition of solar to a house typically raises its value at resale, homeowners should ask themselves how long they expect to remain before they put down a big upfront outlay, said Dividend Finance’s White. It’s important to discuss with a knowledgeable real estate broker the value of the solar system and warranty on a home’s listing price, plus work out the details of service and warranty transfer early on in a listing process. Potential homebuyers should also be asking about inheriting solar early on.
Dividend has been providing solar loans since 2013 and White says a more robust residential and commercial solar market has “tightened loan spreads” which ultimately makes for less-expensive borrowing. The overall low interest-rate climate in the U.S. also provides historically favorable terms.
Leta stressed that warranties, while they vary, are often decades-long, which means they usually extend beyond a loan period, a benefit to the homeowner and a feature in passing along a solar system should a home be sold.
Don’t ignore tariffs and shipping woes when considering solar
There are some short-term market uncertainties. Solar has not escaped global shipping backlogs and shortages hitting the many especially tech-heavy industries as the world powers back from the worst of COVID-19; how much varies among solar panel and equipment manufacturers and dealers, depending on where products are sourced, said Leta.
She said SunPower has kept up with demand thanks to a robust supplier, but that’s not universal across the industry and should be a key question from homeowners as they pursue solar installation. Leta is also a board member for the trade group SEIA.
The solar industry is also pushing the Biden administration to rethink tariffs on solar components made in China and elsewhere, arguing that the president should wait to close the door on imports until domestic solar manufacturing has ramped back up. The U.S. surrendered its competitive position to overseas makers during Biden’s vice presidency under Obama and new demand has kept up the need for greater imports.
Biden has made U.S. jobs and America-first manufacturing the key talking points of his agenda to boost renewable energy and help slow climate change, positions that tend to at least keep many Republicans at the negotiating table. The Trump administration also pushed solar tariffs. For some in the solar industry and beyond, a pro-tariff stance challenges the U.S.’s ability to hit renewable-energy targets on a tightening timeline.