With the recent significant financial rebates passed by both the Federal and State governments there has never been a better time to go solar! Until recently solar has been unaffordable to many American homeowners. Now with the new rebates and tax credits the cost to install a new solar system can pay for its self in as little as 6 years. Now more than ever our country needs its energy independence and finally politicians have stepped up to do their part. Take advantage of these programs before it is too late.

Click to Enlarge

Federal Tax Credits

Homeowners across the nation are now eligible to receive a 30% tax credit off the price of their new photovoltaic solar system. In 2006 the federal government passed the Renewable Energy ITC. This was designed to provide homeowners incentives to go green and make the switch to clean sources of energy. Until recently the program was capped at a ceiling of $2000 which only offset a small portion of the system cost. In 2009 congress modified the bill lifting the cap and allowing the credit to cover up to 30% of the net price of the system (less any state or local rebates).

With the cap lifted this now covers a significant portion of the net costs associated with a new PV solar system. For example, if the price of the solar system was $25,000 and your state rebate was $3,000 then your federal tax credit would be $6,600. Unlike normal tax deductions such as depreciation this tax credit can be used as cash to pay your federal income taxes. Meaning, if at the end of the year you owed $10,000 in taxes and you used your tax credit you would only need to pay $4,400. If the amount of taxes owed is less than the amount of the credit then the balance can be carried forward up to 5 years. The cap is set to stay lifted until 2016.

State Cash Rebate

In 2006 the state of California passed what has come to be known as the "million roofs act". This bill was designed to provide cash rebates to make solar power more affordable to California homeowners. It has made available over $2.1 billion to be used over the next 10 years by homeowners and businesses throughout the state. All major utility companies are participating in this program.

People often ask "If the state is broke then how do you know I will get my money". If you've looked at your electric bill recently you may have noticed a new charge on there entitled public purpose program. This is money that you and every other utility customer have paid for this rebate program. Actually if you do the math it makes up about 17% of your entire bill. So if you’re total bill was $2000 per year this means you have already paid $1,380 towards these rebates out of your own pocket since 2006.

Now the nice part about this program is the money is distributed by the utility companies and is kept in a special account to guarantee that the funds will be available. This means that you don't have to worry about the state being broke because they are completely kept out of the loop. The unfortunate part is if all the money is not claimed in the within the 10 years the utility company gets to keep the balance. So all you have to do is step up and claim money that is already yours!

Let's take a closer look at how all this really works. Unlike the federal incentives which are based on the price of the system, state rebates are calculated on annually system output. This mean's the more electricity your system produces the bigger your rebate will be. Rebates are paid on a per watt basis and are on a declining schedule. So the sooner you decide to go solar, the higher you will get paid per watt.

For example, let’s say that you had a 10kw system. This would mean that your solar systems produced 10,000 watts annually. If the state was paying $1.50 per watt, then your state rebate would be $15,000. Rebate amounts all started out at $2.50 per watt at step 1 and will end at step 10 paying out only $.20 per watt. Since it is on a declining schedule the more systems that are installed the less per watt you will receive.

Currently there are two types of state rebates which are EPBB (Expected Performance Based Buyback) and PBI (Performance Based Incentive). EPBB rebates are anything with an annual system output of 50kw or less. For most homeowners this is the type of rebate you will receive and it is paid out in cash within 60 day from the time of installation. For those with systems bigger then 50kw you will qualify for the PBI rebate. They are paid out monthly in cash over the course of 5 years. There are many system design factors that come into play as well such as location, azimuth, equipment rating and sun exposure.

What Is Net Metering?

Recently net energy metering laws were passed forcing California utility companies to buy back excess power produced by solar systems. Until now solar systems owners did not get credit for over production during peak seasons and were charged retail rates for underproduction during off peak times. This forced many system owners to go off grid with complicated and unreliable battery backup systems to prevent net losses on power. Now, utility companies allow you to bank excess electricity and they will purchase it back at retail rates for credit on the owners account. This literally allows you to save for a rainy day and is known as your annual true-up.