Only a few years ago, residential solar installations were mostly of interest to those wanting to "go green." However, as the cost of solar panels continues to drop, many Houston-area homeowners now find that a residential solar installation pays off both environmentally and financially.
High utility bills also drive demand. Today, Houston-area electricity rates average 10.98 cents per Kwh, 7.58 percent less than the national average of 11.88 cents per Kwh. However, due to the significant cooling requirements in Houston’s subtropical climate, Forbes notes that utility bills here are among the highest in the country — more than triple those in Seattle, for example.
Tax Credits and Other Incentives
In Texas, the cost of residential solar is offset by various tax credits and rebates. And there’s good news about the Solar Investment Tax Credit (ITC) originally set to expire on December 31, 2016. The full 30 percent tax credit is now available for residential systems purchased and installed by the end of 2019. After that, a phase-out begins. In 2020, the tax credit is reduced to 26 percent. In 2021, the credit drops to 22 percent, and it ends altogether after that.
In Texas, those who invest in rooftop solar also enjoy a full property tax exemption. A homeowner does not pay property taxes on increased property values resulting from a solar installation. This 100 percent property tax exemption is a commonly overlooked opportunity.
Further cost savings are realized through incentives offered by local utilities and various government entities. Texas solar incentives are regularly updated at a website maintained by North Carolina State University.
Residential rooftop solar installations now cost about $3.00 per watt. That means a smaller 3.1 Kw system would run a little less than $10,000, while a 5 Kw system would run about $15,000. There are four options available to homeowners that want to invest in rooftop solar:
Some homeowners may want to pay cash for their system. Buyers are responsible for system maintenance, although manufacturer warranties for system components often cover much of a system's typical 15- to 20-year lifespan. If you sell your home during the normal life cycle of your rooftop solar system, you’ll likely recover some of your investment in the form of a higher selling price.
Borrow to Purchase
With interest rates on home equity and personal loans remaining at relatively low levels, borrowing money to pay for a solar system is a wise choice for many homeowners.
A residential solar lease will often reduce the potential savings, but it does provide two big advantages. There is little or no upfront cash outlay, and the lessor, the actual owner of the system, takes care of installation and maintenance. However, since the leasing company gets the tax credits, savings are usually greater with a purchase.
Remember that a home's value is impacted by a purchase or lease decision. For example, FHA appraisals allow you to add the value of your system to your home’s overall value if you own the solar installation, but not if you lease it.
Power Purchase Agreement (PPA)
A PPA is similar to a lease. You pay a preset amount for each Kwh of electricity that is consumed. When you require more electricity than the rooftop solar setup produces, you purchase the rest from the local utility in the traditional manner. Although PPAs are convenient, savings are usually less than if you purchased the system outright.
The Simple Dollar offers specific calculations of savings over the life of a hypothetical solar installation when comparing these various options. At Solar Power Rocks, analysts project that residential solar installations in Texas will outperform the S&P 500.
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