Solar Tax Credit Is Stepping Down in 2020

Rooftop Solar Panels

Designed & Installed by LighthousSolar

What Is the Solar Investment Tax Credit (ITC)? 

The solar Investment Tax Credit is one of the most important federal policies to support the expansion of solar energy in the United States. The ITC is a 30% tax credit for the solar system installed on residential, commercial, and large-scale utility solar farms which enables you to deduct 30% of the cost of solar installation from your federal tax liability and there is NO cap for that!

The most important benefit of the solar tax credit is to provide financial support for customers and make the process of shifting toward a solar power system more affordable, as well as providing market assurance for companies to develop long-term investments that drive competition and technological innovation, which result in lower energy costs for consumers.

How the Solar Tax Incentive Works? 

The most important consideration to be eligible for the solar tax credit is that you own your solar energy system. Either as a business owner or homeowner you can claim your tax credit directly. If you don’t have enough tax liability to claim your whole tax credit in the first year, don’t worry, you can rollover the remaining credits across the next 5 years. 

On average, American households use 11,000 kWh electricity per year and to offset all of that electricity use, we would recommend an 8 kW solar system. If installed by LighthouseSolar, this would cost you an estimated $20,000 (before tax credits and rebates) which makes you eligible to receive $6,000 solar tax credit. The net investment, without considering any local rebates, is thus $14,000.                                                                               

How Long will the Solar Tax Credit be in effect?

There has been a much debate on the expansion of solar tax credit. Congress passed a bill in 2015 and the tax credit is now available to homeowners and commercial sectors with different rates through 2021.

However, the full 30% tax credit WILL NOT be available after 2019 and will drop by 4% as of January 2020. The tax credit will thus begin a slow rampdown through 2022 as follows: 

2019: The tax credit remains at 30% of the cost of the system. This means that if you get your system before the end of 2019, you will have the opportunity to get 30% tax credit for your solar panel system.

2020: Owners of a new residential and commercial solar power system can only deduct 26% of the cost of the system from their taxes.

2021: Owners of a new residential and commercial solar system will be able to deduct 22% of the cost of the solar power system from their taxes.

2022 onwards: Only owners of a new Commercial solar PV system can deduct 10% of the cost of the system from their taxes. There is No Federal Tax Credit for Residential solar energy systems.

In summary, the solar Investment Tax Credit is applied to your solar power system cost and the amount you receive varies based on the solar system size you choose. A simple example of the differences in the solar tax credit in 2019-2022 for a 13-kW solar system size is shown below:

Changes in your savings as Solar Tax Credit changes in 2019-2022 

Year	Total Solar Cost before Tax & Rebates	Tax Credit	Credit Amount You Receive	Tax Deductible	% Change
2019	$28,448	30%	$ 8,534		N/A
2020	$28,448	26%	$7,396	($1,137)	-13%
2021	$28,448	22%	$6,258	($1,137)	-15%
2022 onwards	$28,448	10%	$2,844	($3,413)	-55%

* No Tax Credit for Residential Sector by 2022 onward.

In 2020, the Tax Credit will drop 4%, which means you will earn $1,130 less than the previous year in terms of tax credit. So, if you are interested in going solar and have been waiting for the right time, you should act now to enlarge your savings.

LighthouseSolar Hints:

1. Battery storage systems are also eligible for 30% solar tax credit when the battery system is charged at least 90% by a renewable energy source (solar) and is installed at the same time.

2. It is important to understand your solar investment. To the extent that getting multiple quotes helps you understand the value and specifics of solar, we encourage you to pursue your options.

3. Demand of your solar provider the level of experience and service proportionate to your investment. Solar has a claim on permanence that many other investments around your home cannot compete with. We recommend relying on the experience of your friends and peers as trusted sources of information and validation. The solar installation is an investment and you would like to have a company that supports you and provides great services when you need it.

4. Working with local companies has many values. There is a community and economic value to supporting your local economy, but more importantly, your solar system will need support and or a tune up at some point in its life and it is very important to work with a company that is of this place. Based here, operates here - today and in the future.  

Residential Solar System

If you’re interested in figuring out the value proposition that solar can offer, we provide Free Consulting. The LighthouseSolar professional sales team will be happy to answer any questions you might have.

- Nafi Shah

Communication Specialist

LighthouseSolar

Essence of Solar Financing

I have had a lot of conversations about how solar financing works and how it varies from traditional financing.  Solar financing can seem a bit strange and unfamiliar so I decided to jot down some facts and hopefully explain some of the basics.

No money out of pocket

Every single loan product we offer for solar system is NO MONEY DOWN.  This means no upfront costs or fees. Essentially you can transition from paying the utility to rent your energy to owning your energy without spending a penny!

Flexible to Meet your Needs

Solar financing is available in many terms making it easy to tailor the loan to the project and/ or the clients particular budget goal.  Our lenders offer 10, 12, 15, and 20 year terms. All solar loans are simple interest and have no pre-payment penalties.

Caters to Federal Solar Tax Credit

This is the meat and potatoes of solar financing and what makes it different from traditional loans. When you purchase a solar system, you can receive a 30% refund of the system’s cost on your next federal income tax return.  Solar financing takes this incentive into consideration in the payment schedule.

When you finance your system the loan is set up to give you up to 18 months to file your taxes and apply the 30% Solar Tax Incentive to the loan.  The finance contract will include 3 different payment amounts. The first payment is an interest-only payment for the period of time (up to 18 months) in between installation completion and when you file your taxes for that year. The second is the payment amount before the incentive is paid to the lender and the third reflects what the payment will be after the 30% has been paid.  This allows you to have enough time to file your taxes and forward the payment to the lender.

Payment of the 30% federal tax incentive is not required by the lender, nor is there any penalty if it is never paid.  You simply would have a higher payment based on the principal loan amount being 30% higher. It is worth mentioning that close to half of people who finance their solar systems never pay in the incentive.  Some use the 30% tax incentive to pay down other higher interest loans or credit cards. Others might take a well-earned vacation or make a larger purchase that may have otherwise been impossible. It is a good example of how solar has hidden benefits beyond the obvious energy cost savings.

To sum it up, there is a financing option for everyone and we cater to each client individually and offer options in a consultative manner.

-Erik Smith

Technical Sales

LighthouseSolar

Our Take On The Tesla Rooftop Solar Panel

We’ve been hearing a lot of buzz in the industry surrounding Tesla’s recent announcement of the “Tesla Solar Roof” product. Being designers and installers of solar technologies we wanted to share some of our thoughts on this product announcement and hopefully clear up some of the questions and confusion left by the announcement event.

Previous Attempts at Integrated Solar

Firstly, the concept of a solar integrated roofing shingle is not entirely new. It has been attempted previously by several manufacturers in the residential market including some big industry players like Dow with their Powerhouse shingle, and Sunpower with their SunTile product. Both products underwent significant marketing efforts and the building out of dealer channel networks, but ultimately were met with limited success in the market and discontinued.

For those with a negative view of the aesthetics of solar panels, there is a clear advantage to using an integrated roofing shingle product. Others, however, find the look of roof mounted solar panels quite beautiful and see their addition as an upgrade to the home’s overall aesthetic.

Points to Consider:

• Power output: Tesla has not yet said much about the technology behind the “Solar Roof” product, but historically PV roofing shingles have utilitized less efficient “thin film” solar technologies which would require far more roof space to achieve the same system power when compared with standard, framed PV modules. Even if the end product uses a higher-efficiency PV cell, the fact that the cells will be spread across individual shingles will again cause a decrease in array efficiency since they cannot be packed as tightly onto the roof. Furthermore, these cells and shingles will be installed directly on the roof’s surface which will cause them to operate at a higher temperature. Standard PV panels utilize racking systems which allow for air to flow below the array, thereby cooling the cells. The power output of PV cells is reduced as cell temperature increases, so this cooling effect is very beneficial.

• Maintenance: For a PV array to operate efficiently it needs to be capable of moving electrons from all of the PV cells making up the array into the home’s electrical system where they are utilized. This requires thousands of electrical connections. In a standard system most of these connections exist within the solar panels themselves and are protected by the glass face, aluminum edges, and insulating backsheet of the panel. The panel-to-panel connections and those into the house are made with highly durable locking components and wire tested to stand up to harsh, outdoor conditions. In PV shingle products each shingle needs to be electrically connected to the shingle next to it, and for this to remain relatively flat will require those connections to be more fragile than those utilized to interconnect standard PV panels. Also, when one of these fragile connections breaks between two shingles, imagine the task of standing on a roof covered with thousands of shingles and trying to troubleshoot and isolate where that problem is located! The modular nature of a PV system built with standard modules makes it relatively easy to determine where a problem has occurred and, if need be, replace a panel or a section of wiring. Lastly, once this solar shingle roof is installed and functioning the smallest change to the roof to add a vent, chimney, or change the roofline for any reason becomes extremely complex and costly.

• Cost: If one were to ignore the maintenance issues with this type of product, it could be argued that cost-competitiveness could be achieved in a new home construction scenario or possibly a re-roof. Many homebuilders, however, will not want to risk the reliability of a new roofing product nor the need establish relationships with new sub-contractors in the conservative roofing installation market. Regardless the solar shingle will most likely cost more than standard roofing plus solar panels combined, will require a more expensive installation procedure, and as noted above, will incur a higher cost of maintenance across the system’s lifetime due to lower overall reliability. When working with roofing companies on Dow solar shingle projects we saw turnkey system costs that were over 400% higher than standard solar PV system costs.

Elon Musk has great vision, is a clever marketer, and certainly has done well to produce a high-quality electric car. With that being said, we will withhold final judgement on the Tesla Solar Roof until technical specifications and pricing are released, but certainly have concerns about Tesla’s ability to get this product to market and find a place for it to be competitive against the increasingly efficient, reliable, and cost-effective mainstream PV market.

Interested in going solar? Speak with our Austin solar panel installation experts at Lighthouse Solar to get started with a free consultation.

The Seasonality of Solar Energy Production

As an owner of a solar system or when considering going solar, it’s helpful to understand what your system will output over the course of the four seasons. Here in the northeastern United States we do see significant variation in daily energy output from our systems over the course of a calendar year.

SPRING AND FALL

Based on real data from the Lightgauge monitoring systems we install for our customers we can closely track each system’s energy output variation during the year. If we split the year into two equal parts at the Vernal and Autumnal Equinoxes (March 21st and September 21st) we can get a quantitative handle on this variation. It turns out that, on average, 65% of our local solar system’s annual energy output is generated between March 21st and September 21st of each year. The other half of the year, between September 21st and March 21st, accounts for the other 35% of annual output.

SUMMER AND WINTER

Furthermore, if we take a look at the two month windows surrounding both the Summer and Winter Solstices (June 21st and December 21st) by comparing system outputs for June and July vs December and January we can further accentuate the seasonal variation. On average our residential solar customers see a total energy output decrease of 40-60% during the months of December and January as compared to July and August.

The factors involved in this variation are threefold.

• Firstly, we know that in our area we have shorter days in the winter than we do in the summer. This means that the solar system will be running for less time each day and therefore produce less average energy per day.

• Compounding the effect of the shorter days is the fact that the sun angle changes dramatically in the winter as well. The sun, even at it’s peak around midday, is much lower in the sky during the winter months. For most residential rooftops this means that the sun’s rays will be hitting the solar panels less directly than during the summer months. This will cause the system’s power output to be lower which also has a direct impact on energy production.

• Lastly, atmospheric conditions need to be considered. Not only do the winter months provide plenty of stormy weather and cloud cover, but the effect of snow cover on the panels after a storm is significant as well. With a thin covering of snow the system will often still be able to turn on and output a small amount of energy. Larger snow accumulations on the panels, however, can keep the system from converting energy for up to a few days until the panels clear.

IMPACT ON UTILITY BILLS

So how does this work with your utility billing? Won’t this cause system owners to get high electricity bills all winter long when their systems are under-producing and their usage is increased due to more time in the house, higher lighting loads, etc.? Not necessarily, and this is where net metering comes into play. When we design solar systems for customers we always look at the total annual electricity usage when sizing the system. For customer’s with adequate roof space (or area for a ground mount) this allows us to design a system which overproduces enough during the spring, summer, and early fall to build up a bank of kilowatt hours with the utility which will carry the homeowner through the winter months. Thereby the effects of reduced energy production during our northeastern winters can in fact be mitigated through correct system design, sizing, and net metering (read more about net metering here).

This is also why, for our customers who get their systems interconnected in months other than March and April, we advise them to utilize their utility’s “Anniversary Date Change” process to make sure that they are optimizing the use of their net metered energy credits over the course of the year.

If you’d like to learn more about optimizing your anniversary date please call our office and speak with one of our Technical Sales Engineers.

Interested in going solar? Speak with our Austin solar panel installation experts at Lighthouse Solar to get started with a free consultation.

What Else Can Solar System Do?

Given the number of installations we are performing to meet customer demand, it is easy to forget some of the powerful opportunities solar has for many of our customers. Solar is inherently modular, which leads us to think that every system is a slight variation on the same technology, values and long term impacts.

It is refreshing and very exciting when we can demonstrate through effective collaborations and a listen first approach that the integration of solar systems into our built landscape has immediate and latent effects that far exceed the obvious and measurable benefits of clean power, on site power, emission free power and water free power.

A project example illustrates this point clearly.

Several years ago, LighthouseSolar won a commission and ultimately an IREC design award to design and install solar classrooms at 15 middle and high schools in Austin, TX. We collaborated with Austin Energy, Austin Independent School District, and a curriculum developer to deploy a solar classroom at each location for the student and teacher communities to use.

To inform our design approach, we asked the question: What would it look like to have Stonehenge meet the IPhone? We are guided by the fundamental principles that solar is also technology of mythic proportions and eternal time scales, yet we live in a world enabled and pressurized by technologies of instant and distributed connectivity.

For this, our solar classroom needed to serve both real design guidelines.

First, the solar classroom is monumental in aspect. Not that it is so big that is can’t intimately hold the attention of a small class of students, rather it is informed by systems scaled beyond our local experience. The movement of the sun is an experience shared by everyone on earth and while each location on earth has a slightly different experience it is worth remembering that a Greek geographer, Anaximander, calculated very closely the circumference of the globe by looking down a well in Egypt. The global is in the local. This sort of expansive curiosity is available upon casual but pointed interest in a solar system. Our classroom makes this more apparent due to the design elements. The structural supports align with the altitude of the sun at the summer solstice. The depth of the room is defined by the lowest sun angle at the winter solstice. Sun angles are also reflected within the tapered angle of the bench foundations that ring the classroom. The student can feel the shape of the solar ecliptic through their feet.

This brings us back to the power and breadth of the connectivity that the iPhone generation is growing into. The expansive question occurs to us: What will the generation look like and be capable of having experienced the sense of the sun coupled with the tools that hand held computers offer? It is more exciting in what is possible than what is quantifiable.

The solar classroom is also equipped with tools of the modern era. Electronic teaching tools, QR Codes, skype conferencing, weather data monitoring and solar production monitoring set up the ability to run experiments, track results and test hypotheses. These are also tools of sharing, global connectivity all in the context of primary education.

Solar energy is more than a commodity, more than an economic opportunity and more than a switch in the dominant energy paradigm. If culture is where science and imagination meet, then perhaps solar holds a deeper proposition to recast our culture in ways that we are yet to discover.

We continue to ask the simple question: What else can solar do? We invite you to inquire accordingly.