Can You Make Money with Solar Panels?
It is possible to make money from owning solar panels. By installing solar panels in the US, the customer is entitled to earn money for every kWh that is injected back into the grid. The customer is also entitled to claim an important tax credit amount.
This can only apply with the Feed-in Tariff policy, which is only available in some states of the US as we will discuss in this article. Despite the Net Metering scheme, which is the most popular mechanism, this will only allow you to save money, not earn it. If you are more interested to know how much you can save by investing in solar panels, check out our solar calculator tool which will help you get a more accurate estimate.
The Context of Renewable Energy Subsidies
Renewable energies’ deployment began in 2010. Back then, green energy sources were so expensive that they couldn’t compete with fossil prices. Therefore, they needed a little push to put the wheel in motion and motivate the private sector to invest in renewables.
That’s how renewable energy subsidies started to deploy across the world, starting in Europe with mechanisms like the Feed-in Tariff, successfully implemented in Germany, Australia, and the UK. Other mechanisms implemented to promote large-scale power plants were the renewable energy auctions, where project developers bid on a utility project to obtain the government incentive. During the auctions, the company that offered the lowest price was able to win the project.
On the other hand, and as usual, the US began its own subsidy mechanism and implemented several policies across the country that transformed the US into an important and complex policy market, different from any other country in the world.
Renewable energy subsidy mechanisms have now become a new way to earn or save money in the US. By installing solar panels in the US, the customer is not only entitled to claim an important tax credit amount, but is also entitled to earn money for every kWh that is injected back into the grid.
What Are the Incentives for Solar in the US?
In order to understand the true costs and value of installing a solar power system at home or in your business, you must first understand the available renewable energy incentives from the government or private sources that you can opt to. Moreover, understanding the different available mechanisms will show us if it’s possible to make money with your PV System.
Federal Renewable Energy Tax Credit
The first, and maybe most important, was an incentive implemented across all the US is the Federal renewable energy tax credit. This incentive is focused on any residential homeowners that choose to install any of the following sources of energy to power their home: Solar Water Heating systems, geothermal heat pumps, small wind turbines, fuel cells, and solar photovoltaic systems.
The program entitles the homeowner to receive a 30% rebate credit over qualified expenditures related to the equipment, labor costs, system installations, and piping or wiring to interconnect the renewable energy system to the household. Therefore, the program allows you to offset the costs of the PV system by 30%, which will be attributed to your annual tax payments.
If the 30% equivalent amount exceeds your tax liability, then you will be able to carry the remaining amount to the next taxable year.
You must know that the program will be available for solar until 2021 and will reduce to 26% tax credit from January 1st of 2020. In other words, if you are thinking to go solar, now would be the perfect time to do it.
It is important to mention that energy storage systems do not qualify for the program. Keep that in mind.
The Net Metering incentive is maybe the most successful incentive applied in the US. The scheme focuses on providing an electricity credit for every kWh of excess energy injected to the grid from a solar PV system.
Over 38 States have implemented Net Metering Schemes, and some have implemented variations of the scheme including Minnesota, Austin, and Texas. They have adopted Value of Solar (VOS) schemes that are a similar concept. The difference is that the rate is fixed over 20 years, and that also accounts for the benefits that the grid obtains from solar energy (ancillary services, frequency regulation, etc.) rather than just taking the price of solar electricity.
It is important to mention that the incentive does not offer cash or money in any form for the kWh injected to the grid, instead, the scheme offsets the consumed electricity during non-solar production hours with the net metering rate. If solar energy production over a month exceeds the consumption of electricity from the grid, the greatest benefit that you could possibly achieve is obtaining a zero-energy bill at the end of the month. Actually, some utilities will ask you to pay at least a fixed amount of money at the end of the month, no matter what your production was.
You can take a look at the States that have implemented this policy in the figure below.
Feed-in Tariff (FiT)
One of the most popular mechanisms implemented worldwide (with a larger rate of success, as well) is the FiT. The FiT is optional and depends on the utility company that wishes to grant such benefit for solar energy. Basically, it consists of obtaining payment for every kWh injected to the grid at a fixed rate over 15 or 20 years.
The difference with net metering is that it offsets kWh produced from solar at a retail electricity rate, which is equal or very similar to the electricity rate that you pay when consuming from the grid. Meanwhile, FiT offers a fixed monetary credit independent from the retail electricity rate that can be lower or higher than the electricity rate of your utility. In other words, in net metering you get paid with kWh and with FiT, you really get paid.
However, FiT schemes have not been successfully implemented in the US. Actually, currently, few utilities promote FiT incentives. Some States where you can still find the scheme active are California (LADWP, Marine Clean Energy, Palo Alto City Council), Indiana (NIPSCO), New York (PSEG Long Island), Colorado, and Rhode Island.
The possibility to earn money with the PV system will depend on the price of retail electricity and the amount of the FiT incentive.
Before 2018, solar energy also could apply to the Production Tax Credits (PTC) incentives, but the scheme concluded at the end of 2017 for solar PV. Only wind projects can have access to this scheme now.
The Delaware Renewable Portfolio Standard is another program that required utilities to purchase at least 25% of its electricity production from solar energy by 2025. Values of the incentive vary according to market conditions. Massachusetts, New Jersey, Ohio, Pennsylvania and Maryland also offer similar Solar Renewable Energy Certificates (SRECs) that will provide a payment between $250-$400 per MWh injected to the grid.
For more information on State Level incentives refer to PV Magazine.
Can You Earn Money by Installing a PV System?
As you can see, most of the available incentives for solar energy aim to reduce your consumption from the grid and the costs of the PV system. You cannot make money with the Federal Tax Credit or with the Net Metering Schemes.
The Feed-in Tariff scheme is the only option that allows you to earn money with your PV system. However, there are not many utilities that offer you the possibility to access the scheme at residential scale, and the profits will vary a lot according to the project itself, the location, the size of the system, and the price of electricity. SRECs are also another option to obtain money from a PV system, but they are more intended for commercial systems that can easily produce 1 MWh in a year. If you decide to change or get rid of your solar panels, there is some money to be made back by recycling the solar panels and their parts.
Commercial and utility-scale projects can achieve higher earnings with a fixed contract of FiT from a solar farm. Low size PV systems (1-5 kW) can eventually achieve earnings through this scheme, however, the attraction of solar energy on residential-scale in the US should be seen from a perspective of “savings” rather than from a “making money” perspective. To estimate how much you can save with solar energy you can visit the PVWatts tool.
- The Renewable Electricity Production Tax Credit – Federation Of American Scientists
- Tax Credits, Rebates & Savings – Department of Energy
- Nipsco – Feed-In Tariff – DSIRE
- Psg Long Island- Commercial Solar PV Feed-in Tariff – DSIRE
- Ladwp – Feed-in Tariff (FiT) Program – DSIRE
- Rip Fits: As Us Feed-in Tariffs Fade, Adopting Elements Could Spur Solar Growth – Utility Dive
- A Policymaker’s Guide to Feed-in Tariff Policy Design – NREL
- What is the Difference Between Net Metering and Feed-in Tariffs? – Solstice