Rebates and tax credits available for solar power
By Trina Kleist, trinak@theunion.com
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12:01 a.m. PT Apr 15, 2008
Solar power can reduce homeowners' energy bills, but tax savings that make the costly investment more attractive could expire at the end of this year, local solar panel installers said Monday.
In addition, those homeowners who use the most power and have the highest bills stand to reap the largest benefit from the investment, according to calculations by Plan It Solar, a solar panel installation company based in Penn Valley.
"People with the highest bills get the best returns on a solar purchase, whether it's cash or financed," said Robert Raush, in charge of sales and design for Plan It Solar.
The Internal Revenue Service allows taxpayers to deduct $2,000 from their tax liabilities for a solar installation that is inspected by Dec. 31 of this year, according to IRS documents. Any unused credit can be carried over into 2009.
The tax credit is due to expire at the end of this year. California U.S. senators Barbara Boxer and Diane Feinstein are co-sponsoring a bill that would extend the credit for another two years.
In addition, Californians can apply for rebates that vary depending on the size of the system. But the rebate is expected to drop significantly in late summer or early fall, depending on the amount of money left in the state fund that subsidizes the systems, Raush said.
This rebate has dwindled each year since its inception in 1999, Raush said. "It's expected to keep petering out," he added. "It's a shame."
In both cases, it remains unclear whether the incentives will continue to be available into the future or for how long.
The two incentives, together with California's system of multiple tiers for the cost of residential electricity and the expectation that electrical rates would continue rise for the foreseeable future, have made for rising interest in solar power in western Nevada County.
Builder Gary Tintle had 164 panels installed on the roof of the new 100 Union Square building in Nevada City. The cost of the system will amortize at 6 cents per kilowatt it generates, but is expected to save the building's 11 tenants, including the Nevada County District Attorney's Office, 8 cents per kilowatt for a net savings of 2 cents per kilowatt, Roush said.
Big returns
Residential ratepayers can expect a significant savings over time, with the biggest electricity users landing the greatest savings.
That's because California utilities are required by law, since the 1980s, to charge more for residential electricity when people use more - a measure designed to encourage conservation.
If you look at your Pacific Gas & Electric Co. bill under the electrical portion, you'll se a listing for "Baseline Quantity" and "Baseline Usage." That's Tier 1, with the lowest rate of a little more than 11.5 cents per kilowatt-hour. The baseline allotment varies with the time of year and location, but is designed to give the lowest prices for the lowest consumption of electricity, Raush said.
About three-quarters of residential electricity consumed falls into this category, giving a price break to those who consume less.
But if your usage rises beyond the baseline amount, the cost per kilowatt-hour rises to 13 cents for Tier 2 and up to more than 36 cents for Tier 5.
People with large homes to heat and cool, and people appliances or amenities that use lots of electricity - such as big-screen televisions, water features, heated pools, saunas and hot tubs, large tropical aquariums - or who keep appliances on for much of the day easily can run into Tier 5, Raush said.
"Our clients have an average electrical bill of $75 to $600 a month. The mini-mansions, those places have electrical bills sometimes of $800 to $900 per month," Raush said. "The biggest one-month bill we've seen is $2,400. That's why people come to us: To bring down their electrical bills."
A residential solar power system has the effect of replacing the electricity in the most expensive tiers first, company owner Martin Webb said. But even a small system offers savings.
A small system - using 12 solar panels to produce about 3,300 kilowatt hours per year - could replace about one-third of the consumption of a small consumer with bills averaged over the year of $125 per month, according to Plan It Solar's calculations. Such a system would cost about $20,400, and could qualify for as much as $5,650 in rebate and tax credit, the company estimates.
Larger systems can save more; the federal tax credit remains the same, but the state rebate rises with the size of the system.
The rate of return on a solar panel system varies depending on how much electricity is used prior to the installation, how many panels are installed, and whether the system is paid for with cash or through financing.
The return also is affected by the efficiency of the system, which varies depending on the orientation of the panels and how cleanly they are maintained. A good mopping once or twice a year prevents dust, pollen and soot from building up that can reduce generation capacity by about 5 percent each year, Raush said.
Solar panels generally come with a 25-year warranty, Webb added. "But the life of solar panels is not known, because the industry is so new," so savings could extend beyond the warranty period. However, the inverter, the box of electrical components that translates the power from the panels to the meter, is known to last about 15 to 20 years, and generally needs to be replaced at the end of that time.
To contact City Editor Trina Kleist, e-mail tkleist@theunion.com or call 477-4230.
