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  • Federal rebate on solar install

    Hi Everyone

    I currently have a quote for the system listed below. My usage is 13,500 kW a year at our home. My question is regarding the federal tax rebate. Probably a question for an accountant, but is it correct that I should figure the federal credit at 30% off of the figure after taking the electric company rebate vs the whole project cost?

    Thanks

    --------------------------------------
    PROPOSED PV EQUIPMENT
    PV Modules: ReneSola Virtus II 156 Series Polycrystalline 255 Watt Modules. See attachment. High efficiency, UL-listed modules that have a 25 year linear power output warranty by a major solar manufacturer. The performance guarantee starts with a performance guarantee of 97.5% through year 1 and an 80% performance guarantee at year 25. 10 year warranty on material and workmanship.
    Inverters: ReneSola Replus-250A Microinverters. These inverters also have a 25 year warranty versus the typical 15 year inverter warranty.
    PV System Mounting Equipment: SnapNrack Series 100 Roof Mount System.
    PV System Monitoring Equipment: Micro Replus Gateway Monitoring System.
    - 8.67 kW estimated installed power capacity (direct current, standard test conditions)
    - 34 modules and 34 microinverters.

    Cost:$25,570 for 8.67 kW or $2.95 kWh
    Amren
    Rebate $2.00 or $17,340 which brings cost to $8,230
    30% federal $2,469 (or can this be 30% of the total cost of project?)
    Out of pocket $5,761

  • #2
    I'm no accountant, but the way it's been explained to me, if you include (add on top) your utility rebate to your project cost and claim 30% tax credit off of the project cost, then you need to file the rebate as your taxable income as well. If you don't include your utility rebate in your project cost, then you don't need to file the rebate as taxable income.

    So basically if your tax bracket for your income is less than 30%, then it probably makes more sense to include the rebate in your project cost. Then you get 30% discount on the rebate but pay less than 30% income tax on it.

    And vice-versa, if your tax bracket is > 30%, you don't want to include the rebate in your project cost to avoid paying more than 30% tax on it.

    Comment


    • #3
      No rebates on free money is what they say
      [SIGPIC][/SIGPIC]

      Comment


      • #4
        Originally posted by russ View Post
        No rebates on free money is what they say
        And that is a succinct way to remember it. I had an accountant tell me earlier in the week that you will know how to treat it based on whether or not they send you a 1099. If you receive a 1099... include the amount in the cost of the system, take the 30% credit and report the 1099 amount as other income. If you don't receive a 1099, you have the option to do it either way... count it as other income and add it to the system cost or just forget about it, but make sure you don't include it in the cost of the system.

        Comment


        • #5
          Great, thank you for the replies, that clears up my options.

          Comment


          • #6
            Just curious where you live. $2/W rebate is pretty generous. Does that come from the utility company, the state, or ... ?

            Comment


            • #7
              Snic

              I live in MO, Ameren is the utility company and they are paying a rebate of $2/watt in exchange for a net metering agreement. Below is an quote from their website on a Q&A section. Our electric is pretty cheap here at .10 kw, so without the rebate, I would not be looking at solar due to the cost of the system. With the rebate and federal 30% credit, the quotes I received had a fairly large range but the pay back period gets down to 4-7 years (depending on total price, and what actual electric costs will be over the next 5 years, etc.)

              "What will Ameren pay me for generating excess power?
              Full retail credit is granted only up to the customer's actual usage during a month; any generation contributed to the grid above the customer's actual usage is credited at Ameren's wholesale rate. Currently, the wholesale rate is $0.0269/kWh from June through September (summer) and $0.0218/kWh from October through May (winter). A credit is issued to the customer on the electric bill for excess power produced each month.

              Are there any rebates or programs available to customers for renewable projects?
              Ameren Missouri customers may be eligible for a $2/watt solar rebate on systems up 25 kW or a maximum of $50,000 rebate. The solar customer's renewable system is required to be net metered. Find more on rebates and funds."

              Comment


              • #8
                As I said, very generous.

                Here in NY it's just over $1/watt rebate (comes from a state agency that all utilities pay into), plus up to $5,000 state income tax credit. In my case, for a similarly-priced system (gross price about $24k), that puts the total discount at somewhat less that what you got. On top of that, the state income tax credit is a rose with a significant thorn: if you itemize deductions, you will end up deducting less state income tax the next year.

                And on top of that, my similarly-priced system is just over half as large, in terms of DC watts, as yours. Labor etc is more expensive in NY, but still it seems to me that you got a great deal. (Or I got a crummy one!)

                Comment


                • #9
                  Originally posted by snic View Post
                  As I said, very generous.

                  Here in NY it's just over $1/watt rebate (comes from a state agency that all utilities pay into), plus up to $5,000 state income tax credit. In my case, for a similarly-priced system (gross price about $24k), that puts the total discount at somewhat less that what you got. On top of that, the state income tax credit is a rose with a significant thorn: if you itemize deductions, you will end up deducting less state income tax the next year.

                  And on top of that, my similarly-priced system is just over half as large, in terms of DC watts, as yours. Labor etc is more expensive in NY, but still it seems to me that you got a great deal. (Or I got a crummy one!)
                  Yeah, it is interesting to see how costs for theses systems vary widely across the country. I would be interested to hear what the average pay back of installed systems are based on current electric rates and usage, after incentives both local and federal. I would assume they are all in the 4-7 year range, but I do not know. I think many people still think too short of term to justify what really is a long term decision if you are trying to recover your costs. I throw myself in that camp as I still wonder if it makes sense to install a system that has up to a 7 year payback.

                  Comment


                  • #10
                    Originally posted by Kenstl View Post
                    Yeah, it is interesting to see how costs for theses systems vary widely across the country. I would be interested to hear what the average pay back of installed systems are based on current electric rates and usage, after incentives both local and federal. I would assume they are all in the 4-7 year range, but I do not know. I think many people still think too short of term to justify what really is a long term decision if you are trying to recover your costs. I throw myself in that camp as I still wonder if it makes sense to install a system that has up to a 7 year payback.
                    Based on the PVWatts calculator http://pvwattsbeta.nrel.gov/ my payback on a 6kw system would be over 8 years. That is based on a $4/watt install cost, with a $2/watt rebate from the Utility (if there is any money left in the fund) and the 30% refund from the Feds. The long payback is mostly due to a low electric rate of about $0.12/kWh.

                    Florida doesn't allow any leasing type arrangements so I would have to pay up front and wait on any refunds. As much as I would like to install there isn't a real good incentive for me if I sell the house in less than 8 years which there is a pretty good chance.

                    Comment


                    • #11
                      Originally posted by SunEagle View Post
                      Based on the PVWatts calculator http://pvwattsbeta.nrel.gov/ my payback on a 6kw system would be over 8 years. That is based on a $4/watt install cost, with a $2/watt rebate from the Utility (if there is any money left in the fund) and the 30% refund from the Feds. The long payback is mostly due to a low electric rate of about $0.12/kWh.

                      Florida doesn't allow any leasing type arrangements so I would have to pay up front and wait on any refunds. As much as I would like to install there isn't a real good incentive for me if I sell the house in less than 8 years which there is a pretty good chance.
                      I agree, until there are enough panel installs in regions that then produce validated sale comps, it is tough to tell if one can recover the cost of the solar panel cost if they move prior to the payback period. Without seeing "value" in resale, the consumer has to weigh the recovery time and if they plan on occupying the home long enough to recover the cost.

                      The system I am considering is $2.95/watt install cost, with a $2/watt rebate from the utility company, and a 30% refund from the Feds. My electric cost is $0.10/kWh so base on my usage of $1,335 a year in electricity, my payback is 4.3 years assuming I projected amount of solar and my electric costs stay static in the area.

                      Comment


                      • #12
                        Originally posted by Kenstl View Post
                        I agree, until there are enough panel installs in regions that then produce validated sale comps, it is tough to tell if one can recover the cost of the solar panel cost if they move prior to the payback period. Without seeing "value" in resale, the consumer has to weigh the recovery time and if they plan on occupying the home long enough to recover the cost.

                        The system I am considering is $2.95/watt install cost, with a $2/watt rebate from the utility company, and a 30% refund from the Feds. My electric cost is $0.10/kWh so base on my usage of $1,335 a year in electricity, my payback is 4.3 years assuming I projected amount of solar and my electric costs stay static in the area.
                        Just be careful and don't confuse "usage" to "generation" when you determine your payback. Unless you have higher tiered electric costs using more does not mean saving more.

                        I use about 18000 kWh per year but that 6kw system will only generate about 8200 kWh per year. The savings on 8200 kWh at $0.12/kWh is about $984. So if my installed cost after all rebates is about $8500 then it will take 8.63 years to pay back.

                        Of course I may be able to get the installed cost below $4/watt and the electric rates may go higher than $0.12/kWh which would decrease my payback time but that is an unknown. I have plans on moving in about 5 years so finding a system with less than a 5 year payback seems a little out of reach.

                        Comment


                        • #13
                          Originally posted by SunEagle View Post
                          Just be careful and don't confuse "usage" to "generation" when you determine your payback. Unless you have higher tiered electric costs using more does not mean saving more.

                          I use about 18000 kWh per year but that 6kw system will only generate about 8200 kWh per year. The savings on 8200 kWh at $0.12/kWh is about $984. So if my installed cost after all rebates is about $8500 then it will take 8.63 years to pay back.

                          Of course I may be able to get the installed cost below $4/watt and the electric rates may go higher than $0.12/kWh which would decrease my payback time but that is an unknown. I have plans on moving in about 5 years so finding a system with less than a 5 year payback seems a little out of reach.
                          Good point, maybe I am looking at the production and sizing of the system incorrectly. How would you run the numbers based on the system below? House faces south, avg full sun is 4.6 hours a day for area per a reference sheet I was given. My use history is 13,500 kWh per year, rate is $0.10 kw.

                          PV Modules: ReneSola Virtus II 156 Series Polycrystalline 255 Watt Modules.
                          Inverters: ReneSola Replus-250A Microinverters.
                          - 8.67 kW estimated installed power capacity (direct current, standard test conditions)
                          - 34 modules and 34 microinverters.

                          Cost:$25,570 for 8.67 kW or $2.95 kWh
                          Amren
                          Rebate $2.00 or $17,340 which brings cost to $8,230
                          30% federal $2,469 (or can this be 30% of the total cost of project?)
                          Out of pocket $5,761

                          Comment


                          • #14
                            Originally posted by SunEagle View Post
                            I have plans on moving in about 5 years so finding a system with less than a 5 year payback seems a little out of reach.
                            That would be assuming the system would add ZERO value to your property after 5 years. Two homes side by side. One has a $150/month electric bill. One has a $30/month electric bill. Which is worth more to the buyer? Okay, we know there is SOME extra value... now we need to quantify it. One rule of thumb is each $1/yr in savings adds $20 to the value. In our example the $120/month savings = $1,440/year = $28,800 extra value. This seems a bit high to most people and I found a better way to sway a buyer as to the extra value.

                            Let's assume a 25 year life to the system. You may get more, but that is a common term for warranties. I think we can agree that the 80% effectiveness of the panels in year 25 will be more than offset by rising energy costs. In other words the 20% decrease in generation will be met with more than a 20% rise in the value of each KWh generated so we will ignore that for now. You want to value this system after 5 years so we have another 20 years of effective life. Let's choose 13X the value of each $1 saved. Now our $1,440/yr becomes a $18,720 value to the system. Plug $18,720 into a mortgage calculator at 240 months (20 years) and 4.5% interest. This $18,720 added to the mortgage increases the payment by $118.43 or less than our $120/month savings. You can show your buyer that if they pay $18,720 more for your home than the price without solar, it will be no worse than a zero-sum game for them. In actuality, with rising energy prices they will come out ahead. Their $118.43/month extra mortgage payment also includes some principle payment so they are coming out ahead instead of paying that money towards a utility bill.

                            That $20 per each $1 in savings doesn't look too far off now! You can do charts that take into account rising electric rates and the principle portion of the payment and make it look pretty good. I'm not saying a buyer will jump up and down and pay you $18K more for your home, but you sure can make a case for that added value if you break down their savings and what it equates to as an equivalent mortgage payment.

                            Comment


                            • #15
                              Originally posted by GridGrants View Post
                              That would be assuming the system would add ZERO value to your property after 5 years. Two homes side by side. One has a $150/month electric bill. One has a $30/month electric bill. Which is worth more to the buyer? Okay, we know there is SOME extra value... now we need to quantify it. One rule of thumb is each $1/yr in savings adds $20 to the value. In our example the $120/month savings = $1,440/year = $28,800 extra value. This seems a bit high to most people and I found a better way to sway a buyer as to the extra value.

                              Let's assume a 25 year life to the system. You may get more, but that is a common term for warranties. I think we can agree that the 80% effectiveness of the panels in year 25 will be more than offset by rising energy costs. In other words the 20% decrease in generation will be met with more than a 20% rise in the value of each KWh generated so we will ignore that for now. You want to value this system after 5 years so we have another 20 years of effective life. Let's choose 13X the value of each $1 saved. Now our $1,440/yr becomes a $18,720 value to the system. Plug $18,720 into a mortgage calculator at 240 months (20 years) and 4.5% interest. This $18,720 added to the mortgage increases the payment by $118.43 or less than our $120/month savings. You can show your buyer that if they pay $18,720 more for your home than the price without solar, it will be no worse than a zero-sum game for them. In actuality, with rising energy prices they will come out ahead. Their $118.43/month extra mortgage payment also includes some principle payment so they are coming out ahead instead of paying that money towards a utility bill.

                              That $20 per each $1 in savings doesn't look too far off now! You can do charts that take into account rising electric rates and the principle portion of the payment and make it look pretty good. I'm not saying a buyer will jump up and down and pay you $18K more for your home, but you sure can make a case for that added value if you break down their savings and what it equates to as an equivalent mortgage payment.
                              First off the electric rates have been pretty flat for over the past 10 years with some ups and downs although with Duke Energy now in the mix that might change.

                              I also talked to a Realtor that lives in my neighborhood. She hasn't seen see a big difference in the value of a home with solar as compared to a similar home without. For some reason having a solar panel system is not a big draw as to having a new kitchen. I also have a solar hot water heater which has reduced my electric bill but again the value of any solar system is seen differently from person to person.

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