How Solar Energy Really Works in Rhode Island…
If you’re a homeowner in Rhode Island you probably have noticed solar power installations popping up in neighborhoods more and more frequently. You may be wondering if it’s time to seriously consider investing in solar energy? There are a lot of myths and misinformation about how solar works in Rhode Island so it’s important to understand some basic facts before meeting with solar companies.
This list of questions and answers will help you better understand the solar process…
What Solar Incentive Programs are Available to Rhode Islanders? Rhode Island has two different incentive programs. One is a Performance Based Tariff offered by National Grid. The other is a Grant offered by the state. Homeowner’s can take advantage of only one program not both.
The tariff, known as the Renewable Energy Growth Program (REG) is essentially a contract to sell solar production to National Grid for a determined number of years. The current tariff rate and term is $.3475 per kWh for 15 years paid to you in a combination of bill credits and cash for every Kilowatt Hour (kWh) produced by your solar system. Tariff rates drop each year, but once you interconnect you are locked in to be paid the tariff value at time of interconnection approval for the full 15 years term.
- System owners are taxed on payments received for production. Make sure this is taken into consideration when you are looking at return on investment in proposals. National Grid will pay you every month for value above what is credited on your electric bill. This is earned income and you will receive a 1099 at the end of the year.
The Grant, which is offered thru Commerce RI by way of the Rhode Island Renewable Energy Fund, brings down the upfront cost a solar installation by around 30% for qualified homeowners. However, if you choose the grant option you will only receive bill credits for the solar production rather than a combination of cash and bill credits. Essentially saving you the cost of electricity for every kWh produced. This is commonly referred to as Net Metering.
- Renewable Energy Grant Funds are limited. Ask your solar representative about availability.
- Funds are awarded on a per watt basis with a cap of $8000 per home solar system.
How do I Know if my Roof is Right for Solar? The key to a good solar installation is of course sunshine. Nothing kills a solar project more quickly than shading. If you have trees on your property that are directly shading your roof, chances are you will have to remove them for solar to be worth it.
Generally, a roof that faces South or Southwest is optimal for solar, but an east or west facing roof can work if there is no shading. Make sure your solar energy company uses a shading tool to assess the estimated solar production. It is crucial to know your true sun exposure to project your cash flows from solar.
- If your roof is more than 10-12 years old it is probably best to replace the shingles before investing in solar. Taking panels off a roof and putting them back on can be very costly.
- Bottom line is the more sun exposure the more money your solar installation will make. Remember, the sun is at a lower angle in the winter, so shading in the site line of your roof can have an impact. Again, a shade study is key to predicting solar production!
Am I Eligible for Renewable Energy Tax Credits in RI? Anyone who installs a qualified solar energy system in the United States is eligible for the Federal Solar Tax Credit otherwise known as the Investment Tax Credit (ITC) which entitles the tax payer to a dollar for dollar credit for 30% of the solar cost of a solar power system (eg; $10,000 cost = $3000 tax credit). There are currently no state tax credits available for solar in Rhode Island.
- Homeowner’s are encouraged to talk to a tax professional to find out if they can use the ITC before going solar.
- The 30% cost reduction is usually assumed to be part of the payback in solar proposals so it’s important to make sure you have the tax appetite to understand the true return on your solar investment.
- The ITC can be carried over into future years and is available to homeowners until 2019.
Is it Worth Financing my Solar installation? There are some excellent solar loans available with no money due upfront. The key is to make sure the money you are saving and making on your solar production each month is higher than your loan payment. Again, this is an important reason to get accurate quotes and to consider tax and other implications. If you have done your homework and qualify for a solar loan where you are cash positive from day one then it’s a good option.
- The 30% tax credit can be tricky with solar loans. Make sure you can either “float” the tax credit amount or use it to pay down and re-amortize the loan. Be sure to talk to your tax professional and your solar installer about the tax credit implications of your loan.
- There are usually some added fees for low interest loans. However, they are often worth adding to the cost of the project as long as the total cost of the loan remains low.
- Make sure you consider the loan term. Often if you see a monthly payment that seems too good to be true it’s because the loan is for 20 years and ends up costing much more in the long run.
What size Solar Power System can I put on my Property? National Grid is very strict about the sizing of residential solar installations to qualify for the incentive program. A specific sizing formula is used based on the three-year average annual electric usage history. For example, if you use an average of 8000 kWh per year the maximum system size allowed for the REG program is 6.52 KW DC (around 22 panels).
- If you are planning on using more electricity in the near future (adding heat pumps for example), you can oversize the solar installation but you must have the receipt for the appliance purchase.
- A good rule of thumb is to base the solar array sizing (kW dc) on 80% of your annual electric usage. If a company offers to squeeze as much solar as possible on your roof, there’s a good chance it will never be approved for the incentive program.
Will my Solar Array Power my House if the Power Goes Out? Solar is tied to the grid, therefore all the production from your solar panels is being fed onto the power lines. Unfortunately, this means if the power goes out your solar power system will not power your home. However, if you were to invest in a battery backup system that is tied to your solar system the batteries would work as an emergency source of power in the event of an outage.
- Batteries are a great idea but are still very costly (about $10,000 per unit). As the price comes down in the future they will become something to consider for average homeowners.
- If you are seriously considering adding a battery backup in the future keep in mind that with the REG program the solar is not tied directly to your main panel. Adding a battery becomes very difficult.
- The Grant program utilizes net metering and does tie in directly so batteries and other alterations are feasible as a future addition.
Does it Matter Which Brand of Solar Panels I Choose? Solar shoppers are naturally drawn to a brand they recognize such as LG or Panasonic, however if you are getting a Tier 1 panel, efficiency and quality will be about the same. Brands like Silfab, SolarWorld and Hanwha are top-tier options that perform as well as the name brand but can be significantly less expensive.
- Industry standard manufacturer warranties are 12 years for the product and 25 years for production. These costs are absorbed by the panel manufacturer and should not be passed on to the customer.
- The size in watts (320, 300, 290) simply means per panel. This does not mean the efficiency is higher. All panels are priced per watt and lower wattage panels are usually cheaper. You may be better off adding more panels of lower wattage rather than pay a premium for the same output.
The bottom line is, investing in solar power as a Rhode Island is a terrific way to save yourself money and hedge against rising electric rates. However, as with any investment it is important to understand the details before diving in. It all starts with sun exposure. If you have a sunny roof, high electric bill and could use a tax credit you are a perfect candidate for a high return on a solar system for your home. Do your homework and find an installer that is willing to design a solar array that fits your needs.