Going Solar in PA: Can YOU Actually Save $?

November 11, 2009

Are solar panels feasible for the common homeowner? This week our guest blogger, Clayton Bedwell, shares his industry knowledge on how to calculate financial incentives for solar installations.
Over the last decade, growing concern over global warming has pushed federal, state, and local governments to legislatively encourage the implementation of clean and renewable energy sources.   Pennsylvania – the Saudi Arabia of coal & natural gas – currently touts some of the most aggressive solar incentives in the country.  However, these incentives won’t stick around forever and aren’t completely straightforward.  Below are a few State and Federal incentives currently available – and how to easily calculate them.  Residential installs can range anywhere from 1 Kilowatt (kw) to upwards of 10kw, but for the sake of simplicity lets use a 5kw system that has a raw install cost of $8 per Watt or $40,000 for the entire project.

• Pennsylvania Sunshine Solar Rebate Program – For residential applications, Pennsylvania will reimburse you $2.25 for every Watt of solar installed.  But, this will be capped at either $22,500 in rebates or 35% of the install cost, based on whichever amount is less.  So for our example, we simply convert Kilowatts to Watts (1kw = 1000w) and multiply by the rebate amount (5,000w x $2.25) to get our total rebate amount of $11,250.  The rebate amounts will decline over time as installation benchmarks of 10 Megawatts are met.
• Residential Renewable Energy Tax Credit (Expires 12/31/2016) – The IRS offers a 30% tax credit for residential solar installations.  This credit is applied after any state rebate programs are removed from the install cost, so in this case, we subtract $11,250 from $40,000 to get our tax basis of $28,750.  Therefor your tax credit is 30% of $28,750, or $8,625.
• Pennsylvania Alternative Energy Tax Credit (Expires 12/31/2016) – Pennsylvania also offers a tax credit, but at 15% its  just half as much as the federal variety.  Just like with the IRS tax credit, we must first update our basis ($28,750 – $8,625 = $20,125) before applying the credit.  So using $20,125 as the updated basis, the PA tax credit comes in at $3,019.

The conclusion?  After applying all the available state and federal incentives, installing solar panels can pay for themselves in 4 years and last at least 30.  What started as a $40,000 solar installation will now cost the homeowner just $17,106!

Posted by Clayton

Filed under: Green Living

Tags: Energy Tax Credit, homeowner, PA Alternative Energy Tax Credit, Pennsylvania, solar installations, solar panels