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Should I Get Solar Panels Now or Wait?

get solar panels now or wait

 

Whether it’s a cell phone, smartwatch, or tablet, when it comes to technology, one of the most exciting things about it is that devices are always getting better. Advances in technology often give us easier-to-use products with more features for less money. 

 

And while that’s exciting, it can also be a little frustrating. Because of how quickly things advance, and our desire to get the best and the newest, most of us end up waiting for the next generation to drop before we get that new device we’ve been eyeing up. 

 

You can look at solar panels the same way. Research and development efforts have led to panels with higher efficiencies and lower costs, and these improvements don’t show signs of stopping. But while it’s true that waiting a few years may get you slightly more efficient panels, you could be missing out on a lot – especially when it comes to what you’ll pay for installation. 

 

A great way to get an even greater return on your solar energy investment is to take advantage of incentives. Whether from your utility, the state, or the federal government, grants and credits make the initial upfront investment for those looking to go solar easier. Since 2006, one of the most substantial incentives was the Solar Investment Tax Credit (ITC) from the federal government.

 

The ITC allowed any solar system owner with federal tax liability to recoup 30% of the solar system’s cost. But like so many good things, this incentive is coming to an end. Starting in 2020, it starts to step back. 

 

If you’re asking whether or not you should wait to go solar, the answer is no. Because the ITC steps back from 30% to 10% (for commercial projects) or 0% (for residential projects), each year you wait you could be losing $1000s.

 

Here’s what we’ll go over:

How Much Will Waiting to Go Solar Cost You?

How Long Do You Have to Get 2019’s 30% Tax Credit?

What Else Are You Missing Out On By Waiting?

Should You Wait to Go Solar?

 

 

How Much Will Waiting to Go Solar Cost You?

The ITC steps down gradually. In 2020, it will be 26%. At 2021, it will be 22%. By 2022, it will be 0% for homeowners and 10% for businesses. 

 

graph describing step back of solar tax credit

 

While 4% may not seem like a lot, it can quickly add up on something as substantial as a solar system. And the bigger the system you install, the more you stand to lose by waiting.

 

While installation costs vary based on a variety of factors, we’ll take a quick look at here’s how much you’ll pay for the same solar installation throughout the ITC step back.

 

Homeowners

This chart shows about how much you would pay for a solar system each year as the tax credit steps back. The chart takes only the ITC into account. Depending on where you live, there may be other incentives available.

 

After 2021, there is no federal tax credit for homeowners installing solar power.

 

Average Monthly Electric Bill Solar System Size Total Installed Costs  2019: Full 30% Tax Credit 2020: 26% Tax Credit 2021: 22% Tax Credit 2022+: 0% for Homeowners
$60 5 kW $20,610 $14,427 $15,251 $16,076 $20,610
$120 10 kW $30,600 $21,420 $22,644 $23,868 $30,600
$180 15 kW $40,000 $28,000 $29,600 $31,200 $40,000

 

Here’s how much money you’re leaving on the table if you wait to go solar:

 

Average Monthly Electric Bill Solar System Size Total Installed Costs  2019: Full 30% Tax Credit 2020: 26% Tax Credit 2021: 22% Tax Credit 2022+: 0% for Homeowners
$60 5 kW $20,610 $0 $824 $1,649 $6,183
$120 10 kW $30,600 $0 $1,224 $2,448 $9,180
$180 15 kW $40,000 $0 $1,600 $3,200 $12,000

 

As 2019 draws to a close, homeowners may find it difficult to get their system installed by 2019 for the full 30%. However, getting in at 2020’s 26% still offers substantial savings over 2021.

 

Businesses

In addition to the ITC and other local incentives, businesses can take advantage of accelerated depreciation, which brings all the tax savings on depreciation from your solar investment to the first year. We’ve factored an estimate of that here as well, but it will vary based on your federal tax rate.

 

Unlike residential systems, commercial solar systems will have a 10% ITC from 2022 and on, however, waiting will still cost you up to 20% of the system’s cost.

 

Average Monthly Electric Bill Solar System Size Total Installed Costs  2019: Full 30% Tax Credit 2020: 26% Tax Credit 2021: 22% Tax Credit 2022+: 10% for Businesses
$600 50 kW $112,500 $55,800.00 $59,760 $63,720 $75,600
$1,200 100 kW $211,300 $104,805 $112,242 $119,680 $141,993
$2,400 200 kW $389,500 $193,192 $206,902 $220,612 $261,744

 

Here’s how much money you lose out on if you put off going solar in 2019:

 

Average Monthly Electric Bill Solar System Size Total Installed Costs  2019: Full 30% Tax Credit 2020: 26% Tax Credit 2021: 22% Tax Credit 2022+: 10% for Businesses
$600 50 kW $112,500 $0 $3,960 $7,920 $19,800
$1,200 100 kW $211,300 $0 $7,438 $14,875 $37,189
$2,400 200 kW $389,500 $0 $13,710 $27,421 $68,552

 

Depending on the size and price of your system, waiting a few years to go solar could cost you several thousand dollars by losing out on the tax credit alone. Businesses may still be able to get the full 30% with the Safe Harbor Provision.

 

 

How Long Do You Have to Get 2019’s 30% Tax Credit?

If you want to take full advantage of the tax credit while you still can, your time is nearly out. With installers’ 2019 calendars filling up, it may be difficult to have your system fully installed by the end of the year. However, businesses and farms looking to install a commercial solar system may still be able to get the full 30% thanks to the Safe Harbor Provision.

 

The Safe Harbor Provision allows those looking to go solar with 2019’s tax credit an option to lock in 2019’s rate. In most cases, this can be achieved with a non-refundable 5% investment in the solar project before 2020.

 

To learn more about the Safe Harbor Provision, check out this article or watch the video below.

 

 

 

What Else Are You Missing Out On By Waiting?

Solar energy is an investment that will pay for itself in a few years, leaving potentially decades of free electricity production. Each year you put off making an investment in solar is a year’s worth of electricity bills you won’t get back. 

 

It’s like paying rent versus buying a house. By purchasing electricity from the utility, you’re essentially renting electric. At the end of each pay period, you’ll have nothing to show for it. However, if you invest in a solar system, you’ll be using that money you would have given to the electric company to pay off your system. In a few years, you’ll be left with an asset you own that produces free electricity throughout its 30+ year lifespan. Each year you put solar off is a year you unnecessarily pay for electricity. 

 

In addition to the savings from your electricity bill, you could be missing out on favorable policies like SRECs (solar renewable energy credits). 

 

SRECs are awarded for every 1,000 kilowatt-hours (kWh) your system produces. You’re able to sell these credits on an open market. Currently, there is an SREC market in Maryland, New Jersey, Pennsylvania, Ohio, Washington DC, and Delaware. There is also an SREC market in Massachusetts, but as of 2018, they stopped accepting new systems into the market. Those who have already installed their solar systems, however, are grandfathered in and can continue to sell their credits.  SRECs are a residual revenue stream for solar owners.

 

how do srecs work

 

It’s unknown if other states will follow suit, but if you go solar while your state’s market is open, you’ll be able to participate. If you wait to go solar, you’ll risk getting shut out.

 

Another reason not to wait is to ensure you’re available for a program called net metering. Net metering gives you a kWh-per-kWh credit for the unused energy your solar system produces. While net metering is available in most states, the longer you wait to go solar, the more you risk your state doing away with net metering. So far, we’ve only seen states grandfathering solar systems into the program in the event of changes. So if you go solar in a state with net metering now, it’s likely that you’ll always enjoy that benefit. 

 

 

Should You Wait to Go Solar?

If you’re going to eventually install solar panels, you should not wait. Depending on the size of your system, waiting to install solar could cost you hundreds or even thousands of dollars. It’s highly unlikely that any technological advances within the next few years will make up for that lost cash, not to mention the hundreds or thousands of dollars you can save by reducing your energy bill and the favorable programs you’ll be able to participate in. 

 

Don’t go another year paying too much money for electricity. Take control and produce your own energy for less.

 

contact us to get solar tax credit before time runs out

 

*We know our stuff when it comes to solar, but taxes can be tricky. Be sure to consult your tax advisor before making any tax-related decisions.

Sara Gambone

Sara is a Marketing Specialist at Paradise Energy Solutions, working from our corporate headquarters in Paradise, PA.

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