Cost of Solar Panels in Bay Area
To think that a solar energy system can be installed in your home at a reasonable price is a reality that many Americans are facing today. Since 2012, the price of electrical energy systems has dropped by 52 percent making it an affordable reality for millions of Americans. In addition to the drop in prices, there is substantial aid currently promised under the Investment Tax Credit (ITC) law. The ITC allows homeowners to deduct from their federal taxes up to 30% of their solar system installation fees. This massive incentive is unfortunately tagged with an expiration date. As of January 2021, the ITC will reduce to zero for most residency buildings and 10% for commercial buildings.
To take advantage of the solar investment tax credit, you must be the owner of the solar energy system. Individuals who are under a lease with their solar energy provider or who are under a power purchase agreement will not be able to claim the tax deduction. On the other hand, owners can claim their credits as soon as their operation begins. If at the end of the year the owner does not owe federal taxes, the solar investment tax credit can be applied the following years until the credit is used. To claim the ITC remember to provide your solar investment information at the time of taxes.
If you are in the state of California, the average price for a 4 kW system (an average residential installation), is about between $25,000 to $34,800. According to Go Solar California, a program administered by the California Energy Commission and California Public Utilities Commission, a single-family home can be powered with a 3 kW system that may only cost a San Franciscan an average of $19,300. Your electrical needs will ultimately determine the price of your unique solar energy program. In either instance, if you are the owner of the solar energy system and the total cost is between $19, 300 to $34,000 your tax deduction can range from $5,790 to $10, 400.
Despite the reduction in the ITC over the coming years, the ITC law has existed since 2005 and has greatly contributed to the green movement by dramatically reducing the cost of solar panel installation. If you wish to take advantage of the federal tax reduction law, you are encouraged to start researching and learning more about solar energy. If you are ready to speak with a specialized person about the installation process and the overall costs of a solar energy system, you may contact our offices at 707-658-2157. Upon request, our solar energy experts will conduct a thorough inspection of your roof, electrical systems, and will assess your monthly electrical usage to create a specified solar energy program that is right for you.
Due to the electrical codes that guide each region of California, it is essential to contact a local expert who is capable of providing the right type of guidance. Before investing in solar energy, we encourage you to learn more about the monetary and green incentives that guide the solar energy industry.
The Growth of an Industry
The traditional way of cultivating energy is quickly going out the window with the introduction of renewable energies. Quickly Americans are beginning to realize that renewable sources of energies beat the traditional burning of fossil fuels. The three big non-renewable sources of energy include coal, gas, and oil. Non like the solar industry is expected to be tripling in size in the following five years.
The growth of the solar energy industry has much to do with the tax incentives provided by the federal government under the Solar Investment Tax Credit. The ITC has aided the growth of the solar energy system by incentivizing many Americans to invest in solar energy systems since 2006. The incentives include a federal tax cut and other finance options that are governed by local governments. In addition, the eco-political climate has cultivated a green movement that has many Americans excited about the green potentials that a solar energy system promises.
The Solar Energy Industries Association (SEIA) claims that the growth of the booming solar energy industry has much to do with the historical drop in solar PV prices. Since 2010, the price of installing and owning a state of the art solar energy system has dropped by more than 70 percent. While installation prices have steadily increased, the current market promises a generous return of investment for anyone that takes advantage of the state and government incentive programs.
Between 2012 and 2017 the solar energy industry has ranked first or second in “electric capacity additions”. The solar energy industry as of 2017 outranks the natural gas industry, the coal industry, and the wind industry. The solar energy industry is on a growth that doesn’t seem to be slowing down. As of 2016, 1.6 million solar energy systems have been installed in the United States. The numbers are expected to increase in 2023 where they are expected to reach a 4 million.
Current California Average Prices
According to the Los Angeles Times, the average solar energy investor in Los Angeles and Ventura county spent around $18,040 dollars in their solar energy system. Investors in San Diego spent an average of $18, 540, while in Orange County the average cost was $18,866. California’s solar energy market has allowed many to own their own solar energy program at a reasonable cost.
While the price of PV panels is going down, the cost of installation seems to be going up. The difference in cost is addressed by the U.S Department of Energy. Now more than ever, the U.S government is reducing the cost of investing in a solar energy program by allowing individuals a multitude of ways to invest in renewable energy. In addition to giving investors a tax break, the government is engaging with cities and counties to help aid the cost of installing a solar energy system.
The Solar Investment Tax Credit (ITC)
The ITC is helping Americans reduce the overall cost of installing a solar energy system in their homes. The Investment Tax Credit (ITC) is a federal tax reduction applied to individuals who directly install and invest in solar energy panels for their residencies or commercial buildings. Until 2019, ITC is 30 percent of the solar energy investment. The ITC is applied as a tax cut that reduces the amount of money the owner would owe the government in taxes. The law changes in 2020 where the percent of the ITC drops down to 26 percent. A year after the percent will go down to zero for property owners while dropping down to 10 percent for commercial projects.
The Investment Tax Credit law is a direct outcome of the early Energy Policy Act of 2005 which sought to incentivize and relief individuals investing in solar energy for residential or commercial buildings. From the onset, the law sought to stabilize the American economy by offering investors a cut in taxes. The ITC has remained at constant highs since 2005 but will experience a downfall after December 31, 2021. If you are considering investing in Solar Energy, the time to do so is now. The tax cut will dramatically reduce the cost of installation and will allow current investors to save money.
The ITC has proven to successfully drive the growth of the solar energy industry across the United States by incentivizing millions of Americans to make the switch. The solar energy industry is experiencing a boom as a result of the laws in place that allow many Americans to own their own solar energy system. With the growth and incentives that are offered by the federal government, the solar energy industry is creating a bang in the market. The SEIA explains that since 2006 there has been a 1,600 percent growth in annual solar installation. The Sun Solar Electric specialists encourage you to take advantage of the federal tax policy that aids both commercial and residential owners. Do not wait until the tax incentive disappears in 2021.
A bump on the Road: Section 201 Tariff
Solar cells are essential components in a solar panel and are produced in mass quantities in places like China, South Korea, and Taiwan. The government's solar tariff otherwise known as the Section 201 Tariff, that was passed on January 22, 2018, is allowing local solar cell companies to compete with foreign companies. A tariff is a tax on imported goods that is meant to protect and favor local markets from foreign competition.
The 30% tax on imported PV cells will add between $500 up to $1,000 dollars to the price of installation. Each year the tariff will fall by five percent meaning that by 2021 the tariff will be at 15%. However, we exist in a free market economy that enjoys the benefits of cheap foreign goods which is why the tariff is only meant to last for four years.
With the falling prices of solar cells abroad, the U.S solar tariff will have a minor impact on the overall price of installation. China and South Korea will be capable of adapting their market prices in order to compete with the growing solar energy market in the U.S. This means PV cells prices could become even cheaper in the following years.
Ways to Finance a Solar Energy System in California
Not every American has the capacity to pay out of pocket for a solar energy system. Fortunately for us, there are private and government-led programs that incentives solar energy investments. Private and government loans provide individuals the opportunity to finance or rent a solar energy program. The green movement has allowed many individuals to enjoy the benefits of renewable clean energy without having to pay for a solar energy system all at once. If you find yourself in the state of California, there are a number of ways in which you can finance a solar energy system.
- Home Equity Loans: Homeowners can seek a loan from their private financing lenders. Homeowners are capable of using their home equity as collateral to establish a new credit line and purchase their own solar energy system. The second mortgage loan will be dependent upon the value of the property and the loan interest rate tends to be lower than a standard credit line. If you use a mortgage loan to buy your solar energy system, you will qualify for the tax deduction under the current ITC law. Solar energy systems add value to the residential property so it makes sense to invest using a home equity loan.
- Power Purchase Agreements (PPA): Homeowners who opt for a PPA can have a solar energy system installed for less cost. PPA offers homeowners to work with a third party provider who will be in charge of installing and maintaining the solar energy system. Individuals in these programs tend to pay for the electricity that is generated by the solar energy system. Individuals in PPA’s do not own the solar energy system, therefore, they are not capable of claiming a tax deduction under the ITC.
- Solar Leases: Home or business owners are capable of enjoying renewable energy by leasing a solar energy system. This program works for individuals or businesses that plan to move regions within a short given time. This renting program may also be more appropriate for individuals who cannot afford to buy a solar energy system, but who wish to reduce their monthly electrical bill. Like with PPA’s individuals in these programs are not owners of the solar energy system and will not be able to apply for an ITC.
- Property Assessed Clean Energy (PACE): Solar energy investors may find the best form of financial assistance through local government loan programs. Loan programs can extend to 20 years and can be passed down to new homeowners if you ever decide to sell your property. If you find yourself in the city of Berkeley, Los Angeles, San Francisco, San Diego, Palm Desert, and Sonoma County, you may qualify for a Property Assessed Clean Energy program. If you are interested in energy and renewable energy programs you are encouraged to learn more about the PACE program to see if you may qualify for a comprehensible low-cost loan.
The cost of solar energy programs can range depending on a variety of factors, but they are guaranteed to save you a large amount of money. Most Americans find that at least half of their utility bill disappears after installing a solar energy system. If you are in a sunny location, as most Californians, you will find the other half of your utility bill is covered in whole or in part by the credit you build with the utility companies. To get the most out of a solar energy program consider the benefit of installing or upgrading your solar energy system with solar batteries.
The Sun Solar Electric company can help you find ways to finance your own solar energy system. To learn more about solar energy system costs and about solar energy, please contact us at 707-658-2157.