New York homeowners have several options for making solar more affordable, including NYSERDA financing and incentives, Power Purchase Agreements and state tax credits. Eligible homeowners may qualify for the New York State Solar Energy System Equipment Credit, which covers 25% of eligible solar costs up to $5,000. These programs can help reduce upfront costs or spread the cost of a solar investment over time.
The upfront cost of a solar energy system can be the biggest hurdle for homeowners looking to go solar.
However, that cost doesn’t necessarily have to be paid all at once – and the initial price of a system doesn’t always reflect what you’ll ultimately pay.
Financing options, state tax credits, and other solar incentives can help make the cost of going solar more manageable. Depending on the program, these options may reduce the overall cost of a solar project or allow homeowners to spread that cost out over time.
In New York State, homeowners have several options to consider when determining how to pay for solar. Understanding what’s available, how each option works and what you may qualify for can help you determine the best way to finance your solar project.
Buying Solar Outright in New York State:
For homeowners who have the financial flexibility to do so, purchasing a solar energy system outright is one way to avoid taking on a monthly loan payment or paying interest associated with financing.
The upfront cost of a solar installation can vary considerably depending on the size of the system, the property and other factors. While paying that entire cost at once requires a larger initial investment, homeowners who purchase their systems can begin realizing the financial benefits of the electricity their panels produce without also having to account for ongoing financing payments.
In addition to purchasing a solar energy system outright, New York homeowners and property owners may have access to several incentives, financing options and programs that can help make going solar more affordable. These include:
- NYSERDA incentives and assistance
- Power Purchase Agreements
- State tax credits
- MACRS accelerated depreciation
1. NYSERDA Incentives and Assistance
The New York State Energy Research and Development Authority (NYSERDA) offers programs designed to help New Yorkers manage the cost of energy improvements, including solar. For eligible homeowners, this assistance can include financing options and incentives that help reduce the upfront financial burden of installing a solar energy system.
Several NYSERDA programs may be available depending on the homeowner, property and project, including loan options, solar incentives and additional assistance for income-eligible households.
Loan Options for NYSERDA-approved Contractors:
For homeowners who prefer to finance their solar energy system rather than pay the full cost upfront, NYSERDA offers several loan options with different payment structures and terms. These financing programs are available for qualifying projects completed by NYSERDA-approved contractors.
The three options include the On-Bill Recovery Loan, Smart Energy Loan and Renewable Energy Tax Credit Bridge Loan.
- On-Bill Recovery Loan: This loan redirects the installation costs associated with going solar, and divides them amongst your utility bill payments. Although this means your utility rates will be higher than they would have been if you paid for the solar system and installation outright, they will still be significantly lower than they were when all your electricity came from the grid. Once the installation cost is completely paid for, no more additional expenses will be added to your utility bills, allowing you to enjoy the full cost-saving benefits of solar.
- Smart Energy Loan: This loan treats installation payments as their own monthly payment, not connected to your utility bills. While this means you will be immediately enjoying the dramatically reduced utility costs associated with solar energy, you will have this loan to pay back in return.
- Renewable Energy Tax Credit Bridge Loan: This loan allows you to use the available state tax credits awarded to solar adopters towards the money you owe for your panel installation. While this means you’ll be missing out on the full benefits of these incentives until your loans are paid, it affordably allows homeowners to immediately enjoy the money-saving potential of solar without adding an additional bill in the form of a monthly loan payment. Provided you owe less than $25,000, this can also be combined with either the Smart Energy Loan or the On-Bill Recovery Loan.
NYSERDA Cash Incentive Per Watt
An additional benefit offered by NYSERDA is a monetary reimbursement provided for every watt your solar system generates, allowing you to increase your money savings merely by generating electrical energy with your panels.
The rates is $0.15 per watt for residential. While that amount may seem modest on a per-watt basis, it can add up to meaningful savings when applied across the total capacity of a residential solar system.
Low to Moderate-Income Affordable Solar Program
In order to allow more low-to-moderate-income households to enjoy the cost-saving benefits of solar adoption without being overly burdened by the purchase and installation costs, New York State enacted the Affordable Solar Program. This provides eligible homeowners with double the previously established incentives offered by NYSERDA, in hopes of allowing households who fall below 80% of the area or state median income to reap the savings of solar energy and helping secure them a more stable financial future.
Income guidelines vary from county to county, and in order to qualify, an electricity efficiency assessment of the home must be conducted. This way, if any lighting, heating, or cooling upgrades are needed before solar can be installed, they can be properly detected and addressed first.
2. Power Purchase Agreement (PPA)
If you don’t have the means or liability to be eligible for solar tax incentives, you may want to consider financing your solar system through what is known as a Power Purchase Agreement, or PPA. A Power Purchase Agreement is a contract between a customer looking to purchase a solar system and a third-party company that owns and operates the solar equipment. Usual applications for this arrangement are larger projects such as schools, churches, firehouses or municipal buildings, and the appeal stems from long-term savings that cost little to no money upfront.
State Tax Credits
New York homeowners may be able to reduce the cost of going solar through the New York State Solar Energy System Equipment Credit. The credit allows eligible homeowners to claim 25% of the cost of a residential solar energy system, up to a maximum credit of $5,000, against their New York State income taxes.
For example, if eligible solar installation costs total $20,000, the 25% credit would equal $5,000 – reaching the maximum amount available through the program.
The credit is nonrefundable, meaning it cannot generate a refund beyond the homeowner’s state income tax liability. However, according to the source you provided, unused portions of the credit can be carried forward for up to five years.
3. MACRS Accelerated Depreciation
MACRS stands for Modified Accelerated Cost Recovery System, and it’s a depreciation system used exclusively to preserve investments for tax purposes.
Like a lot of assets, solar panels depreciate over time. Depreciation can be quickly defined as a gradual loss of value that occurs as an object is purchased and used over time. This use further diminishes an object’s condition from the value it initially held, leading to a decrease in value over time, similar to the value of a car.
Here’s how it works: As your solar system is used, its value lessens, and as that value is gradually lost, you can deduct this ‘loss of value’ from the taxes you need to pay. This decreases your taxable income as the value of your solar panels decreases, lowering your taxes and yielding sizable long-term monetary savings.
Find the Right Way to Finance Your Solar Project
The upfront cost of solar doesn’t necessarily tell the full story of what a system will ultimately cost. Financing options, tax credits and other incentives can help reduce or spread out that investment, giving homeowners different ways to approach the cost of going solar.
Which options make the most sense will depend on your property, project, financial situation and eligibility for available programs. Understanding those options before moving forward can help you make a more informed decision about your solar investment.
No matter what your financial situation, options are available to make solar an attractive, practical, and beneficial option for your household energy needs. For more information about solar energy services–from financing, to installation, and more–contact Solar by CIR today.