Financial Options for Solar Panels

Here are the following ways you can purchase solar panels.

Purchase Outright

This is by far the most attractive return on investment, especially if you borrow to finance the system. Generally, the savings generated will be much larger than the cost of the money borrowed. Purchasing a system qualifies customers for all rebates, tax credits, and revenue from Solar Renewable Energy Credit (SREC) sales, and significantly increases the property value of your home.

Loans

CIR works with a variety of lenders for bridge loans for your residential tax credits, and with other financial institutions for the net cost of your project. We are able to offer low-interest loans, some with longer terms, to make payments less than what you’re currently paying for your electric bill. Please ask your CIR representative for a more specific breakdown.

Power Purchase Agreement (PPA)

A Power Purchase Agreement or PPA is a contract between you (the customer) and a third-party financing company which owns, operates, and monitors the solar equipment. In most cases, PPAs are used when a customer does not have the tax appetite or liability to take advantage of the federal and state tax incentives. Common project types include: churches, schools, municipal buildings, fire houses, etc. PPAs provide you with long-term savings with little to no money upfront. These projects also include system monitoring, maintenance contracts, and a low fixed cost of energy. These particular energy systems hedge you against inflation and rising electric rates as well as provide a production guarantee.

NYSERDA

New York State’s Energy Research and Development Authority (NYSERDA) will provide a cash incentive currently paying $0.35 per watt for residential projects, and $0.45 per watt for small commercial projects under 750kW in size.

Incentives vary for projects 200kW and larger. Call us today to find out more if you have a larger than 200kW project. Incentives will reduce periodically, as funding is committed and are subject to change.

For more information, check out this page.

NYS Tax Credit

New York State will provide a 25% income tax credit up to $5,000 that can be used until fulfilled. Excess credit may be carried forward for five years.

For more information, check out this page.

Federal Investment Tax Credit

As of January 1st, 2021, the Federal government will provide a 30% tax credit, uncapped, on any system regardless of size and not exclusive to main residences for the next 10 years.

For more information, please reach out to us.

MACRS Accelerated Depreciation

Qualifying solar energy equipment is eligible for a cost recovery period of five years. For equipment on which an Investment Tax Credit (ITC) grant is claimed, the owner must reduce the project’s depreciable basis by one-half the value of the 30% ITC. This means the owner is able to deduct 85% of his or her tax basis.

Depreciation is the loss of value that occurs over time when the object purchased is used for a specific use. As a business owner, you are eligible to deduct this “loss in value” from your taxable income when used for your business. If you are running a profitable business, and you can show that the solar power you are generating is for business use (as opposed to personal use), then it may have a strong impact on reducing your bottom line.

Rural Energy for America Program

Renewable Energy & Energy Efficiency Funds may be used for the purchase, installation, and construction of renewable energy systems, such as small and large solar generation. The USDA offers a loan with guarantees on up to 75% of total eligible project costs. Also there are grants available for up to 25% with terms of $2,500-$500,000. Applicants must provide at least 75% of the project cost (if applying for a grant only), 25% of the project cost (if applying for load, or load and grant combo). Projects greater than $200,000 require a technical report and energy efficiency projects require an energy audit or assessment.

Low to Moderate Income

Affordable Solar is a program being added to the NY-Sun initiative in an effort to reach out to low-to-moderate income (LMI) households. Those eligible will qualify for double the incentive that is currently being offered by NYSERDA capped at 6 kW. The income guidelines vary from county to county qualifying those who fall beneath 80% of the area or state median income. In order to qualify, you would also need an electricity efficiency assessment of the home to determine whether any lighting or heating/cooling upgrades are necessary to decrease your energy consumption before getting your solar system installed.

How Long Does it Take to Break Even on Solar Panel Investment?

The amount of time it takes for your solar-generated energy savings to match the expense of installing solar panels is entirely dependent on how you finance your solar installation and how large your system is. Most systems break even in about 7-10 years and are warranted for at least 25 years.

Calculating Your Solar Payback Period

Here’s an example to help you calculate your solar payback period.

Combined Costs

First, we’ll determine your combined costs. you’ll need to know the gross cost of your solar panel system. Let’s assume the gross cost of your solar system is $20,000. Now, we need to understand the upfront incentives available to you, including the solar tax credit and local rebates or incentives. Given that the ITC is currently set at 26 percent, with a $20,000 solar system, you’ll be eligible for $5,200. Now, let’s also assume you can take advantage of an additional $1,000 in local rebates – this brings your upfront incentives to $6,200 and your combined costs to just $13,800.

Gross cost ($20,000) – upfront incentives ($6,200) = combined costs ($13,800)

Annual Benefits

To calculate your annual benefits, you’ll need to know how much you’re saving each year on electricity costs. Let’s assume your monthly electricity bill is about $100 – annually, that amounts to $1,200 in avoided electricity costs assuming your system covers 100% of your electricity needs. You’ll also need to know how much you’ll receive from other incentives each year, like SRECs. In our example, we’ll assume you’re earning $500 annually from selling SRECs – this means you’ll receive $1,700 in annual benefits.

Avoided annual electricity costs ($1,200) – annual incentives ($500) = annual benefits ($1,700)

Final Calculation

Now, to calculate your solar payback period, you just need to divide your combined costs by your annual benefits!

Combined costs ($13,800) / annual benefits ($1,700) = solar payback period (8.1 years)

In our example, your payback period would be 8.1 years – pretty close to the 8.7 year average on EnergySage!

Customer Reviews

Bryan

“Darren and his CIR team did a fantastic job on our smaller 3kW project. We saved money on our electric bill in the first month and our ROI is under 7 years. Installed in 2018 it is quietly saving every month. We have several months where we only pay for the mandatory connection and distribution fees. The key to a successful project with quick payback is conservation. Darren will walk you through all the details.”

Karen

“The installation process was great. The workers were very nice and respectful of my property. With solar panels, my electric bill is less than $18 a month even during the summer with air conditioning. The entire process was painless.”

Solar Panel Financing FAQs