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Homeowner's Guide to Solar

Updated: Jun 8, 2023

General Solar Knowledge

What is a Photovoltaic (PV) System? What is Solar Energy?

Solar photovoltaic (PV) systems, also referred to as solar electric systems, harness the power of sunlight and convert it into usable electricity. These systems are capable of supplying electricity to various household components, including lights, appliances, and even electric vehicles.

How does a Solar PV System operate?

A solar PV system operates by harnessing the power of sunlight and converting it into usable electricity. The process begins with solar panels, which are composed of multiple interconnected photovoltaic (PV) cells. These cells contain semiconductor materials that absorb photons from sunlight, generating an electric current. As the sunlight strikes the PV cells, it creates a flow of electrons, producing direct current (DC) electricity.

To make the DC electricity usable in homes and businesses, it goes through an inverter. The inverter's primary function is to convert the DC electricity into alternating current (AC) electricity, which is the standard form of electricity used by most appliances and electrical devices. Once the electricity is converted to AC, it can be utilized to power lights, appliances, and other electrical loads within the building.

During periods when a solar PV system generates more electricity than is needed, the excess energy is sent back to the electric grid. This is made possible through a process called net metering. The utility meter records the net amount of energy consumed by the customer, taking into account both the energy purchased from the grid and the excess energy supplied back to it. At the end of each billing cycle, the customer is billed for the net energy usage, considering the energy consumed from the grid and the energy credits earned from surplus generation.

Overall, a solar PV system operates by capturing sunlight, converting it into electrical energy, and utilizing it to power electrical devices. It offers a sustainable and renewable energy solution that reduces reliance on traditional fossil fuel-based electricity generation.

How are solar system sizes estimated?

Solar system sizes are estimated based on several factors that determine the amount of electricity the system can generate. The key considerations for estimating solar system sizes include:

  1. Energy Consumption: The first step in determining system size is to analyze the energy consumption of the property where the solar system will be installed. This involves assessing the average monthly or annual electricity usage, measured in kilowatt-hours (kWh). A higher energy consumption will typically require a larger solar system to meet the electricity needs.

  2. Available Roof Space: The physical area and orientation of the roof play a vital role in estimating solar system size. More roof space allows for the installation of a greater number of solar panels, resulting in increased electricity generation capacity. Factors such as shading, obstructions, and roof angle also need to be considered to optimize solar panel placement.

  3. Solar Irradiation: The amount of sunlight that reaches the location influences the system size estimation. Solar irradiation data for the specific region helps calculate the expected energy output from the solar panels. Regions with higher solar irradiation generally require smaller solar systems to generate the desired amount of electricity.

  4. System Efficiency: The efficiency of solar panels and other system components affects the overall system size. Higher-efficiency panels can generate more electricity within a given space, allowing for a smaller system size. Conversely, lower-efficiency panels may require a larger system size to achieve the same energy output.

By combining information on energy consumption, solar irradiance, and system efficiency, solar installers or designers can estimate the appropriate size of a solar system. This estimation is crucial for ensuring that the solar panels installed can generate sufficient electricity to meet the property's energy needs and optimize the return on investment for the solar installation.

How Does Net Metering (NEM) Work?

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Solar Energy Incentives

What is the Federal Investment Tax Credit or the Solar Tax Credit?

The Solar Tax Credit is a federal incentive that allows individuals to claim a tax credit for their solar energy systems, effectively reducing their federal tax liability. The credit is calculated as a percentage of the total cost of the solar system, with the current rate set at 30% until the end of 2032. It's important to note that the deadline to qualify for the 30% Solar Energy Tax Credit is December 31, 2032.

The Federal Investment Tax Credit for residential solar was extended for 12 years until 2034 by the Inflation Reduction Act of 2022. During this period, the solar tax credit will remain at 30% until 2032, after which it will gradually decrease to 26% in 2033 and then to 22% in 2034.

This federal tax credit for residential solar energy aims to make solar power more affordable by providing a dollar-for-dollar reduction in taxes. To be eligible for the credit, your solar energy system must have been put into service during the current tax year, and you will need to complete IRS Form 5695.

Unlike deductions, these tax credits directly lower the amount of tax owed, potentially resulting in a tax refund. It's important to understand that the tax credit does not act as a "discount," as individuals are still responsible for covering the costs of the solar system and then claiming the credit from the IRS when filing their tax returns. Regardless of whether or not they itemize deductions on Schedule A, taxpayers can claim these credits on IRS Form 5695.

What is the property tax exemption in Texas?

In Texas, there is a property tax exemption available for solar energy systems. This exemption, known as the Texas Property Tax Code Section 11.27, allows property owners to exclude the added value of a solar energy system from their property tax assessment.

Under this exemption, the appraised value of the property is reduced by the amount equal to the value of the solar energy system. This means that the property owner will not be taxed on the increased value that the solar installation brings to the property. It effectively helps incentivize the adoption of solar energy by reducing the financial burden associated with property taxes.

It's important to note that while the property tax exemption applies to the added value of the solar energy system, the base value of the property remains subject to taxation. Additionally, eligibility and implementation of the exemption may vary across different jurisdictions within Texas. Therefore, it is recommended to consult with local tax authorities or a tax professional to obtain accurate and up-to-date information on the specific property tax exemption for solar in your area.

Financing Options

For homeowners who want to make the switch to solar but might not want to spend a lot of money upfront, solar loans are a great option. Homeowners who finance their solar systems still reduce or eliminate their electric bill and they also own their solar system. Additionally, the massive federal incentives and funding makes solar loans the most affordable loans in the world!

What are the benefits of financing your solar PV system?

  1. No upfront cost: most homeowners who finance their solar system qualify for $0 out of pocket options.

  2. Immediate cost savings: for most homeowners who take out a solar loan, their monthly payment for their solar loan is significantly less than their current electric bill.

  3. Return on investment: over time, the savings on your electricity bills will offset or exceed the monthly financing payments, resulting in a positive return on investment. The average ROI time for homeowners who switch to solar in the United States is approximately 7.5 years.

  4. Increased property value: Solar PV systems are considered a valuable upgrade for properties and will increase the resale value of your property. Studies have shown that homes equipped with solar panels tend to sell at a higher premium compared to non-solar homes.

  5. Environmental benefits: by generating clean, renewable energy from the sun, solar PV systems contribute to reducing greenhouse gas emissions and dependence on fossil fuels. Financing your system allows you to participate in the transition towards a more sustainable and environmentally friendly energy source.

  6. Rising cost of electricity: in the past 10 years, residential electricity rates in the United States have experienced a significant increase. By opting for solar power, individuals not only decrease their current electric bills but also evade the inevitable rise in prices anticipated for the future

Benefits of Solar

How much are energy costs rising?

According to data from the U.S. Energy Information Administration, residential electricity rates in the United States have increased by approximately 15 percent since 2010. The rate of increase can vary by region, with some areas, such as Texas, experiencing even higher jumps, such as nearly 12 percent in a single year, surpassing the national average. These upward trends reflect a significant rise in electricity costs over recent years.

Why are energy costs rising?

The rising electricity costs in America can be attributed to various factors. One significant factor is the increasing demand for electricity due to population growth, urbanization, and the expanding use of electronic devices and appliances. As more households and businesses require electricity, the demand on the power grid increases, leading to higher costs.

Another contributing factor is the aging infrastructure of the power grid. Many components of the electrical infrastructure, such as power plants, transmission lines, and distribution systems, require maintenance, upgrades, and modernization. The costs associated with maintaining and improving this infrastructure are often passed on to consumers, resulting in higher electricity rates.

Additionally, the cost of fuel used for electricity generation plays a crucial role. Fluctuations in the prices of fossil fuels, such as natural gas and coal, can impact electricity costs. When fuel prices rise, it becomes more expensive to generate electricity, which in turn leads to higher rates for consumers.

Furthermore, the transition towards cleaner and more sustainable energy sources, such as renewable energy, can also contribute to rising electricity costs in the short term. While renewable energy technologies, like solar and wind power, have become more cost-effective over the years, the initial investment and integration of these sources into the grid can lead to temporary increases in electricity rates.

Looking ahead, it is expected that electricity costs will continue to rise due to these ongoing factors. The growing demand for electricity, the need for infrastructure upgrades, potential fuel price volatility, and the shift towards cleaner energy sources are likely to contribute to the upward trend in electricity prices. However, it is worth noting that investing in energy-efficient technologies, such as solar panels and energy-saving appliances, can help mitigate the impact of rising electricity costs by reducing overall energy consumption.

How much can you save on electric bills?

In most cases, homeowners will save a significant amount of money by going solar. By generating your own electricity, you can reduce or even eliminate your monthly electricity bill. The amount you save will depend on a number of factors, including the size of your solar panel system, your energy usage, and the cost of electricity in your area.

How does solar increase the value of a home?

Homeowners who go solar are not just saving money on their monthly bills, they are also investing in an asset that allows them to build equity in their home. Solar PV systems are a part of the home, and each payment made towards the cost of the solar PV system creates additional value in your home.

According to the U.S. Department of Energy’s Office of Energy Efficiency & Renewable Energy, a home with solar panels will sell twice as fast as a home without solar panels.

The U.S. Department of Housing and Urban Development states that energy-saving improvements increase the potential resale value of your home and help it sell more quickly because they:

  • “Make your house more affordable to more people.”

  • “Attract attention in a competitive market.”

  • “Are improvements which will actually save money.”

What are the environmental benefits of solar?

Solar energy offers several environmental benefits:

  1. Reduced greenhouse gas emissions: Solar power generates electricity by harnessing energy from the sun, producing no direct greenhouse gas emissions during operation. By displacing fossil fuel-based energy sources, solar energy helps to reduce carbon dioxide and other harmful greenhouse gas emissions, mitigating climate change and air pollution.

  2. Renewable and sustainable: Solar energy is derived from a virtually unlimited resource—the sun. As long as the sun continues to shine, solar power can be harnessed, making it a renewable and sustainable energy source. Unlike finite fossil fuels, solar energy is abundant and will not be depleted over time.

  3. Decreased dependence on fossil fuels: Traditional electricity generation relies heavily on fossil fuels like coal, oil, and natural gas. By embracing solar energy, we can reduce our dependence on these finite and polluting energy sources. Diversifying our energy mix with solar power helps enhance energy security and decreases our vulnerability to price fluctuations and geopolitical tensions associated with fossil fuel imports.

  4. Conservation of natural resources: Solar power does not require the extraction or combustion of scarce resources like coal or natural gas. By utilizing solar energy, we can reduce the demand for these resources, preserving them for other essential uses and minimizing the environmental impact of resource extraction.

  5. Water conservation: Many conventional power generation methods, such as coal and nuclear power plants, require substantial amounts of water for cooling and steam generation. Solar energy systems have minimal water requirements for their operation, thus helping to conserve precious freshwater resources, especially in water-scarce regions.

  6. Improved air and water quality: Solar energy systems do not produce air pollutants or release harmful emissions during operation. By reducing the reliance on fossil fuel-based power generation, solar power helps improve air quality and reduces the emissions of pollutants like sulfur dioxide, nitrogen oxides, and particulate matter, which can have detrimental effects on human health. Solar power also avoids the potential for water pollution associated with coal ash or oil spills.

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