One of the most satisfying things we can do is gain energy independence. Start with efficiency. Get a professional energy audit and follow the recommendations, however mundane they may be. Then it’s time for the fun part, installing solar panels.
We all want to save money and get a good deal, especially on big-ticket items. Timing is everything and it is no different when buying a renewable energy system. For photovoltaic systems (PV for short), the timing is good. Prices are the lowest ever, while efficiency has continued to climb. Incentives are also very strong right now. The two primary incentives include a 30% federal tax credit and Nevada’s net-metering program.
There is another incentive that can help but it’s not available to everyone. I’m referring to NV Energy’s SolarGenerations rebate program. For homeowners, the next round of rebates will be valued at $1.35 per watt with a 10,000 watt size limit. Different rules apply for small businesses, schools and public property so check their website for details. Because the program’s tremendous popularity is expected to exceed the available rebate dollars, participants are selected using a lottery process that is now underway. The application deadline is November 9th. If you are getting ready to add solar to your home in the near future, now is the time to apply for the rebate.
What if you don’t win the lottery? Should you wait until next year to try again? Perhaps not. Fortunately, there is an alternative to the SolarGenerations rebate that might be even better in the long run. Keep in mind that if you accept a rebate from NV Energy, you assign your system’s Portfolio Energy Credits (PCs) to the utility. This is what they are paying you for since they can be traded on the market or used to meet their legally-required clean energy quota. Keeping your PCs might be worth it. To illustrate how, I’ll use a typical 5 kilowatt PV system as an example. It is a common size for a residential system in Nevada and happens to be the size of the system that provides all the electricity for my home and electric car annually.
Rebate Scenario
Installed prices before incentives are typically in the range of $4 to $6 per watt. We’ll split the difference and use $5, starting with a 5,000 watt system price of $25,000. For a rebate lottery winner, the $1.35 per watt rebate takes it down to $18,250. Take the 30% tax credit and you’re down to $12,775 for a system that could produce nearly $1,400 in yearly energy savings (assuming 11,500 kWh @ $.12 ea.) while adding considerable equity to your home. Assuming a 5% yearly utility inflation rate, simple payback occurs in about eight years. Without the rebate, simple payback is extended about two years. If you offset gasoline purchases with an electric vehicle, you can cut that time in half and double your return on investment. Of course, the impact on our environment is priceless — but that is not factored into this exercise.
Alternate Scenario
If you forgo the rebate, your (post-tax incentive) cost is $17,500 but you can trade your PCs (see www.nvtrec.com for details*). Now this is where the area becomes a bit gray since in Nevada, it seems that the utility determines the schedule, rate and whether or not to make an offer for PCs. However, based on recent practices and pricing (as outlined in this presentation to the Nevada Senate Committee on Commerce, Labor and Energy – PDF), trading your PCs could result in a payback period equal to or better than the rebate scenario above, plus the ongoing revenue. This scenario comes out ahead by $2,250 in just two more years. Given a stable market for PCs, it’s better to skip the rebate. Changes in legislation or market options could further enhance revenue potential.
“In order to participate, owners of renewable energy systems must contact the Public Utilities Commission of Nevada (PUCN) to register their system. A very simple application form is available on the PUCN web site. The value of a PEC is market-driven. PECs issued to a renewable energy system owner by the PUCN are valid for four years.”
– from the Database of State Incentives for Renewables & Efficiency (a very good resource)
One thing is absolutely certain, no matter what option you choose, solar power has become a safe, stable investment that can provide tremendous value. There are certainly no banks paying 20% interest. Green Living is the way to go. Get going!
* Note: The Help page on the NVTREC website erroneously states that only systems of 150 kW or greater are tracked. A spokesman at the Public Utilities Commission of Nevada verified that the site is out of date and that any size system can qualify for the program as long as it meets all other requirements.
* Note about the above note: I’m not sure what prompted it but two days after this column was published I noticed that the Help page on the NVTREC website has been miraculously updated! It no longer refers to the 150 kW size requirement. Thank you to the person responsible for fixing that.
“Assuming a 5% yearly utility inflation rate, simple payback occurs in about eight years. Without the rebate, simple payback is extended about two years”
If the rebate is $6,750, and the system generates $1,400 per year, isn’t the payback extended closer to 5 years?
The concept of payback can be misleading since there are many factors that should be included in the equation but are often ignored.
In the example above, my calcs for “simple payback” are:
$25,000 system cost
-$6,750 rebate = $18,250
-$5,475 30% tax credit = $12,775
With 5% annual inflation for electricity costs, it takes about 8 years to reach parity.
However, the increase in home equity immediately exceeds the total investment (see this Green Living column, Solar Increases Home Value for details). If you add that to the equation, payback is immediate. Either way, the return on investment is far better than you’ll find in any bank and much safer than gambling in the stock market.
Ultimately, if what we do causes irreparable harm to the biosphere that sustains us, all this talk about payback is meaningless. I believe we need to change the way we do a lot of things regardless of the cost.
It is wise to go through the professional audit first to make sure that your home is properly located and will get the maximum solar energy available.