How Solar Program Works
Solar energy is an economical, renewable, and clean source of energy. The electricity produced in excess is stored in the battery or supplied to the electricity grid. Solar Panel is a one-time investment that helps you save money on changing electricity tariffs. An investment in solar panels system is an investment in a bright future. At the same time, investing in a solar panels system requires market research and understanding. Before opting for a plan, you should conduct a comprehensive home energy audit followed by an analysis of the solar potential, which will give you an insight into your energy needs. Solar energy incentives provided at National, State, and local levels encourage US citizens for adopting renewable energy resources. Such as Federal Solar Tax credit provides the consumer with the opportunity to deduct up to 20% from annual tax on going solar. While the power purchase agreement plays most significant role for qualifying for local incentives and rebates.
Federal Solar Tax Credit
The investment tax credit (ITC) is alternatively known as the federal solar tax credit. It applies to both commercial and residential Solar Panel systems. Moreover, there is no limit to its value. During 2020, ITC allows the user to deduct 26% of the installation cost from the federal taxes. In 2021 it will enable the new residential and commercial solar user to deduct 22%, further decreasing to 10% on commercial installation in 2022.
Additionally, there will be no tax on the residential installation. The federal solar tax credit was established by the Energy Policy Act 2005. The owner is eligible for the tax relaxation as long as he/she owns the solar energy system. On the other hand, if you sign a lease with the solar system installers, you may not directly own the system and not qualify for the federal solar tax credit relaxation. Green Solar Energy brings you in direct contact with local solar suppliers.
There are different types of solar power purchase agreements offered by the solar leasing companies. The lease agreement provides flexibility in case there is a change in circumstances. Residential lease spans between 20 to 25 years according to various needs and demands. On the other hand, the commercial lease ranges from 7 to 20 years. The leasing company monitors the solar panels system performance during the lease duration to ensure it is operating as desired. They are also responsible for repairs and maintenance of your solar panels. The user can keep track of the system through free online, tablet, or smartphone applications. The user can buy the solar panels system anytime at the pre-defined price stated in the contract or fair market value, whichever is higher. If the user plans to sell the property, the lease is transferrable as well. At the end of the agreement, the user can either renew the lease agreement or request the company to remove the solar energy system. There are different levels of solar leasing including the following.
With this lease agreement, the user pays nothing upfront and pays an agreed fixed amount per kilowatt-hour (KWh) rate for the agreement duration. Normally the rate changes between 1-3% annually.
With Custom down-payment solar leases/Power Purchase Agreements, the customer pays a small down payment, approximately $1,000 & $3,000, and receives a discount in monthly payment or a lower rate per kWh.
With a pre-paid solar lease/Power Purchase Agreement, the user pays 100% upfront when he/she signs the contract. After that, the users do not have to pay anything for the rest of the agreement duration. If the agreement allows, the user can benefit from the sale of available Solar Renewable Energy Credits (SRECs).