Switching Smart: Solar incentives in Texas
Texas is second after California in the top solar-generating states. It might become number one in the next 5 years. Why did solar energy get so popular there? Electric go up like never before. Our advice: go solar ASAP but do it the Smart way: read our article about Texas solar incentives and make use of them.
Texas is a huge energy factory. In 2022, the state produced 12% of the U.S. electricity, twice as much as second-place Florida. It also generates over 12% of solar energy in the United States. SEIA believes that it is going to outpace California by 2028. The solar industry blooms in Texas, with Mission Solar growing to be the face of American-made high-quality solar panels.
Texas sun shines bright all year long
average number of peak sun hours in Texas
The first obvious reason for this is a lot of sunlight. Texas gets 135 clear days a year and about 5.73 peak sun hours a day. What is more, Texas is located in the south and gets enough peak sun hours both in summer with a maximum of 6.29 in August and in winter with a minimum of 4.11 in December. A 7-kilowatt solar system will generate over 30 kWh/day of AC for half a year, enough to fully power a medium-sized house.
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Texas has the most power outages in the US
than 9,500 tornadoes were reported in Texas between 1950 and 2021. About 120-130 tornadoes hit Texas every year, according to data from the National Oceanic and Atmospheric Administration (NOAA). They often lead to destruction and power outages. Solar panels are a great choice for a tornado-heavy state: they withstand winds of at least 140 mph and add a layer of protection to your roof.
A solar system with batteries makes a lot of sense in Texas because of the high number of power outages. Texas experienced more power outages than any other state, according to Climate Central. Of the 1,542 weather-related outages documented in the U.S. over the study’s 20-year analysis, 180 were in Texas. The ice storm that hit the state in February 2021 left more than 4.5 million homes and businesses without power, some for several days. The crisis caused at least 246 casualties.
Texas electricity spike up
An average Texas household, consuming 1,094 kWh per month, pays 158.19 on electricity. This is close to an average bill across the US. The are rising rapidly though: the price per kWh jumped 11.34% from 12.82 ¢/kWh in 2022 to 14.46 ¢/kWh in 2023.
In late June, Texas broke a new temperature record with RIO Grande Village hitting 119 degrees. Electricity doubled amidst the heat wave from 5000,500 per mWh to 5,000, pushed by soaring demand for cooling.
Solar system owners enjoy their freedom from terrifying bills. With a PV system completely satisfying your energy needs, you’ll save 450,500-2,000 a year and recoup your purchase costs in 5-7 years. Upfront costs of going solar become smaller when you consider Texas solar energy programs.
How to go solar in Texas: Solar incentives, credits, and rebates
There are many benefits for those who choose solar energy. We’ll guide you through the most important ones.
With the Solar Investment Tax Credit (ITC), homeowners can deduct 30% of not only the solar system’s cost but also its shipping and installation from their income taxes. If your system costs 10,000, you can get over 3,000 back through a tax deduction.
Freeze your property tax with Property Tax Exemption
that’s how much solar panels increase your home value on average
A solar system increases the value of your home by 4% on average. But with the property tax exemption, you don’t have to pay extra taxes on it. The value of your home increases, while the property tax remains the same. Win-win! To claim this exemption, fill out Form 50-123 and check the Solar and Wind-Powered Energy Device Exemption and Appraisal Guidelines for more information.
Sell excess electricity with Net Metering Program
On sunny summer days, your solar panels generate more electricity than your home needs. You can sell this extra energy to the grid for credits and receive an electricity bill reduction. In the best case, one kilowatt-hour given to the grid is one kilowatt-hour off of your next utility bill.
Net metering — a billing mechanism that credits homeowners for the electricity they give to the grid
Although Texas doesn’t have a statewide net metering program, there are many utility companies offering this opportunity. Here are some of them:
El Paso Electric City of Brenham CPS Energy Green Mountain Energy (commercial)
Is Texas a Good State for Solar Incentives?
Installing solar panels has continued to be come a growth industry as more people continue to find that the benefits and overall electricity savings that solar permits outweigh the upfront costs associated with them. But still that upfront costs continues to be one that many identify as the primary reason why they wont install solar. To combat this many government rebates and incentives exist on a local as well as State and Federal level. With Texas being the second largest state to adopt solar according to Statista, it’s no question that the popularity stems from some great saving wins.
The average cost of installing solar equipment in Texas ranges between 15,496 and 30,935 before any tax credits, rebates or incentive programs are considered. This is relative to the national average of around 24,000.
However, after the federal solar investment tax credit (ITC) is considered, the average system cost in Texas can drop to between 10,927 and 21,654. Of course, additional incentives can be applied to bring these costs down even further, making them a critical part of going solar in the Lone Star State.
In terms of solar adoption in Texas, as previously mentioned the state is ranked second in the country in terms of solar adoption, sitting just behind California. Unlike California’s solar adoption, the rate of photovoltaic (PV) adoption has more to do with the enormous energy needs of Texas residents and the abundance of sunlight rather than the availability of valuable incentives.
The Lone Star State is a decentralized one, opting to set the rules more at a city or county level rather than at a state level. As such, it is home to only a few statewide benefit programs, which are less appealing than in most other states. However, there are numerous local incentives available from local governments and utility companies that you might be able to take advantage of.
Freedom Solar Power
Blue Raven Solar
In the chart below, we’ll provide a quick list of all of the solar incentives that are currently available to Texas homeowners. Below that, we’ll provide additional information for each and explain how important each one is to keeping your conversion costs to a minimum.
Federal Solar Tax Credit (ITC) for Texans
The federal tax credit is the most valuable incentive available in Texas. This is provided by the federal government and guarantees a tax credit applied to your income tax burden for 30% of your system value.
It’s important to note that you can only take advantage of the full credit if your income taxes owed are higher than the credit value. You can, however, roll over any unused credit for five years. This helps you take advantage of the full amount, even if your income tax liability is too low the year you install your system.
In Texas, where the pre-incentive solar power system can cost over 30,000, the typical credit amount is 9,281. This assumes that you install a system size of 11.5 kilowatts (kW) and pay the average cost per watt in the area, which is around 5000.69.
The federal credit was originally offered in 2006 to all U.S. residents. At that time, the credit amount was also 30%. The rate dropped to 26% in 2022 and was meant to drop again to 22% in 2023 and then expire in 2024.
Thankfully, as part of the Inflation Reduction Act, and in an effort to continue to promote solar adoption throughout the country, the federal government extended the credit and reinstated the original credit rate. The rates are now scheduled to change as follows:
- 30% for all systems installed through 2032
- The rate will drop to 26% for systems installed in 2033
- It will drop again to 22% for systems installed in 2034
- The credit will no longer be available for systems installed in or after 2035 2
Claiming the federal credit is not terribly time-consuming, and the process itself is simple. You’ll be ready to claim the credit when you file your taxes for the year your system is installed and commissioned. You can follow the steps below at that time.
- Step 1:Print out IRS form 5695 to fill out, or notify your accountant that they’ll need to fill out the form for you.
- Step 2: Go through the form and fill in any applicable information. You’ll usually need to know things like the address where your system was installed, the total price you paid for the system, the system capacity, the name of your solar company and more. You should have any paperwork provided by your solar installation company handy before you begin.
- Step 3: File the form along with your taxes. If you’re using automated filing software, you’ll usually be prompted to answer a question about whether you installed a solar array for that tax year.
There are some incentives that you can do without, especially if the benefit you receive is minimal and the time investment to file is significant. However, the federal credit is an absolutely essential incentive, in our opinion.
This perk is the most appealing because it can provide a credit of up to 10,000 in some cases, and the form you need to fill out usually takes less than 10 minutes. The minimal time it will take you to file for this credit is well worth it, especially since you can get a credit of nearly a third of your entire system cost.
Texas’ Renewable Energy Systems Property Tax Exemption
The property tax exemption prevents your taxes from increasing after you install your solar system.
Under normal circumstances, a home improvement that raises your property value will also bump up your assessed value. Since your taxes are determined using your assessed value, they will go up as well.
Installing a solar energy system is expected to bump up your Texas home value by over 4%, which is a significant increase. 3 This would typically cause your taxes to increase, but the tax exemption in the state of Texas prevents that from happening.
Instead, your system value is not considered when determining your assessed value, which means your taxes shouldn’t change at all as a result of going solar.
It’s challenging to estimate exactly how much this will save you over time, as the savings depend on your home value, your taxes and your system size and value.
However, if we assume you pay around 30,000 for your solar array, the 1.8% property tax rate in TX would equate to an annual savings of over 500 every year on your tax bill.
Disregarding system depreciation, that’s over 10,000 saved on taxes over the life of your system. This benefit is more valuable in areas with high property value, like Dallas, Austin and Houston.
How to Claim the Property Tax Exemption in Texas (click to expand)
Similar to the federal credit, the property tax exemption just requires a single form to be filed for your home. You can follow the brief instructions below to claim the exemption:
- First, download Form 50-123 from the Texas Comptroller’s website, which is the Exemption Application for Solar or WInd-Powered Energy Devices
- Next, fill out the form. It’s just a few pages long and will require general information about your solar power system
- Finally, file the form with the Comptroller’s office
Once you file the form, your property taxes will be adjusted, and the value of your solar system will be disregarded.
Is the Property Tax Exemption Worth the Time/Effort of Claiming in Texas? (click to expand)
This tax exemption is another crucial piece of the puzzle when it comes to maximizing your solar savings. This exemption is a great incentive in any state where it’s offered, but it’s especially important in Texas.
The Lone Star State doesn’t have a state income tax and instead uses an above-average property tax rate to collect taxes. It ranks seventh in the country for the highest property tax rate, with an average rate of 1.8%. 4 Since the property tax rate is high in Texas, taking the property tax exemption is especially important.
Taking advantage of this exemption also only takes a few minutes and minimal paperwork, so the amount saved is absolutely worth the time and effort, in our opinion.
Solar Incentives In Texas That Homeowners Can Qualify For
The solar energy market in Texas is booming. In 2021 in the United States, 23.6 gigawatts of solar energy capacity were installed. Of that, solar companies installed 6 gigawatts in Texas alone. Texas became the top market for solar energy in 2021. surpassing even California for the first time.
Texas receives so much sunlight throughout the year and leads the country in wind power. However, despite the Lone Star State’s ideal climate for renewable energy production, Texas burns more coal and emits more carbon dioxide than any other state.
Solar Incentive Programs from Oncor
The Texas solar market creates excellent opportunities for installers for numerous reasons. There are a variety of financial incentives, both state-wide and from local governments, that encourage solar panel installations. Understanding these programs is critical for explaining how these programs work to Texans.
For example, the Investment Tax Credit (ITC) has and will continue to fuel solar energy growth throughout the state. The federal solar tax credit is 30% for solar installations in 2022 through 2032. It’s recommended customers speak with a tax expert to ensure they can utilize the tax credit and beware of offering tax advice.
State-Level Incentives
In addition to federal tax incentives, there are local incentives throughout Texas. Let’s explore these programs so you can discuss them with potential customers.
TXU Energy Renewable Buyback Plan
TXU, an energy retailer, is based in Irving and has a buyback program for homes with solar panels or wind turbines. When homes with renewable energy systems produce more power than the home consumes, they feed the excess to the power grid, and customers receive credits on their energy bills.
To participate, renewable energy system owners need to sign up for the TXU Energy Renewable Buyback plan and enter an interconnection agreement with their local Transmission Distribution Utility (TDU). An interconnection agreement gives your customer permission to connect the solar PV system to the utility grid in their service area.
The TDU will need to inspect the solar panel system. They will then use a Smart meter to track how much energy goes from the grid to the home and vice versa. Once your customer has received the required approval, they can start receiving clean energy credits on their electricity bill.
Solar Energy System Property Tax Exemption
Because a solar energy system costs thousands and significantly reduces electricity bills, it can increase your customer’s property value. However, there is a property tax exemption from charging additional property taxes due to an increase in home value from installing a solar power system. In other words, going solar won’t cause your customer’s property taxes to increase.
Fannie Mae Green Initiative Loan Program For Multifamily Properties
This program provides free water and energy efficiency audits and technical solar assessments. In addition, it finances green property improvements for multi-unit housing. The eligible green upgrades include:
- A photovoltaic solar system.
- LED lighting.
- Energy-saving HVAC equipment.
- ENERGY STAR appliances.
To qualify, the property owner must commit to upgrades projected to decrease the entire property’s annual energy and/or water consumption by at least 30% combined. At least 15% must be projected energy savings.
Net metering
Although there isn’t a state-wide policy requiring net metering (also known as net energy metering), some utility companies offer it. In fact, CPS Energy. El Paso Electric and Green Mountain Energy provide bill credits to solar system owners for excess power they supply to the electricity grid. When the property needs more power than the solar system provides, the utility company will first use the credits from surplus solar energy before charging customers for the electricity.
These programs allow homeowners to accrue credits for each kilowatt-hour of power that the utility company tracks. Depending on the climate and energy use in the home, there might be certain months where the solar homeowner banks more solar credits and other periods where they consume more. Net metering programs are beneficial to solar system owners because they can utilize excess energy without relying on battery storage systems.
Local Solar Rebates
There are also some photovoltaic incentives available through local governments and utility companies.
American Electric Power (AEP) Solar Rebates
The Smart Source Solar PV Program offers rebates for residential and commercial AEP Texas customers. Systems that are 3 kW 5 kW can qualify for 450,500 in rebates. For systems that are 5 kW 7.5 kW, they are eligible for 5000,250. Projects that are 7.5 kW to 30 kW can qualify for 3,000. In addition, there are tiered incentives for commercial solar systems by system capacity. Solar companies need to be enrolled in the program for projects to qualify.
Austin Energy
Residential customers of Austin Energy can qualify for 5000,500 in rebates by completing Austin Energy’s solar education course and installing a home solar system with a Participating Contractor. The solar installer submits the rebate paperwork on the customer’s behalf.
CPS Energy Solar Rebates
This utility company serves the city of San Antonio and offers rebates for residential and commercial solar energy projects. Residential customers can qualify for 5000,500 in rebates and a 500 premium for using local solar panels. In addition, it offers a tiered incentive for commercial solar projects based on their capacity.
Oncor Solar Photovoltaic (PV) Program
Oncor offers solar rebates for residential and commercial solar installations. Residential projects between 1 kW and 15 kW can qualify for 8,500. In addition, commercial projects between 5 kW and 300 kW of capacity are eligible for up to 120,000 in rebates.
To qualify, applicants must be a customer of Oncor, which has a service area that includes Dallas, Fort Worth, and Arlington. Also, the system must be installed by an approved service provider.
Solar Incentives Could Convince Texas Homeowners To Switch To Solar
Numerous solar incentives throughout the state are making solar energy more appealing and a Smart financial investment. Combined with Texas being one of the sunniest states in the country, these factors make the solar energy market poised for further growth. As a solar professional, there are many opportunities in serving this booming market.
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Types of Solar Rebates Available in Texas
Texas offers several types of solar rebates and incentives to encourage residents to switch to renewable energy. One such program is the Residential Renewable Energy Tax Credit that provides a federal tax credit equal to 26% of the cost of qualified solar electric property installed on residential properties. There is no cap on this incentive, making it an excellent option for homeowners looking for long-term savings.
Texas also offers various utility-based rebate programs such as Oncor’s rooftop solar photovoltaic (PV) system Program that provides homeowners with up to 8,500 in rebates per qualifying projects while CPS Energy’s Solar PV rebate program provides rebates up to 15,0000 for eligible systems. If you qualify these are applied directly against your upfront costs and can help you make substantial savings when installing a new solar panel system.
Overall, there are many financial benefits available in Texas that make the transition towards renewable energy easier and more affordable. Be sure to explore all available options before investing in a new solar panel system so you can take advantage of these valuable incentives and start saving money right away!
How to Qualify for Solar Rebates and Incentives in Texas
In order to qualify for solar rebates and incentives in Texas, there are a few key requirements you should be aware of. The first is that your solar panel installation must meet certain standards set by the state’s utility companies. For example, your panels must have a minimum output capacity and be installed by a certified professional.
Another important consideration is your location within Texas itself. Certain areas may offer more generous rebates or incentives than others, so it can be helpful to do some research on what programs are available in your community before making any decisions.
It’s also worth noting that many of the available solar incentives in Texas come with an expiration date, so if you’re considering going solar it’s important to act quickly if you want to take advantage of these financial benefits. Overall, with proper planning and attention to detail, qualifying for these valuable rebates can help make the switch to renewable energy even more affordable and accessible for homeowners throughout Texas.
What you NEED to know about Texas Solar Incentives?
Benefits of Going Solar with a Rebate or Incentive Program
Going solar is an environmentally friendly decision that can also save homeowners money in the long run. By taking advantage of rebate and incentive programs, homeowners can further reduce their upfront costs and increase their return on investment. One of the benefits of going solar with a rebate or incentive program is that it minimizes any financial barriers to making the switch to renewable energy. These programs allow homeowners to access financing options that they may not have been able to afford otherwise.
Another key benefit of these programs is that they help promote sustainable living by incentivizing homeowners who make eco-friendly choices. In Texas, for example, some utility companies offer rewards for reducing energy usage during peak hours or using energy-efficient appliances – this encourages households to take steps towards becoming more environmentally conscious as a whole community. Those who invest in solar power at home become less reliant on traditional power grids, meaning fewer greenhouse gases are released into the atmosphere from fossil fuel-based power sources.
As you can see, there are many benefits associated with going solar through a rebate or incentive program. From reducing carbon footprints and promoting sustainable living practices within local communities to lowering overall costs while increasing return on investment – these initiatives clearly demonstrate how combining conservation efforts with economic incentives can lead us closer toward achieving our shared goal of global sustainability while improving quality-of-life both financially and ethically speaking alike!
Conclusion
Texas offers several solar rebates and incentives to encourage homeowners to switch to renewable energy. These programs are designed to make it easier on your wallet by providing financial benefits that can offset some of the costs associated with installing a solar system. Whether you’re thinking about going solar or have already made the switch, it’s important to understand what options are available so that you can take advantage of these programs.
Transitioning to renewable energy is not only good for the environment but also good for your finances in the long run. By taking advantage of Texas’ various solar rebates and incentives, you can save money on your utility bills and reduce your carbon footprint. As more people make the switch to renewable energy, we will continue to see expanded options for solar incentives and a cleaner future ahead.