Kicking around the idea of going solar? 2019 is the year you should finally do it. Here’s why…
Vanishing Tax Incentives
If you purchase a solar system for your home or commercial property in 2019, you’ll still be eligible to receive a 30% Federal tax credit. This is a true tax credit that allows you to deduct 30% of the total cost of the system from your Federal tax debt. But in 2020 the tax credit drops to 26%, then to 22% in 2021, and finally fades away in 2022 for residential properties and drops to 10% for commercial properties.
Lock-in Guaranteed Rates for 20 Years
The second and lesser-known reason for installing solar in 2019 is something called a Net Energy Metering (2nd version) agreement, or NEM2. Once your solar system is installed, you’ll sign an agreement with PG&E that allows you to feed your excess solar power back into the grid for credit. This 20-year agreement locks-in the terms that guarantee the utility company’s buy back rates. The agreement can be passed on to the new owner if the property is sold, but cannot be transferred to your new home. You will have to sign whatever agreement is in effect at that point.
The original NEM1 agreement that PG&E and other utility companies signed with the state of California, was renegotiated when a pre-determined amount of solar installations was achieved, state-wide.
With the original NEM1 agreement, a customer with solar would pay a $10 per month meter fee and PG&E would give the customer a 1-to-1 credit for the power produced. So if PG&E were charging 32 cents per kWh (Kilowatt hour) then they would have to credit back at 32 cents per kWh. As long as the solar system produced as many kWh’s per year as used, then there would be no money due to PG&E at the end of the year on the True Up statement.
Pleading Their Case
When negotiating for NEM2, the utility companies asserted that solar customers had access to the grid on-demand, whenever they needed it. Basically using the utility companies as a battery backup for only $10/month. Considering the cost of maintaining the grid, they had a point.
With the renegotiated NEM2 agreement, you will still pay a $10/month meter fee, but any time power is pulled from the grid, you’ll be charged 2 1/2 cents/kWh for that power: At night, on a very cloudy day, or any time more power is being used than the solar system is producing. If you average $250/month in PG&E bills before solar, this doesn’t add up to much. You may wind-up owing PG&E $30/month or so, after solar. This breaks down to $10/month for the meter fee and $20/month in minimum charges.
Other changes in the NEM2 agreement include a one-time fee of $145 (typically included in your solar quote).
Additionally, new solar customers will be forced to switch to a Time of Use (TOU) schedule, charging different amounts per kWH depending on the time of day. With the TOU-A rate schedule, the peak hours are from 3pm to 8pm on weekdays. At all hours of the week (except peak hours) customers are charged 32 cents/kWh. If the system is producing more power then the customer is using, the customer is credited at 32 cents/kWh. But during peak times those charges and credits go up to 40 cents/kWh. Limiting or avoiding electrical usage during peak hours will make solar credits built up during off-peak hours, go further.
So how long will NEM2 last? The California Public Utilities Commission plans to revisit NEM in 2019. Who knows what the terms of NEM3 will be? It’s possible that NEM3 may be further restricted for new solar systems interconnected after 2019.
Bottom Line
Take advantage of the full Federal tax credit and don’t take your chances on NEM3. Get your solar system installed this year! Contact us today for a quote.
Contributed by Mike Shaheen, commercial and residential solar expert for CalSun Electric & Solar in Paso Robles. If you would like more information about adding solar to your business or home, please call him directly at (805) 468-9030.