{"id":4582,"date":"2022-12-17T20:53:53","date_gmt":"2022-12-17T20:53:53","guid":{"rendered":"https:\/\/imsfund.com\/?p=4582"},"modified":"2022-12-17T20:53:53","modified_gmt":"2022-12-17T20:53:53","slug":"how-homeowners-can-make-sense-of-the-climate-finance","status":"publish","type":"post","link":"https:\/\/imsfund.com\/index.php\/2022\/12\/17\/how-homeowners-can-make-sense-of-the-climate-finance\/","title":{"rendered":"How homeowners can make sense of the climate finance"},"content":{"rendered":"


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Solar panels create electricity on the roof of a house in Rockport, Massachusetts, U.S., June 6, 2022. Picture taken with a drone.\u00a0<\/p>\n

Brian Snyder | Reuters<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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When Josh Hurwitz decided to put solar power on his Connecticut house, he had three big reasons: To cut his carbon footprint, to eventually store electricity in a solar-powered battery in case of blackouts, and \u2013 crucially \u2013 to save money.<\/p>\n

Now he’s on track to pay for his system in six years, then save tens of thousands of dollars in the 15 years after that, while giving himself a hedge against utility-rate inflation. It’s working so well, he’s preparing to add a Tesla-made battery to let him store the power he makes. Central to the deal: Tax credits and other benefits from both the state of Connecticut and from Washington, D.C., he says.<\/p>\n

“You have to make the money work,” Hurwitz said. “You can have the best of intentions, but if the numbers don’t work it doesn’t make sense to do it.”\u00a0<\/p>\n

Hurwitz’s experience points up one benefit of the Inflation Reduction Act that passed in August: Its extension and expansion of tax credits to promote the spread of home-based solar power systems. Adoption is expected to grow 26 percent faster because of the law, which extends tax credits that had been set to expire by 2024 through 2035, says a report by Wood Mackenzie and the Solar Energy Industry Association.\u00a0<\/p>\n

Those credits will cover 30 percent of the cost of the system \u2013 and, for the first time, there’s a 30 percent credit for batteries that can store newly-produced power for use when it’s needed.<\/p>\n

“The main thing the law does is give the industry, and consumers, assurance that the tax credits will be there today, tomorrow and for the next 10 years,” said Warren Leon, executive director of the Clean Energy States Alliance, a bipartisan coalition of state government energy agencies. “Rooftop solar is still expensive enough to require some subsidies.”<\/p>\n

California’s solar energy net metering decision<\/h3>\n

Certainty has been the thing that’s hard to come by in solar, where frequent policy changes make the market a “solar coaster,” as one industry executive put it. Just as the expanded federal tax credits were taking effect, California on Dec. 15 slashed another big incentive<\/a> allowing homeowners to sell excess solar energy generated by their systems back to the grid at attractive rates, scrambling the math anew in the largest U.S. state and its biggest solar-power market \u2014 though the changes do not take effect until next April.<\/p>\n

Put the state and federal changes together, and Wood Mackenzie thinks the California solar market will actually shrink sharply in 2024, down by as much as 39%. Before the Inflation Reduction Act incentives were factored in, the consulting firm forecast a 50% drop with the California policy shift. Residential solar is coming off a historic quarter, with 1.57 GW installed, a 43% increase year over year, and California a little over one-third of the total, according to Wood Mackenzie.<\/p>\n<\/div>\n

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For potential switchers, tax credits can quickly recover part of the up-front cost of going green. Hurwitz took the federal tax credit for his system when he installed it in 2020, and is preparing to add a battery now that it, too, comes with tax credits.\u00a0Some contractors offer deals where they absorb the upfront cost \u2013 and claim the credit \u2013 in exchange for agreements to lease back the system.\u00a0<\/p>\n

Combined with savings on power homeowners don’t\u00a0 buy from utilities, the tax credits can make rooftop solar systems pay for themselves within as little as five years \u2013 and save $25,000 or more, after recovering the initial investment, within two decades.\u00a0\u00a0<\/p>\n

“Will this growth have legs? Absolutely,” said Veronica Zhang, portfolio manager of the Van Eck Environmental Sustainability Fund, a green fund not exclusively focused on solar. “With utility rates going up, it’s a good time to move if you were thinking about it in the first place.”<\/p>\n

How to calculate installation costs and benefits<\/h3>\n

Here is how the numbers work.<\/p>\n

Nationally, the cost for solar in 2022 ranges from $16,870 to $23,170, after the tax credit, for a 10-kilowatt system, the size for which quotes are sought most often on EnergySage, a Boston-based quote-comparison site for solar panels and batteries. Most households can use a system of six or seven kilowatts, EnergySage spokesman Nick Liberati said. A 10-12 kilowatt battery costs about $13,000 more, he added.<\/p>\n

There’s a significant variation in those numbers by region, and by the size and other factors specific to the house, EnergySage CEO Vikram Aggarwal said. In New Jersey, for example, a 7-kilowatt system costs on average $20,510 before the credit and $15,177 after it. In Houston, it’s about $1,000 less. In Chicago, that system is close to $2,000 more than in New Jersey. A more robust 10-kilowatt system costs more than $31,000 before the credit around Chicago, but $26,500 in Tampa, Fla. All of these average prices are as quoted by EnergySage.\u00a0<\/p>\n

The effectiveness of the system may also vary because of things specific to the house, including the placement of trees on or near the property, as we found out when we asked EnergySage’s online bid-solicitation system to look at specific homes.<\/p>\n

The bids for one suburban Chicago house ranged as low as $19,096 after the federal credit and as high as $30,676.<\/p>\n<\/div>\n

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