Image source: Pew Research Center
Solar: Solar energy is one of the best ways for people to reduce their carbon footprint, but it has also significantly contributed to their capacity to save money.
A California utility regulator recently limited the usage of net metering.
As a result, it will at least 60% reduce the overall savings for houses from selling electricity to the grid.
Additionally, it affects the nation as a whole by changing the economic balance.
What solar brings
Josh Hurwitz, a Connecticut native, installed solar energy at his residence for three reasons:
- Reduce his carbon footprint
- Store electricity in a solar-powered battery in the event of a blackout
- Save money
Hurwitz’s decision will enable him to pay for his system in six years and save tens of thousands of dollars over the following fifteen years.
Additionally, it shields him from increasing utility costs.
He is getting ready to build a Tesla battery to store the energy he produces because solar has so far behaved brilliantly.
“You have to make the money work,” said Hurwitz.
“You can have the best of intentions, but if the numbers don’t work, it doesn’t make sense to do it.”
Inflation Reduction Act
The Inflation Reduction Act, passed in August of this year, is helpful, according to Josh Hurwitz’s experience.
One advantage of prolonging and raising tax incentives is that it will encourage the usage of home-based solar power systems.
The law will hasten adoption growth by 26%, according to the Solar Energy Industry Association and Wood Mackenzie.
Also prolonged are the tax credits set to expire from 2024 until 2035.
The credits will cover 30% of the system’s cost.
A 30% credit is also available for batteries that can store recently generated electricity for later use.
Warren Leon, executive director of the Clean Energy States Alliance, made the following remarks to a bipartisan coalition of state government organizations:
“The main thing the law does is give the industry, and consumers, assurance that the credit will be there today, tomorrow, and for the next ten years.”
“Rooftop solar is still expensive enough to require some subsidies.”
Read also: Twitter employees laid off get early win over Musk
California solar market
Being certain about anything is the hardest part about solar.
Because of the frequent regulation changes, market experts have dubbed the market a “solar coaster.”
California removed a key incentive on December 15, the day after the new federal tax credits went into effect.
Any excess solar energy that homeowners’ systems create can be sold back to the grid.
As a result, the computations and California’s huge solar-power business were jumbled.
However, it will start working in April 2023.
According to Wood Mackenzie, the solar market will see a significant 39% fall in 2024 if the state and federal reforms are enacted simultaneously.
Even without considering the incentives offered by the Inflation Reduction Act, the consulting firm projects a 50% decrease due to the California policy shift.
According to Mackenzie, home solar is also coming off a historic quarter.
A little more than one-third of the total, or 1.57 GW, are located in California, a 43% increase from the previous year.
Tax credits can help potential switchers quickly recoup some of the up-front costs of going green.
Josh Hurwitz installed his solar system using the federal tax credit.
He is currently preparing to include a battery because it qualifies for tax advantages.
While waiting, some contractors offer packages that let customers pay the full amount upfront and gain credit toward future leases on the same equipment.
Rooftop solar systems can pay for themselves in as little as five years when tax incentives are paired with savings on electricity that homeowners don’t purchase from utilities.
Additionally, if the initial investment is reimbursed in 20 years, it can save more than $25,000.
Portfolio manager for the Van Eck Environmental Sustainability Fund, Veronica Zhang, stated:
“Will this growth have legs? Absolutely.”
“With utility rates going up, it’s a good time to move if you were thinking about it in the first place.”
Read also: Mortgage application shows positive movement amid falling interest rates
In some places, utilities must pay higher prices for any excess electricity produced by residential solar systems during peak output or used to recharge house batteries.
However, these states also have more generous subsidies and consumer-friendly policies.
Before this week, California had some of the laxest rules.
However, state utility regulators decided to let utilities pay less for any extra power they are required to purchase after power companies protested that the prices were too high and drove up the cost of electricity for other customers.
According to Wood Mackenzie, the details of California’s decision made it seem less demanding than the company had anticipated.
EnergySage estimates that California’s payback period without a battery will be ten years rather than six when the new laws take effect.
The company also expects savings to decline by 60% in the future years.
According to EnergySage, systems with batteries won’t be as severely affected because owners keep the majority of the extra power rather than selling it to the grid.
“The new [California rules] certainly elongate current payback periods for solar and solar-plus-storage, but not by as much as the previous proposal,” said Mackenzie.
“By 2024, the real impacts of the IRA will begin to come to fruition.”
Rooftop solar: how homeowners should do the math on the climate change investment