Opportunities for Home Solar Power in Louisiana
[1- Swanson Graph]
As one would expect in a state that relies so heavily on fossil fuels for its economy, solar policy in Louisiana is a bit weak. Even so, there is a state tax credit here that is so huge that Louisiana has one of the quickest paybacks in the nation. As the above Swanson chart shows, the costs of solar have dropped dramatically to a point where solar is a smart energy choice for Louisiana.
Let’s take a look at some of the great solar options available in Louisiana.
Comparing Louisiana Solar Options
The chart below gives you an idea of the costs and returns for each solar option available to Louisiana residents – purchase, purchase with credit, and solar leasing. One important thing to note from the chart below.. solar in Louisiana makes you money. Unlike states with weaker solar tax credits, Louisiana actually makes you money right away.
2 – 3-in-1 graph]
[2 – Cash graph]
A cash purchase always delivers the most immediate, largest savings. With no loan payments, you realize 100% of the energy savings immediately, along with the Federal 30% tax credit.
Considering an average purchase price of $20,000 for a 5kW system, you will receive a Federal tax credit of $6000 (30% on the net cost), your first-year investment is only around $14,000!
But wait. Louisiana gives a state tax credit of $2000/kW, available in full as a refund the first year. That $10,000 takes your first year cost down to $4000!
Your energy savings the first year should be around $624. Taking into account energy cost inflation, your system should pay for itself in around 6 years, and by year 25, you should see a net profit of around $20,300!
Purchase with Credit
[2- Credit Graph]
For most people, paying for solar with a home equity loan makes the most sense. Because you are using a home equity loan, you not only get the 30% Federal credit and state tax credit, but you can deduct the interest on the loan as well. You get all of the benefits and incentives without any cash out of pocket.
Let’s assume a home equity loan of 5% for a $20,000 system. While there will be a few years in the beginning where the loan payments are greater than the savings in energy costs, energy inflation will quickly outpace your loan payment.
With an average $20,000 installation price, a purchase on credit makes perfect financial sense. Year one, you should have about $624 in energy costs, and have loan payments totaling about $1898. This means around $106 per month out of pocket your first year, but remember, you got $16,000 in tax credits! That tax credit means you are $14278 ahead the first year!
By year 15, when the loan is paid off, you will be realizing about $850 per year in savings, and by year 25 your total net returns are around $216,900, even after paying off the system!
If you would like a custom quote based on your energy use, click here for a quote.
[2 – Solar graph]
Solar leasing is a great way to go solar if you are short of cash or if you don’t have the ability to take a loan. As you can see above, the immediate returns are not as impressive, but due to normal energy cost inflation, your savings multiply year after year!
In Louisiana, you will start out with a relatively small savings of just a few dollars per month, which multiplies over time, but you save this money with no money out of your pocket.
With solar leasing, you generally have two distinct options.
With standard leasing, you basically pay a rental payment for a solar roof system. The system is installed and maintained by the solar company on your roof. Depending on the amount of sun you get, the lease payment plus the new, lower electric bill should be less than what you are currently paying.
With a Power Purchase Agreement (PPA), you agree to allow a company to install home solar on your roof. You then purchase the energy your panels produce at a substantial discount to your current residential electric rates. As with a lease, the company maintains the system and assumes all risk. You just collect the savings.
Keep in mind that with a lease, you do not get the residual value of the system to your property, as you do not own it. You also do not receive any of the tax credits or other benefits of home solar ownership, other than lower energy costs.
Louisiana’s Renewable Portfolio Standard (RPS) Guidelines
A state’s Renewable Portfolio Standard (RPS) is a plan, based on legislation or regulation, that outlines goals and targets for production of renewable energy in the state. The RPS is the tool that encourages power companies to supply renewable energy rather than using fossil fuels.
Louisiana has no RPS, which means that the whole solar and renewable energy program is held together by one big giant tax credit. A strong RPS is critical to ensuring a long-term, sustainable energy policy that includes solar.
Additional Considerations for Louisiana
Louisiana has no “solar carve-out’. A solar carve-out is a guarantee that at least some portion of the energy generated will come from solar. With an RPS in place, there is no mechanism to enforce or plan a solar carve-out.
Louisiana has some of the lowest electricity prices in the US. . Why is this bad news? The actual cost of a solar system is a function of energy prices. The higher the energy cost, the less expensive the yearly cost of installing solar.
Louisiana has a weak “net metering” policy. Net metering basically sets out a statewide policy for monitoring and crediting the excess amount of power your solar system provides.
There are no solar rebates in the state. Bad.
Solar performance payments, or rewards for production of solar power, are nonexistent in Louisiana. Solar performance payments are bonuses paid to homeowners producing solar energy.
Louisiana has no sales tax exemption for solar. Many states exempt home solar from state sales tax, further reducing the actual cost of the system. Louisiana charges state tax on solar. This is a very easy, inexpensive change that would greatly increase participation.
Some Positive Signs for Solar in Louisiana
The largest state tax credits, of $2000.kW, are available here. This is a truly great incentive, but it is driving the whole solar program due to a lack of an RPS.
Louisiana solar purchases are exempt from property taxes, effectively lowering the up-front costs of installing and keeping solar on your property.
Net metering requires each utility to monitor how much energy is produced, and to credit you for any excess over what you use. Louisiana has good net metering laws, crediting each surplus to the next utility bill indefinitely or allowing some customers to receive the surplus as an annual payment.
The Louisiana legislature has provided one terrific incentive for residents to switch to solar, but it is putting all of its eggs in one basket. The tax credit was a bold move, but it needs to be paired with a strong RPS and more cooperation from the utilities in the future.