Missouri Solar Panels: Why Solar Energy Is Now Super Cheap in Missouri
According to the Swanson effect, the cost of the cells used to make solar panels, is predictably dropping, by 20% every ten years. Price of solar cells decreased from a whopping per watt rate in 1977 of $76.67 to a mere per watt rate of $0.36 in 2014.
Do you think that Missouri is too cold to efficiently generate home solar energy? Nope! Check out the Swanson graph above to see how dramatically solar prices have fallen in the last decade. Along with some recent legislative changes, solar innovation has made Missouri solar a smart choice.
Since “net metering” has been adopted statewide, any excess energy you produce with your system is credited back to your utility bill each month. Along with some other smart policies, Missouri is making progress in becoming a sustainable, balanced energy state.
Let’s take a look at the different solar options available to households in Missouri.
Comparing Missouri Solar Options
The chart below gives you an idea of the costs and returns for each solar option available to Missouri residents – purchase, purchase with credit, and solar leasing.
Cash Purchase
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.
For illustration purposes, we are going to focus on one of three Missouri utilities offering cash rebates for solar, Columbia Water & Light, Empire District Electric, or KCP&L. These utilities offer a rebate of $500 per kW, and we assume a standard 5kW system.
For Missouri, the average system costs $19,000 before any incentives or rebates. This means a cash layout of $16,500 after rebates. After rebate, you will see an average energy savings of $750 per year, and the Federal tax credit of $4950, this drops your first year cost down to only $10,800!
Your electricity savings, taking into consideration energy price inflation, should pay for your Missouri solar system within 13 years. After 25 years (the system warranty period), you should see a net return of approximately $17,600, or around 8.2%. Not a bad return, and remember that you are helping to provide good-paying, local jobs and save the environment.
Purchase with Credit
Years ago, the only way to buy home solar was to pay cash. As the lifetime of the system has gotten longer and the efficiency has grown, you no longer have to lay down $19,000 cash to buy your solar system. In fact, as a return on cash invested, financing is actually more sensible than paying cash.
Low interest rates and utility company rebates along with the Federal tax credit give solar financing the largest actual returns. You get all of the benefits of solar, without any cash out of your pocket!
Let’s assume a home equity loan of 5% for a $16,500 system after rebate. 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. As Missouri fairly high energy costs, your savings will also be higher than other states.
With an average $16,500 installation price, a purchase on credit makes perfect financial sense. Year one, you should save about $750 in energy costs, and have loan payments totaling about $1570. This means around $68 per month out of pocket your first year, but remember, you got $4950 in tax credits. That tax credit means you are $4130 ahead the first year!
With each year, your savings increase and your money out of pocket decrease, until at year 15, you are saving approximately $1300 per year. After 25 years, you will have a net profit of around $10,600, even after paying for your system.
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 the relatively high Missouri energy costs and the normal energy cost inflation, your savings multiply year after year!
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.
Michigan’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.
Missouri’s RPS is not spectacular, but it is certainly a good start towards sustainable energy and environment. Missouri mandates 15% renewable energy by 2021, with concrete intermediate steps in the meantime.
The Missouri RPS sets in motion firm guidelines in how solar and other renewables are to be treated by utility companies, and govern what utilities can charge consumers for services.
Additional Considerations for Missouri
There are no state tax credits to encourage participation in Missouri. State tax credits are a win for both the state and the consumer. For the state, there is no out-of-pocket cost, and for the consumer, there is an incentive to participate.
Solar performance payments, or rewards for production of solar power, are almost nonexistent in Missouri. Solar performance payments are bonuses paid to homeowners producing solar energy. Although there is no current performance payment program, there are Solar Renewable Energy Credits (SREC) that can be sold.
Missouri has no sales tax exemption for solar. Many states exempt home solar from state sales tax, further reducing the actual cost of the system. Missouri charges state tax on solar. This is a very easy, inexpensive change that would greatly increase participation.
Some Positive Signs for Solar in Missouri
Missouri has a 100% property tax exemption for solar. This is a great way to encourage participation, by leaving untaxed all of that additional value a solar system adds to your property.
Missouri has a strong solar rebate program. Though it is not mandatory statewide, many utilities in the state offer strong rebates that significantly reduce the up-front cost of a system.
Net metering requires each utility to monitor how much energy is produced, and to credit you for any excess over what you use. Missouri has an excellent net metering law. The only weakness is in the discounted rate they pay you for your excess energy, so make sure you choose the right size system to avoid producing more than you use.
Missouri has a solar carve-out of 2%. This is not very ambitious, but it is a good beginning for future plans with greater amounts of mandated solar production.
Conclusion
Missouri is taking steps to be one of the most competitive states when it comes to solar, but there are some key areas that the state is lacking. State tax credit and sales tax exemption are two simple, effective ways to encourage participation in solar, and Missouri has no discussions ongoing to change the current policy.
On the plus side, the strong utility company rebate program makes Missouri solar power extremely affordable to buy and install, and if it would become mandated statewide, solar production in Missouri could really take off.
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