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.
Mississippi has historically underutilized solar panel energy, considering the high (over 5 hours per day) daily hours of sunlight. As the above Swanson chart below shows, the costs of solar have dropped dramatically to a point where solar is a smart energy choice for Mississippi.
Mississippi has been struggling with solar issues such as net metering for years, putting off decisions and extending comment periods indefinitely. Aprivate study commissioned by the Utility Commission found that under almost any possible scenario, solar would be beneficial to both the consumer and the utility companies, but the utilities continue to push back against uniform rules.
With solar being beneficial to all involved, it is surprising that Mississippi has not done more to encourage home installation and common-sense rules and incentives to drive participation. Even with the lack of state incentives, all Mississippi residents qualify for the Federal Tax Credit of 30%, making solar panels a smart choice for Mississippi homeowners.
Even with a lack of incentives, the state does have two things that make solar especially affordable: fairly high energy prices and plenty of sun.
Let’s take a look at the different options available to Mississippi residents.
The chart below gives you an idea of the costs and returns for each solar option available to Mississippi residents – purchase, purchase with credit, and small solar. Sadly, since there is no RPS in place, there is no solar lease program available in Mississippi at this time.
A cash purchase always delivers the most immediate, largest savings. With no loan payments, you realize 100% of the energy savings from your solar panel system immediately, along with the Federal 30% tax credit.
We base our example on a home served by the TVA, as they give a $1000 rebate along with a $.02/kWh generation bonus.
Considering an average installation price of $20,000 for a 5kW system, you will see an immediate return of $1000 (from the TVA), a Federal credit of $5700, and an estimated first-year savings of around $760 in energy costs.
Your energy savings, along with the generation bonus from the TVA, amount to about $875 the first year. Subtract this savings, along with the rebates and tax credits, and your year one cost drops to around $12,425!
Taking into account expected energy price inflation, your yearly savings should be an estimated $1300 within 15 years. This should completely pay for the system within 15 years, but you still own the added value of the system to your property, and you are supporting local jobs and the environment too!
Years ago, the only way to buy home solar panels 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 $20,000 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 along with the Federal tax credit and TVA rebate 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 $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. As Mississippi has fairly high energy costs in the US, your savings will also be higher than other states.
With an average $20,000 installation price, a purchase on credit makes perfect financial sense. Year one, you should save about $875 in energy costs, and have loan payments totaling about $1800. This means around $77 per month out of pocket your first year, but remember, you got $5700 in tax credits and a $1000 rebate. That tax credit means you are $4900 ahead the first year!
By year 15, when the loan is paid off, you will be realizing about $1250 per year in savings, and by year 25 your total net savings are around $9900, even after paying off the system!
If you would like a custom quote based on your energy use, click here for a quote.
Even if you do not have the resources to pay cash for a system, or you don’t have the home equity to borrow $22,500 for a full 5 kW system, you can still benefit from solar!
In fact, especially if you are serviced by the TVA, your actual returns are even better. TVA offers their $1000 rebate regardless of the size of the system. This means your real cost for the smaller system is considerably less.
Let’s assume a home equity loan at 5% for a small solar panel rooftop system of $9000. You get an immediate rebate of $1000, lowering your cost to $8000 for a 2kW system. With first year loan payments of $760, energy savings of $300, and a generation bonus of $50, your net loan payments are around $410. After your Federal tax credit, you end up with around $1990 in your pocket the first year!
By year 15, you should see around $500 per year in savings each year. At year 25, you should profit by around $4000, all with no money down! Remember, you are also providing good local jobs and saving the environment.
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.
Mississippi, sadly, is one of the few states to have no RPS. What this means for the state is that there is no incentive for power companies to convert from dirty power to clean solar and other renewable.
Mississippi 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.
Mississippi has no “net metering” policy. Net metering basically sets out a statewide policy for monitoring and crediting the excess amount of power your solar system provides. Mississippi is one of only six states that have no net metering policy for the state.
Mississippi has no “interconnection” rules, governing how home systems hook up to the power grid. A lack of interconnection rules greatly increases the cost of plugging in and sending power back to utilities.
There are no state tax credits to encourage participation in Mississippi. 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.
Mississippi has no property tax exemption for the value of home solar systems. You are taxed for the increased property value of adding solar to your home. Not exempting solar discourages participation.
Mississippi has no sales tax exemption for solar. Many states exempt home solar from state sales tax, further reducing the actual cost of the system. Mississippi charges state tax on solar. This is a very easy, inexpensive change that would greatly increase participation.
Mississippi has some of the higher energy prices in the nation. Why is this good news? Even though there are few state incentives to convert to solar, 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.
There are active discussions taking place to set net metering standards in the state. This standard will greatly increase participation in solar for consumers.
The TVA has taken the lead in offering purchase rebates and performance payments to clients using solar. Once a utility takes these steps, it is generally easier to pressure other utilities to do the same.
Mississippi has certainly not been at the forefront of developing legislation to drive renewable energy, but they have recently taken concrete steps to move towards 21st century energy policy.
Even though state energy policy is lacking, the amount of sunlight in the state still makes solar panels a viable renewable energy alternative.