Save with solar in Connecticut

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Introduction to the State: Connecticut

Connecticut is currently one of the best states to invest in solar power, and there are two strong reasons for it: the state government has introduced rebates and tax breaks to make solar power more affordable, and the high electricity rates in Connecticut increase the savings from installing a solar panel system.

The renewable energy policy in Connecticut is among the most aggressive in the nation, with a statewide goal of generating 27% of all energy from renewable sources by the year 2020. Home and business owners with solar photovoltaic arrays can export any surplus generation to the power grid, getting credit for it at the full retail price.

Connecticut has the 2nd Highest Energy Prices in the Nation

With state electricity rates averaging 21 cents per kilowatt-hour (kWh), Connecticut has some of the highest energy costs in the USA, surpassed only by Hawaii. In addition, inflation is expected to increase electricity prices by more than 3% each year. For anyone who depends completely on the power grid for electricity, this is bad news; however, home and business owners who install solar panels will see increased savings year after year. Self-generation with solar panels provides an attractive alternative to the two monopolistic utilities, Eversource and the United Illuminating Company, for both home and business owners.

To get an idea of how solar power can save you money in Connecticut, let’s consider the average homeowner in the “Constitution State.” The average electricity rate in Connecticut is 21 cents per kWh compared to the national average of 13 cents per kWh. Therefore, for every 1,000 kWh of clean energy a solar system produces, Connecticut homeowners save $2,100 while the average US consumer only saves around $1,300. Connecticut homeowners would be saving over 60% more for a given solar array size!

Keep in mind that energy savings are not the only financial benefit of solar power. A solar panel system increases the value of your property, and you may be eligible for a sizeable tax credit from the federal government, equivalent to 30% of your investment.

Solar Power Incentives in Connecticut

Rebates
There are many incentives for solar power in Connecticut, but the most remarkable is the rebate program for photovoltaic systems under 20 kilowatts (kW) of capacity:

  • Any kilowatt of installed capacity below the property’s consumption and below 10 kW gets a cash rebate of $540.
  • Any kilowatt of installed capacity below the property’s consumption and greater than 10 kW gets a rebate of $400 up to a system size of 20 kW.

For example, a 15 kW solar power system would get a rebate of $5,400 for the first 10 kW, and an additional $2,000 for the remaining 5 kW, for a total of $7,400!

Tax Benefits
In Connecticut, solar photovoltaic systems are exempt from both the sales tax and the property tax. The sales tax exemption represents an immediate upfront savings of 6.35% of the system’s cost, and the property tax exemption means your property taxes stay the same even after a solar array is installed. A solar panel system increases the value of your property without increasing your property taxes, saving property owners several thousand dollars in the long run.

Also, keep in mind that there is a federal tax credit for 30% of your total investment in solar power. This deduction can be claimed on your first tax declaration after the solar panels are installed.

Special Programs
The regulatory framework in Connecticut allows you to accumulate a zero-emission renewable energy credit (ZREC) for each megawatt-hour of clean energy generated, and these can be sold to utility companies trying to meet the clean energy goals set forth by the state government.

The only disadvantage of signing up for the ZREC program is that you must give up on the upfront rebate described above. For solar arrays under 20 kW, the rebate will always be a better option. However, for solar projects that exceed the 20 kW rebate cap, ZREC sales may be a more attractive option. Make sure to consult a local solar professional if you system exceeds 20 kW.

Purchasing a Solar Power System with a Loan

Paying cash for a solar system will always lead to the most lifetime savings. However, most homeowners cannot afford to pay the full cost of their solar panels upfront. The best option for homeowners that want to own their solar system, but cannot buy the system upfront is a low-interest loan. Keep in mind that you will have access to multiple cash flows to cover the loan payments:

  1. Direct energy savings from your solar array.
  2. A sizable cash rebate or ZREC sales, whichever is better in your case.
  3. A 30% federal tax credit.

When you add these together, it is possible for a solar power system to fully pay the loan used to purchase it, without you ever having to spend a single dollar from your pocket. In these cases, the payback period is zero – the project yields positive cash flow from the start!

Power Purchase Agreements (PPA)

An alternative to buying a solar photovoltaic system outright is leasing the solar panels by signing up for a Power Purchase Agreement (PPA). This approach allows home and business owners to get the benefits of solar power without having to own the system directly. Here’s how it works:

  • A company installs, owns and services the photovoltaic system in your property.
  • You agree to purchase all energy generated by the array at a locked in rate below the retail price of electricity instead of buying electricity from your utility.
  • You can save money immediately without putting having to put any money into the system.

The main drawback of a PPA is that the company offering you the service keeps the rebates and tax exemptions, as well as any income from ZREC sales, since these benefits are exclusively for the system owner. However, the company that owns the system can usually offer you a lower electricity rate because they can take advantage of these incentives. A PPA provides a zero-risk way to lower your electric bill with solar energy.