Massachusetts offers a winning combination for solar power: there are tax benefits and rebates to make photovoltaic systems more affordable, and the state has an active market for Solar Renewable Energy Credits (SRECs). Not only can home and business owners who invest in solar power reduce their electricity bills, they can also qualify for a significant amount of income from SREC sales.
The Massachusetts state government has created favorable conditions for solar power through the state’s renewable energy portfolio standards. Local utility companies are required to generate 25% of their energy from renewable sources by the year 2030. Additionally, the state has set a goal of developing 1,600 megawatts (MW) of solar power capacity by 2020.
Expensive electricity is one of the factors that makes Massachusetts a great market for solar power. The average electricity price in Massachusetts is 20 cents per kilowatt-hour (kWh), far exceeding the national average of 13 cents per kWh. All three of the major utilities (Western Massachusetts Electric Co., National Grid, and NSTAR) have rates significantly above the national average.
Solar power provides a great option to save money and become less dependent on the local power grid. For every megawatt-hour (MWh) of electricity generated, you can save $200 on your electricity bill and earn one SREC, which can be sold for over $300. In other words, the total value of generating 1 MWh with a solar photovoltaic system can exceed $500! With this combination of savings and earnings, it is possible to see a payback period of five years or less, which is great considering that solar arrays normally come with a 25-year warranty.
Although Massachusetts lacks a statewide rebate program, municipal utilities will sometimes offer rebates for home and business owners. These programs are generally capped and designed for small-scale residential installations. However, solar power is a great investment even without them thanks to the other incentives available.
Solar PV systems are fully exempt from taxes in Massachusetts. This means the owner of the solar panel system is not charged a sales tax when the system is purchased. Additionally, a solar system will raise the property value, but the owner does not have to pay additional property taxes after the system is installed.
Solar photovoltaic systems in Massachusetts earn two tax credits for their owners. One is deducted from state taxes, the other from the federal tax burden:
There is a slight difference in how tax credits and tax exemptions work, but both contribute to making solar power more affordable!
The Solar Renewable Energy Credit (SREC) program is perhaps the best incentive for solar power in Massachusetts. Basically, utilities that cannot meet their renewable energy goals will purchase SRECs to avoid state fines. SRECs can be sold to your utility at prices that are quite high, sometimes above $300 each! Any home or business owner with a photovoltaic array is granted a SREC for each 1,000 kWh generated, even if they are used for self-consumption!
It is important to note that energy savings are permanent, but SREC income can be variable. The value of SRECs are expected to decrease over time, making today the best day to go solar. Even though the value of SRECs are expected to decrease over time, they can still provide a significant source of income over the life of your system.
Solar power systems in Massachusetts generate a high cash flow over their first few years of operation thanks to the combination of energy savings and SREC sales. Therefore, if you purchase your photovoltaic array with a loan, your energy savings and SREC income will often cover your loan payment.
Keep in mind that this is only possible if the loan offers attractive terms, such as a low interest rate and a long repayment period. For example, a home equity line of credit can be used effectively to finance a solar array, but the same cannot be said of credit card debt.
If you are looking for a zero-risk alternative for going solar, you can consider a Power Purchase Agreement (PPA). Here is how a PPA works:
In Massachusetts, all incentives go to the system owner. Therefore, if you choose to go solar with a PPA, you will not be eligible to receive the above incentives. However, the company that owns the system will claim all incentives and can pass the savings on to you by offering you a lower fixed electricity rate. If you are looking for a zero-risk solar power option that doesn’t require an upfront investment, a PPA is recommendable.