Connecticut Solar – Everything You Need to Know

#2 Options for Buying Solar Panels in Connecticut

Cash Upfront

Even though the costs of solar panels can be quite high, many homeowners choose to save up and pay “all cash” for their solar energy systems. There are many reasons why this option may be chosen, but it simply means exactly what it sounds like: homeowners approach a solar installer with the cash in hand to purchase a solar energy system, and pay the installation fee.

In the state of Connecticut, there are several solar energy companies that homeowners can buy systems through. We’ll discuss how to choose the right company a little further down.​

The benefits of paying in cash for a solar energy system include:

• You own your energy. You aren’t paying for the energy that the sun provides; it’s “free” in the sense that no one demands you pay for the use of the energy captured by the solar panels on your property.
• There are some tax incentives for owning your solar panels outright. We mentioned earlier that the state of Connecticut is running out of money to pay out the tax incentives for solar installation. The federal government tax credit program for solar installation decreases in 2019. So if you’re interested in buying your solar panels for the tax rebates, time is running out.
• The payback is immediate. Most of the time, average solar energy systems generate more than $2,000 in energy savings every year, and that number is based on current electricity rates. As electricity costs rise, your energy savings will be even higher, meaning that the return on your investment will be felt immediately, and will only increase in value.
• Your property value will increase. More than 10 years ago, the Appraisal Journal estimated that installing solar increases your home’s value by $20 for every single dollar in annual energy cost saved. This means that if your solar energy system saves you $2,000 dollars per year in energy costs as estimated above, your home’s value would increase by as much as $40,000 – and that was a decade ago. The value of solar energy has only increased as utility prices have increased, meaning that your home’s value could increase by many tens of thousands of dollars with a solar installation.

All that sounds great, but the real question is always: How much cash will you need? Solar energy system costs vary depending on the size of the system if the company has to design solutions for less-than-ideal set ups or a number of other factors. The NREL estimates that the national average for buying a solar energy system outright is around $40,000.

However, that is the upfront cost and doesn’t take into consideration the tax credits and incentives. Combined with the federal tax credits available right now, that cost could be lowered to around $28,000 after the rebate.

This cost is not subjected to sales tax, and there also net metering and performance-based rebates in place in Connecticut to help you recoup the cost very quickly. The cons for buying your solar energy system outright are few:

The high upfront cost of the system and the fact that homeowners are responsible for the maintenance and replacement of damaged parts are the two most commonly cited concerns about buying a solar energy system.

After 25 years though (the estimated lifespan of solar installations), you can expect to save around $42,187, with a payback time of just 7 years!

Leases

If you’ve ever bought a car and made payments to the dealership until that car was paid off, then you understand how leasing works. This arrangement is basically a “rent to own” situation, in which you, the homeowner, make payments to the solar panel leaseholder until you have paid the entire cost of the panels and any other equipment that you’ve purchased.

Once the lease has expired, you have the option to make a final payment, usually a few hundred dollars or less, to purchase the solar energy system outright. In the state of Connecticut, there are just a few requirements that a homeowner must meet in order to be approved for a solar lease from most companies:​

• You must own a home in Connecticut.
• In most cases, you must be a customer of the company offering the lease. For example, UI Utilities, or CL&P offer solar leases to their qualified customers.
• There are income requirements that must be met. In most cases, your entire household income may not be more than 200% of your area’s median income. This chart gives a great idea of the eligibility requirements for solar leases in Connecticut.
• Your credit score must be considered “good”. For most companies, this means that your score must be at least 650.
• There are certain requirements that your home will have to meet as well. Your roof must be in good condition, be relatively new (under 10 years old), and not be shaded heavily. Finding out if your home is right for a solar installation is very important to ensure that your money is well spent.

Leasing solar panels is one of the most common ways that Connecticut citizens are able to pay for solar upgrades. This works for most homeowners for many reasons. They aren’t required to have any money upfront. In most cases, even the installation is done for free. This means that you can begin enjoying the benefits of solar energy right away.​

Additionally, Connecticut’s solar energy lease model is a flat rate model. This means that you won’t see an increase in the lease payment during your lease period. With the ability to budget for the cost of the lease, and the ability to install the panels without any money up front, it just makes sense for most homeowners to use a lease.

There are some pros and cons of leasing that you should be aware of before you make the decision to lease your solar panels.

Pros:

• As a homeowner who leases their solar panels, you get “solar dividends”. These are credits that can be used to replacing parts of the system that break down over time, for the cost of removing the panels should you decide not to purchase them at the end of the lease, or to cover the final payment to purchase them at the end of the lease.
• Even with a solar lease payment, the savings on your energy bill should still mean that you’ll be paying less overall for your energy than you are right now. Most standard systems cost less than $100 per month for the lease payment for a 15-year contract.
• The National Renewable Energy Laboratory has predicted a 3% rise in electricity costs for the state of Connecticut over the next 15 years. If carbon taxes or other legislation go through during that time, the increase in utility prices could be even more. Your lease payment for solar panels will be far cheaper than an increase in your energy rates.

Cons:

• The bumper-to-bumper warranty does not last the entire 15 to 20 years. Most warranties only cover about 5 years. You’ll have to do the maintenance after this time, which usually involves getting up on the roof to wipe off the panels and brush away debris once every few months. The lack of warranty doesn’t mean that you’ll be stuck replacing a broken panel, however, as those are under guarantee for 25 years.
• You won’t get the tax incentives that homeowners who buy their solar panels outright will get. However, the state of Connecticut is quickly running out of money to fund these tax incentives, so the likelihood of receiving a significant incentive is less and less probable.
• Most solar energy leases are 15 to 20-year commitments. You do have the ability to purchase your solar energy system after 20 years for a low price, and you can transfer the lease to the buyer if you ever sell your house, but you do have to be prepared for a long-term payment.

More: Solar Leases

Power Purchase Agreements (PPAs)

A Power Purchase Agreement, or PPA, is an arrangement made with a specific solar installer. Rather than pay for the solar panels or the installation, you simply buy the energy produced by the panels from the company. In exchange, they can use your roof as a place to install their panels, and they’ll also accumulate some of the leftover energy to use or resell to other clients.

This sounds just like buying energy from the power company like you do now, but there are a few key differences.

The installer will be responsible for all maintenance and repair for the entire time that the panels are installed, and if you decide not to renew the contract when it expires, they will simply remove the panels from your property. In many cases, contracts can be transferred to new owners if you move, making it even easier for new owners because the installation and regular maintenance are already routine.

There are several pros and cons to using a PPA rather than a lease or other financing option.

Pros:

• You pay by the actual amount of energy you use, rather than a flat payment, such as with a lease. This is excellent for families who may need to keep their energy bill low during certain months – simply by using less electricity, you can keep your PPA bill lower.
• Most solar power companies offer multiple payment options. For example, SolarCity offers homeowners the chance to pre-pay for some of their electricity by paying a deposit; fully prepaying the account to avoid monthly bills, or getting started for nothing down.

Con:

• You won’t own your solar panels when the contract expires, such as with a solar energy loan, and the cost of buying the panels outright at the end of the contract will be much higher than the cost of buying your panels after a solar lease contract. You must also wait at least five years before you can purchase the panels in a PPA contract.

PPAs are great options for landlords who want to attract conscientious renter but don’t want to have to worry about maintaining expensive panels or long-term contracts.

They are also popular for commercial solar customers, again because the lack of maintenance and the ease in which panels can be moved or removed altogether make this arrangement perfect for a company that may relocate in the future. Qualifying for a PPA depends on the individual company that you choose.

Like a lease, your home will have to be a good candidate for solar power, with not much shade over the roof and a large enough south-facing area for the panels to be installed. Some companies offer solutions to get around homes that have certain challenges, though, so you might want to look into the options even if you think your home won’t qualify.

More: Power Purchase Agreements

Loans

The final option that many people turn to when considering going solar is getting a loan. This is different from leasing in that at the end of your loan, you own the solar energy system outright, while at the end of a lease, you’ll still have one large “purchase” payment to make if you choose to buy your system.

There are several types of loans that homeowners can consider for solar installations, including home refinancing, home equity loans, and construction loans. But there are specific solar loans offered in the state of Connecticut for those wanting to install solar panels.​

Solar loans tend to be long-term loans, with 10- to 20-year term lengths. The rates of the loan depend on the company, but most of the time, the interest is a low fixed APR that ranges between three and five percent.

Depending upon how much you borrow and how long your loan term is, your payment could be as little as $50 per month. This is a great way for those on a tight budget or a fixed income to go solar without worrying about affording a major purchase.

The benefits of using a loan rather than a lease are the same as buying your system outright. With a loan, it’s your name listed as the owner of the panels, so you can still apply for the tax incentives and rebate programs to help offset future costs.

In fact, you could apply for the federal government’s 30% rebate program, pay that amount on your loan, and be years closer to being paid off for good. That could also help lower your monthly price, making it even easier to afford going solar.

Qualifying for a solar loan is similar to qualifying for a lease arrangement, or for any other kind of loan. Most lenders will look at your credit history, your income level, and the amount of debt you currently have, to assess your application. As with buying your panels outright, you’ll also be responsible for the maintenance and repairs on your solar panels when you use a solar loan in Connecticut.

Taking out a 15 year with 5% interest to pay for the same installation as the cash purchase above drops your savings down to a still incredible $34,848, with a payback time of just 11 years. You’d be hard pressed to find a better financial estimate from solar anywhere in the US.

And as with all solar installations, you’ll need to ensure that your home has a good set up for the solar panels, and that you are prepared in the event that you ever move. One of the downsides to using a loan to finance solar panels is that a loan is much harder to transfer to a new owner than a lease or PPA situation.

This could lead to a situation in which you are stuck paying a loan on solar panels that are installed at a house you don’t even live in anymore. If you decide that you want to pack up and move your panels with you, you’ll have to pay professionals to remove the panels for you, and to re-install them in your new location.

#3 Connecticut Solar Policy Information

Net Metering

The state does offer certain performance payments, or performance-based rebates, for homeowners who produce electricity in excess of what they use or need. There are two ways that these performance-based payments work. The first is called ZRECs, or zero-emission renewable energy credits.

These are paid to you by the power company, and can be applied to your account to keep your power bill low. This means that what electricity you do use from the power company during the night or during inclement weather could be very cheap or totally free, depending on how much extra solar energy your panels have produced.

The second way is through good old-fashioned cash. Sometimes, power companies will just send you a check for the solar energy they have purchased from your panels. However, most Connecticut utility companies use ZRECs. This entire arrangement is called net metering, and not all solar-friendly states have this type of program.

It means that your solar energy system is connected to the same grid that utility companies use, making it easy for you to sell your excess energy.

More: Net Metering

Homeowners Associations

Connecticut does not have any laws to protect homeowners who want to install solar energy panels, but are not allowed to by their homeowners’ association. Solar access laws and solar easement laws are making strides in some states, giving homeowners the ability to side-step HOAs who don’t wish to allow solar installation within the community; however, Connecticut is so far not one of these states.

You may be able to ask your installer to act as a mediator, and negotiate with the HOA on your behalf. Many companies have experience with this issue, and can explain more fully how they will go about satisfying any aesthetic requirements or concerns while designing an efficient system for your property.

In the meantime, as more states adopt solar energy laws, HOA power over solar installation should become a thing of the past very soon.

#4 Financial Incentives, Rebates, and Tax Credits

Federal Tax Credit

The Residential Renewable Energy Tax Credit offers a 30% rebate of the total cost of the panels, the cost of the installation, and the cost of any required equipment to assemble or install the system. This installation must be done at your primary home – meaning that you cannot claim the ITC at a rental home or a vacation home.

However, this rebate can be claimed on both existing homes and new construction. After 2019, federal tax credits for solar installations will begin to decrease until the total expiration of the program in 2022. After 2019, the rebate will be 26% until 2020. During the final year of the program, the rebate will be 22%.

More: Solar Federal Tax Credit

Connecticut State Solar Tax Incentives

Connecticut is at the top of the nation for solar rebates, with up to nearly $10,000 available for solar rebates. The amount of rebate you can apply for depends on your energy use. If you use more than 20kW, your rebate will be around $9,400. If you use less energy, your rebate could still be quite a lot – from nearly $600 all the way up to $1,500. Rebates work just like getting a rebate on an appliance purchase.

You buy the system outright for the upfront cost and then apply for the rebate. After you qualify for the rebate, you’ll receive a reimbursement check for the amount of the rebate. With money running out in the Connecticut rebate program, it’s important to not delay on a solar energy system if you are counting on this program to help you afford the cost.

It’s unclear whether Connecticut has plans to fund a new rebate program, or to replenish the existing program anytime soon.

Property Tax Exemption

You will see an exemption on your property taxes for installing solar energy systems, which is good news. Because solar energy systems can increase the value of your home exponentially, there was a time when you’d be stuck paying higher taxes based on this increased value.

But now, Connecticut offers homeowners an exemption to offset that rise in taxes. Your property taxes will stay the same as they were before the installation.

Sales Tax Exemption

Unfortunately, there aren’t many tax credits available within the state of Connecticut for solar installations. Installations are exempt from state sales tax, which can save you quite a bit of money; however, your state income taxes won’t see any changes due to the installation of solar energy systems.

General Increase in Home Value

In 2015, the U.S. Department of Energy released a report based on more than 22,000 homes across the nation. This report showed that installing solar panels on the roof will make a house sell for at least $15,000 more than it would have without them.

This number indicates that the data from the Appraisal Journal in 1999 is still very accurate – for every $1 you save in your annual energy bills, your home’s value goes up by around $20. In an earlier example, we showed that the average utility savings are at least $2,000 per year for most standard solar installations, meaning that your home’s value shot up by about $40,000.

And if the standard solar installation is about $40,000, as estimated by the NREL, this means that if you are trying to sell your home, the increased value in the price pays for the solar energy installation 100%.

Because Connecticut has the net metering program that allows homeowners to actually make money on their excess energy, and because the property tax concerns are addressed by an exemption from the state, Connecticut is one of the prime states for selling properties with existing solar installations.

The only real concern left for new homeowners is often the maintenance, which could potentially be hired out to the installing company, but really only requires four to six instances of cleaning the panels every year.

With a solar lease or PPA arrangement, selling your home may be a little trickier. While companies have made these arrangements easy to transfer to new buyers, buyers may be wary of entering into a new contract right away, especially one that is long-term like solar leases and PPAs.

However, the fact that they can also transfer the contract if they ever move is a great way to convince a buyer who may be on the fence. In order to help realtors describe and sell homes with green upgrades like solar installations, the National Associations of REALTORS published the Green MLS Implementation Guide.

This guide can help you market your green home more efficiently, so that you attract the kind of buyers who would be most interested in a home with solar energy installations.

Finally, there is always the question of what you will do if you ever move. While solar panels can increase the value of your home for a potential buyer, you may be thinking that after paying so much for the panels, you’ll want to take them with you to your new home.

That can be done, but it’s costly. Connecticut law states that only licensed professionals can uninstall or install solar panels, so you’ll have to pay a company to take them down, and put them up again in your new location. With leasing or PPA options, uninstallation is usually free.

More: Buyers Will Pay More for Solar Homes
If you’d like to dig even more on local incentives and rebates, check out the DSIRE database.

How to Find a Quality Solar Installer

Once you’re ready to dive into installing solar panels on your home, you’ve got to choose the right installer. Solar energy is a booming business in Connecticut, with many more options than most other states for installers.

It’s always a good idea to follow a few basic tips when shopping for the best solar installer in your area:

• Always look at reviews. If you don’t have any family or friends who have had solar panels installed, get online and look at consumer reviews on Angie’s List, Yelp, or other services. Look for reviewers that are obviously actual customers, and pay attention to the things they didn’t like. Bad reviews happen to everyone, but a pattern of reviews all saying the same negative things means that there is definitely something wrong. Also look for a response from the company itself; if they have a record of consistently and quickly fixing any issues and addressing reviews in a professional manner, then the company may be a great choice.
• Don’t get only one quote. Always be sure you call around and get multiple quotes for the job. Most solar installers have websites that include online quote requests, so you could easily request several quotes over your lunch hour one day. You’ll need to know your average energy usage and your local energy rates for most quotes – both of these numbers can be found on your latest utility bill. When you get a quote, you aren’t just looking at the price. You’re also finding out how promptly a company responds to contact, and how professional their contact is. A company that contacts you back in a reasonable time frame and with a well-written, well-presented quote is probably going to leave your home in better condition, and perform a better installation, than a company that replies with a few brief lines in an email several weeks after the first contact.
• Ask about warranties. The type of financing you use will dictate how much maintenance you have to do, but you should always be aware of your warranty options. Solar panels are very expensive, and replacing one that breaks or gets damaged could be a hard financial burden to bear if you don’t have a warranty in place.
• Be sure that the company you choose is certified to work in the state of Connecticut. The state requires that all installation be done by a licensed professional. If your solar panels are not installed by a licensed professional, you could become ineligible for the financial incentives offered by the state.
• Choose an installer with multiple financing options. Whether you want to lease, PPA, or buy your panels with a loan, it’s a good idea to choose an installer with experience in several types of financing options. This indicates that they are more likely to be flexible, and can help you decide which financing method is best for you.

What to Do Next?

If you own your system outright, your payback period begins almost immediately. On average, you can expect to see paybacks from net metering, lowered utility bills, and other incentives, in as little as 6.6 years. A solar energy project should be seen as an investment in your financial future.

However, unlike many other investments, the return on investment for solar energy is mind-bogglingly large. Let’s compare solar energy metrics to those of investments in the S&P 500 stock market. In June 2014, the Wall Street Journal published a study that looked at the average return on investment over the past 85 years for various investment types.

The average return on investment for the S&P 500 is around 9.4%. Now, a similarly sized investment in a solar energy system, with a 6.6-year payback period, would see an average annual rate of return at around 14.89%. That’s a huge leap from a yearly return on investment in the stock market.

This means that by the time your solar lease or loan was up, or in about 25 years when your purchased panels are no longer guaranteed, you will have seen a total return on investment of 680%. There is almost no other investment on the planet that can promise that kind of return.

These numbers are based on the total cost of purchasing a solar energy system after receiving the rebates and incentives available.

Besides the upfront costs of owning solar panels, the risks of investing in solar energy are very little. Solar panels begin working right away. Your energy bills will be lowered right away. Thanks to Connecticut’s net metering system, you could easily start seeing a very low energy bill very quickly.

Connecticut’s weather and laws make it one of the best states for solar energy production, and with such high return rates on your investment, there’s almost nothing that can present a definitive reason for not choosing to install solar energy panels on your Connecticut home.