Idaho Solar – Everything You Need to Know

id-solar

Information about Solar Panels in Idaho

Idaho is famous for its beautiful mountains and clean air. You might not know that it’s also a haven for clean, renewable energy (80% of its electricity is from hydro)! With all this in mind, producing your own clean energy from ID Solar just seems to fit!

Even with the state’s low electricity rates and shaky net metering policies, you can still save thousands going solar by wisely choosing your financing and taking advantage of the federal and state tax incentives.

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Below you’ll find all the information you need to help you go solar in Idaho. We’ve calculated savings estimates and pulled info together on the state’s solar policy and incentives. By the time you’re finished reading this, you’ll be ready to go solar in Idaho!

#1 Are Solar Panels Worth it in Idaho?

C
Overall Grade
14 years Avg. Payback Time (For Cash Purchase)
6.3 % Estimate IRR (Return on your investment on cash purchase over 25 years)
$13,938 Your Net Profit Over 25 Years (Cash Purchase)

* Note that these are estimated values for informational purposes only, and do not take into account the full complexity of all financial projections. They also only apply to cash purchases, which means your numbers will be different if you lease your system or pay for it with a loan (factoring in interest). Also note that we are not financial advisors, so this information should not be construed as financial advice.

Solar 'infrastructure' in Idaho is strong in some ways but non-existent in most. The state offers a great tax incentive for going solar, but has failed to pass basic policies (like RPSs and Net Metering) that encourage solar in the state. On top of that, Idaho’s cheap electricity means you save less going solar than in other states. All this means we give Idaho a rating of C for solar in the state.

#2 Options for Buying Solar Panels in Idaho

Idaho homeowners can either purchase their installations in cash or finance through a loan.

Cash Upfront

Want to save as much as possible? Go cash. You have to pay for the entire installation upfront, which is certainly nothing to take lightly, but you avoid all the interest rates, lease payments, and other fees that drag down your savings. You also get to take advantage of the great tax incentives!

Installing solar in Idaho costs about $3.71 per watt, so an average-sized 5kW installation will cost around $18,516 before incentives. After applying the federal tax credit and state tax deduction, this total drops to just $11,626 (more info on both of these incentives can be found below).

That’s quite a bit of money, but installing this 5kW installation can save you upwards of $13,938 over 25 years (the estimated life of most solar installations), with a payback time of 13 years. This means that, after year 13, you’ll be producing clean, absolutely no-cost electricity for the rest of your system’s life! This estimate takes into account both Idaho’s average utility rate increase of 3.5% as well as solar panel’s typical 0.8% decrease in energy production each year (due to panel degradation and wear and tear).

Bottom Line: Because of Idaho’s low electricity rates, it takes about 13 years to see a return on your investment, but after that, you are pumping out completely free, clean energy for the rest of your installation’s life!

Leases

Leases and power purchase agreements (collectively known as third-party ownership, or TPO), the financing mechanism that propelled residential solar forward to the big time in the late 2000s, have yet to really catch on in Idaho.

The main issue is that, along with a handful of other states, the legal status of TPO in Idaho is murky – no one quite knows whether they’re allowed or not. This means that the national solar installers that make their money from TPO (like SolarCity and Sunrun) are hesitant to enter the state.

In Idaho, solar leases are dead in the water. This really isn’t a bad thing, though. A solar TPO allows you to go solar for no money down and it led to residential solar’s explosion in popularity in the late 2000s and early 2010s.

Now that the solar industry has matured some, more organizations are offering solar loans. They offer the same benefit (no upfront costs), but typically with higher savings. Also, installation costs have dropped to the point where cash purchases are more feasible. With loans becoming more common, TPO’s main selling point (no upfront costs) just isn’t powerful or special enough to outweigh its drawbacks (no ownership, lower savings).

Bottom Line: If you want to finance your solar installation, you’re better off going with a solar loan anyway!

More: Solar Leases

Solar Loans in Idaho

Loans are another excellent way to invest in solar. You retain ownership (so you can take advantage of the great tax benefits), but avoid that huge upfront bill to install solar.

You can’t talk about loans without discussing interest; with solar, these interest payments affect your total savings. How much? Well, it depends on the length of the loan and the interest rate.

A fairly standard 15-year loan with 5% interest tacks on an additional $7,862 for the 5kW installation discussed above. This gives you a grand total installation cost of $19,488 after incentives. As mentioned, this higher cost drops your totals savings to $6,076 over 25 years, with a payback time of 21 years.

It’s much lower than savings from a cash purchase, but for little or no money down and increased home value (more on that later), it’s hard to argue financing with a loan is a bad decision.

If you’re interested in a loan, one fantastic option is offered by The Idaho Office of Energy Resources. This office offers low-interest loans for solar as well as other renewable projects like solar water heating, geothermal electric, and wind. For a single family home, it’s a 5-year loan with 4% interest. The max loan amount is $15,000. Applicants must pay a $100 fee for credit checks.

With this loan, you’re able to save much more money over the long run, as the interest is lower and the length of the loan is a full 10 years shorter than in the savings estimate above. If you use this loan, you’d spend just $1,944 on interest, bumping up your total cost after incentives to $13,570. Obviously, your monthly payments will be much higher than the 15-year loan, but you’ll be spending much less overall.

Bottom Line: If you decide to go with a loan to finance your solar project, definitely consider this great option.

More: Solar Loans

#3 Idaho Solar Policy Information

We give Idaho a solid F for solar policy. Read on to learn what’s missing.

idaho-flag

Renewable Portfolio Standard

Renewable portfolio standards might sound like a strange and foreign concept to you, but it’s actually very simple. RPSs are just mandates passed by state lawmakers that a certain percentage of electricity sold in the state must come from renewable sources by a certain date.

As of 2017, 29 states have passed RPS goals. Hawaii’s 100% renewable by 2045 is the most aggressive. California and New York are close behind (considering their much bigger sizes than Hawaii), each pledging 50% renewable by 2030.

RPS is one of the single most important pieces of legislation a state can pass to encourage the growth of renewables. Without them, utilities have little reason to adopt renewable energy.

Unfortunately, Idaho is one of only a handful of states (mostly centered around the south) that have yet to adopt any sort of RPS goals. As we mentioned before (and you can read more below), 80% of Idaho’s electricity is already renewably-sourced, but that doesn’t mean it can push solar forward a little bit.

The state should consider adopting an RPS, at least for solar. It doesn’t have to be much – South Carolina has a voluntary 2% by 2021 goal!

More: Renewable Portfolio Standard (RPS)

Electricity Prices

Idaho has cheap electricity. The 4th cheapest in the country, actually. Eighty percent of the state’s electricity already comes from hydroelectric (a renewable resource), so once the hydro plants are built, they don’t need to worry about buying fuel, leading to seriously cheap electricity. (As an aside, coal accounts for just 0.6% of Idaho’s total electricity generation, compared to the US’ national average of 33% – good job, Idaho!)

Idaho’s average electricity rate is $0.096 per kWh. Compare this to the national average of $0.128/kWh, the northeast’s $0.192/kWh, and California’s $0.186/kWh and you’ll realize just how good Idaho has it!

These cheap prices, though, are a double-edged sword. Yes, cheap electricity is great, but it also means it’s harder to save money by going solar. Think about it: the higher the utility’s electricity prices, the more you can save by installing solar and producing your own free electricity.

Be sure to take advantage of all the incentives you can to boost your total savings as much as possible!

Net Metering

Idaho has no statewide net metering policy. Usually this is bad news for solar homeowners, since utilities have no real reason to offer net metering without the state forcing them to.

Without statewide net metering policies, utilities either simply don’t offer net metering incentives or offer incentives at their avoided cost, which is basically how much it would cost them to produce that electricity (and usually just a fraction of the retail rate, around $0.03 to $0.04 per kWh).

Surprisingly, even without mandatory net metering and no RPS mandates, Idaho’s three privately-owned utilities (Idaho Power, Rocky Mountain Power, and Avista Utilities) still offer excellent net metering incentives!

Each of the utilities will credit your account for all excess electricity you put into the grid at the full retail rate. This means that if you pay the utility $0.09 per kWh for electricity, they’ll pay you the same amount for any excess electricity you produce but don’t use that ends up in the grid.

Avista specifically states that any credits left in your account after 12 months must be given up without any compensation; it’s still a great deal, especially considering that Avista is voluntarily offering this program!

More: Net Metering

Interconnection Process

As you can imagine, working with utilities can sometimes be a pain. Processes are slow and complicated, let alone potentially expensive! The interconnection process, or simply gaining utility approval to connect your solar installation to the utility grid, is one of these things that can quickly become mired in bureaucratic stagnation.

To help curb this issue, many states standardize this interconnection process across all utilities in the state. Regulations typically state that residential solar installations need simple, quick, and easy application processes and that utilities must respond to applications fairly quickly. Many standards also note that utilities must avoid charging homeowners fees for studies or application submittals.

Unfortunately, Idaho has yet to adopt any standardized interconnection process, so each utility will have different rules and experiences. Be sure to call up your utility or look online to learn about their interconnection process before moving forward. Your installer will also have a firm grasp on the process and will likely take care of the entire process for you!

Homeowners Associations

There are two parts to any strong policy protecting access to solar: protection of sunlight access as protection of the right to simply install solar.

Idaho’s got the first part covered with its law (Idaho Code 55-615) allowing solar homeowners to create solar easements to protect the sunlight hitting their solar panels. Homeowners can enter into a voluntary agreement with their southerly neighbor that states that no trees, buildings, or other developments will be built that blocks sunlight to the solar panels.

When the home sells, the easement is sold along with the house, further protecting the solar panels’ precious sunlight.

Unfortunately, Idaho isn’t quite on the ball with the 2nd part. Many states pass laws that ban HOAs, local governments, or any other organization from blocking solar installations. Idaho has yet to pass any such law, leaving homeowners who want to go solar to the whims of any cantankerous HOA with a vendetta against solar.

If you’re worried about your HOA, the best thing to do is submit plans early and stay friendly, responsive, and collaborative. Until Idaho passes this sort of law, this is the best step forward!

#4 Financial Incentives, Rebates, and Tax Credits

Idaho homeowners are eligible for two excellent solar incentives: the federal tax credit and the state tax deduction.

idaho-capitol

Federal Tax Credit

Any homeowner who purchases and installs solar is eligible for the federal tax credit. Emphasis here is on ‘purchases’, as the tax credit goes to the owner of the installation. If you finance in cash or with a loan, you’re eligible for this awesome incentive. If you go solar with a lease or PPA, the credit goes to your installer.

As a tax credit (not a deduction), it’s equal to a dollar-for-dollar discount on your total installation cost. So if you spent $21,000 on your solar installation, you’d reduce your total taxes by $6,300 come next April.

This awesome tax credit was originally set to expire in 2016, but the feds extended it until 2019, at which point it begins to drop incrementally until it’s permanently retired in 2022.

More: Solar Federal Tax Credit

Idaho Tax Deduction

Homeowners who install solar in Idaho are also eligible for the Residential Alternative Energy Tax Deduction (Idaho Code 63-3022C). This deduction allows you to write off 40% of the total cost of the installation in the first year, and 20% of the cost each year for the next three years, with a max deduction of $5,000 each year and $20,000 total.

Unlike the federal tax credit, this incentive is a deduction and therefore a little bit trickier to calculate. Tax deductions lower your taxable income, so how much you save depends on your tax bracket. Let’s run through a quick example to see how this works:

Your solar installation cost you $18,516 before incentives. Idaho has 8 tax brackets, but let’s focus on the highest tax rate, which is 7.4% (for residents who make over $24,737 a year). Here’s a quick breakdown of the yearly incentives:

  • Year 1: 40% of $18,516 is $7,426. Multiply $7,426 by 7.4%. Your total savings are $548.
  • Year 2: 20% of $18,516 is $3,703. Multiply $3,703 by 7.4%. Your total savings are $274.
  • Year 3: 20% of $18,516 is $3,703. Multiply $3,703 by 7.4%. Your total savings are $274.
  • Year 4: 20% of $18,516 is $3,703. Multiply $3,703 by 7.4%. Your total savings are $274.

So in all, this tax deduction will drop your total installation price by $1,370. Not too bad!

Utility Based Incentives

No Idaho utilities currently offer incentives for going solar.

Property Tax Exemption

Property and sales tax exemptions aren’t huge incentives, but are really a symbol that the state is doing everything in its power to make going solar a great deal. You can consider them the icing on the cake.

Idaho currently has no property tax exemptions for the value a solar installation adds to a property. With a property tax of 1.574% for urban areas, this could mean savings around $300 the first year for a 5kW installation! Sorry, Idahoans.

Sales Tax Exemption

We often don’t think about sales tax when we think about buying something, but for a huge purchase like solar it really adds up! Many states exempt both solar equipment and the installation from state sales tax.

Again, Idaho has yet to take this step. At the state sales tax rate of 6%, this could mean an additional $1,114 in savings for a 5kW system. Come on, Idaho!

General Increase in Home Value

Installing solar means adding serious value to your home, as long as you own the system. Cash or loan – it doesn’t matter. How much value does solar add? The Lawrence Berkeley National Lab studied home values across 6 different states in 2016 and found that home buyers are willing to spend about $4/watt more for solar homes. This means an average-sized 5kW installation can bring an additional $20k in resale value!

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.

What to Do Next?idaho-springs

Going solar in Idaho means slimmer savings than in other states with tons of financial incentives or high electricity prices, but don’t write it off! You can still save quite a bit of money by taking advantage of the tax credits and financing smartly. Talk to a few local installers to get some personal estimates and see what financing is available in your area.

Image Credits under CC License via Flickr - 1 & Pixabay - 2, 3, 4

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