Louisiana Solar – Everything You Need to Know
Information about Solar Panels in Louisiana
To anyone seriously considering Louisiana solar, we're going to come right out and say that it is a challenging landscape to make a good return on your investment here. Policy in this state has been very generous in the past, but due to retroactive caps placed on their best incentive, many people are finding it difficult to make a choice to go solar.
In Louisiana, your desire for solar power must be strongly motivated by helping to save the environment and provide renewable energy for yourself to move away from using fossil fuels.
#1 Overall Solar Grade
* 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.
#2 Options for Buying Solar Panels in Louisiana
We are going to explore the three most common ways that you can get solar on your rooftop, showing you which one (if any) provides a safe return, and how incentives and financials impact each option.
Unfortunately, if you are seriously interested in purchasing a new solar system in Louisiana, you should know that it will be a bit of an uphill struggle to recoup the investment you will be making.
Due to the inhospitable climate for solar in this state, there are not many incentives to speak of. Although it is possible to make money, many will likely consider it too little, too late.
Although cash might not always be the best option from a net present value perspective, it is always a solid choice if you have the cash. It allows you to have complete ownership of your system and you can immediately take advantage of any tax breaks and rebates. Also, once you pay back your system price on paper, everything else is pure profit!
Using cash, we’ll run through how much your system would likely cost from start to finish:
To install solar in Louisiana, you will need about $18,383 in cash to pay for your new system outright. From there, the 30% federal tax credit will drop that total cost after the first year to only $12,868.
To determine how much money you’ll save over the 25-year lifecycle of your solar system, we’ll take that cost and then account for Louisiana’s average yearly electricity price increase and the solar panels’ average annual 0.08% drop in production. These affect how much power it will likely produce each year and therefore how much you will save on your energy bill.
Considering all of those variables, that $12,868 system will take about 19 years to pay for through savings on your energy bill, and will lead to about $4,586 in profit over 25 years.
Obviously, several thousands of dollars is never a bad thing to have in your pocket. From an investment perspective, however, this is only about a 2.4% return on your initial cash outlay. There is money to be made, but there are many other investments that will yield much higher returns than Louisiana solar.
In most cases, leasing solar panels is a decent option for someone that has no cash to spend and maybe doesn’t have any equity in their home to take out a loan, either. Leasing companies will install the system on your rooftop and maintain it for free. In return, you will pay a monthly leasing fee and a reduced electricity bill.
This usually provides modest savings each year, but the return is immediate and the system itself should be hassle free. The problem with Louisiana solar is that leasing companies chase the incentives provided by the federal and state governments. Their goal is to get the equipment paid off quickly so they can start making money.
Typically, they also increase the leasing bill each year by some percentage. With electricity costs so low and the lack of incentives so high in Louisiana, it will be difficult for any company to make money in the state. This will, therefore, make any leasing deals less attractive for residents.
More: Solar Leases
Taking out a loan to purchase your solar system is typically a smart move, serving as a sound financial investment to make money for you in the long run. You don’t have to provide the cash up front, but you still own the system and reap the tax credits. In Louisiana, however, the incentives available just don’t help enough to offset costs in a way that will lead to profit.
For loans, the initial cost of the system will be the same, but this time you are borrowing the money to cover the costs. In many states, the saving you receive on your electricity bill outpace the interest payments you make.
This is not the case in Louisiana, thanks to their insanely low electricity prices. In fact, once you add in the interest costs of $8,066 over the course of a standard loan (15 years, 5% interest), you’ll never actually break even on your solar system. Obviously, if you can find a loan with a shorter length or lower interest rate, you might be able to save a little. But with estimated savings so low even with a cash purchase, you’ll have a hard time finding loans that are worthwhile.
More: Solar Loans
#3 Louisiana Solar Policy Information
The way a state handles its solar policy tells a lot about how serious it is about getting solar going. In the case of Louisiana solar, it appears that lawmakers aren’t even sure what solar is, much less what they should do with it.
The fact that they completely lack some standard policies, as well as suffering from lack of cohesion or competitiveness in the ones that they do offer, makes it pretty clear that generating solar power in the state of Louisiana is not a high priority.
Renewable Portfolio Standard
Many states create a renewable portfolio standard (RPS) that puts into law the expectation they have for solar adoption. Typically, these policies will define what percentage of the power generated within the state should come from wind, hydroelectric, solar, or other renewable sources and what year they want the goal to be reached.
For example, the state of Rhode Island wants 38.5% of their power generated from renewable sources by the year 2035. They started with 3% in 2007 and plan to increase that percentage by 1.5% each year until they have hit their goal. In this way, residents and utility companies alike all know what to expect and can make plans to hit the targets. Because there is a firm target, utilities are forced to both adopt renewable energy and offer incentives to help spur things along!
Unfortunately, Louisiana has no such policy. This lack of target-setting is one of the leading causes of the lack of incentives available to residents.
Another reason for the lack of enthusiasm for Louisiana solar is the fact that their power is so cheap to begin with! With the national average hovering around $0.129/kWh, Louisiana’s $0.094/kWh rate is incredible. In fact, it’s the 2nd cheapest electricity in the entire country!
What’s interesting is that Louisiana is also the largest consumer of energy in the United States on a per capita basis and owes much of that to the reason their electricity is so inexpensive: their enormous refinery and petrochemical industries.
Because the state acts as a hub for oil, natural gas, and refined products, the raw materials necessary for their utility companies are right next door. Having an earth-friendly solar array parked next to these fossil-fuel burning industries would be a nice touch of irony, but you’ll have to pay for the privilege.
With electricity so cheap, it is stiff competition for solar power, which is not yet at that level of cost-efficiency. The more expensive local utility companies are, the higher the likelihood that you will be able to offset that cost and save money with solar power. As you saw in the savings estimates above, it can dramatically impact the payback times and overall returns.
Because solar panels can only produce energy from the sun during the daytime, when home energy consumption is often lower while people are at work or school, solar installations tend to produce more energy than can be used within that timeframe. Then, at night when everyone is home, the panels can’t produce anything! The lopsided production and the need for outside electricity at night are the main reasons that homes with solar power still need to be connected to their local utility grid.
Luckily, net metering policies exist in many states that allow solar panels to feed that excess energy back into the grid while also allowing the home to draw power during the nighttime when it is needed. These policies help to decide how the resident will be compensated for the power that they are dumping back into the grid and they can be a very attractive perk of going solar.
Unfortunately, Louisiana’s net metering is not a good example of a generous policy. While they do allow net metering to occur and residents are compensated for their production, excess production is credited at the utility companies avoided-cost rate.
This means that you won’t get the full retail value that they charge for the power, but rather their actual cost. Currently, this rate floats between $.034-.04/kWh, less than half of the price you pay for the same electricity. For systems installed after 1/1/2016, this credit will be carried over to the next billing cycle.
More: Net Metering
As mentioned above, almost all residential solar systems are connected to their local utility grid, both to provide power regardless of time or weather as well as to push electricity into the grid. The rules that handle how this connection is made from the home to the grid are called the interconnection rules, and in many states, the state legislature or utility commission (the government organization that regulates utilities) defines them.
With Louisiana solar, the interconnection rules are pretty sparse and don’t include a lot of clarity around certain issues. In general, residents with a system under 25 kW (this will include almost all homeowners) can interconnect with the grid, and it is the utility’s responsibility to provide a meter that can measure power flowing both into and out of the home.
They also require an external disconnect switch, which can be expensive. However, they will waive that requirement if the system’s inverter meets specific auto shutdown requirements. There are no insurance requirements specified.
If you need to connect your system, you’ll need to sign an agreement 45 days before the install. Expect to pay a one-time cost for the installation of the net meter as well as any “reasonable costs of connection” to the utility company.
Solar Access Rights and Homeowners Associations
With more and more solar arrays popping up on houses across America, issues occasionally arise between solar homeowners, their neighbors, and HOAs over access to sunlight or even solar installations themselves.
First off, Louisiana passed legislation in 2010 that prohibits certain organizations from blocking homeowners from installing a solar system. This is great, as it means HOAs or other covenants legally can’t obstruct your solar installation!
However, that’s only half the battle. The law doesn’t go so far as to prevent the obstruction of that system by a neighbor.
Imagine a scenario in which you have just installed some fresh new panels on your home. Then your neighbor decides to build a giant tree house for his child, blocking the sun from your panels for several hours per day. In this case, you will lose power production, and suffer financially, now that your panels are suddenly in the shade.
Luckily, many states have decided that access to the sun can be protected and have created laws loosely categorized under “solar rights“. Louisiana has no such law, so if you are planning on going solar in the state, you’ll need a good relationship with the Joneses.
#4 Financial Incentives, Rebates, and Tax Credits
Unfortunately, there isn’t much going on in Louisiana regarding incentives. If you are interested in producing your own clean energy to help yourself and the planet, you won’t have access to as many perks here as you would in other parts of the country.
Federal Tax Credit
Always the gold standard, the residential renewable energy tax credit is the first step in getting a discount on your solar system. Providing an incredible tax credit worth 30% of the cost of your installation, this program will help offset any tax obligations that you might have. Though the credit is nonrefundable, you are allowed to roll the credit over for several years if your tax liability isn’t high enough in the first year alone.
In Louisiana, this is by far your best incentive for going solar. Note that after 2019, this credit shrinks from 30% to 26%, then 22% after 2021 – at which point it will disappear completely!
More: Solar Federal Tax Credit
Louisiana Solar Tax Credits/Rebates
When it comes to state tax credits, we have some excellent news and some terrible news. The good news is that Louisiana has a program in place until December 2017 that provides up to $10,000 in tax credits and will cut a check for any amount over their tax bill. This is a very generous incentive and would make going solar a no-brainer!
Now for the bad news. Notice the use of the word “would” in the previous paragraph. Unfortunately, the program had a maximum cap on the amount of money that it could send out and allocated it on a first-come, first-serve basis. It met that quota in July 2016 and is no longer accepting applications. Without this excellent program, solar savings in Louisiana took a major blow.
Utility Based Incentives
Currently, Louisiana’s utility companies have no incentives of their own for solar. Typically, utilities are not very enthusiastic about offering incentives unless the state government is making a push to adopt solar at the top level (remember our discussion of renewable portfolio standards?).
As we mentioned in the section on RPSs, Louisiana has no requirement for utilities to generate a certain portion of their power from renewable sources. As such, they are perfectly happy to keep burning fossil fuels to use a source of cheap and easy energy production.
Property Tax Exemption
One small glimmer of hope exists within Louisiana’s property tax code. As of 1994, residents will not be responsible for paying ad valorem tax on any solar additions to their homes or swimming pools. This means that even if the value of your home were to go up as a result of installing the solar system, you wouldn’t have to pay any additional taxes on that value. Property tax exemptions are always a win financially!
Sales Tax Exemption
Along with property taxes, many states offer an exemption for sales taxes on any equipment and installation costs related to renewable energy. Louisiana is not currently one of these states, which means you’ll need to add 4% in sales taxes to the total cost of your solar system.
General Increase in Home Value
As mentioned previously with the property tax exemption, adding a new solar system to your home can increase its value in a meaningful way. In fact, according to a study by Berkeley Lab, homes with solar systems sold at about a $4 per watt premium over their neighbors. Having that increase in home value without the increase in property taxes means that you’ll be able to save a little money from Uncle Sam, while still being able to cash in whenever you sell!
If you’d like to dig even more on local incentives and rebates, check out the DSIRE database.
#5 New Orleans Solar
Sometimes major cities will have specific rebates or incentives of their own to help speed along the adoption of solar. For residents of Louisiana, however, none of the major cities or utility companies are currently offering anything in the way of financial incentives for going solar in the state. If you’re in the New Orleans area, your experience will be very similar to homeowners in any part of the state. Hopefully, there will be a more progressive presence here in the future!
What to Do Next?
Given the harsh scenario that residents interested in going solar in Louisiana face, it might be time for a tough decision about taking the plunge. As we said, it’s hard for us to recommend going solar in this state. In most cases, it simply just isn’t a sound investment. We are hoping that the state government makes some changes going forward that make for a stronger choice! In the meantime, choose your financing wisely and take advantage of all available incentives.