Missouri Solar – Everything You Need to Know
Information about Solar Panels in Missouri
Missouri solar has been hampered by a few lapses in solar-friendly policies and government support, but that doesn't mean that there aren't plenty of people living there saying, "Show Me the Sun!" In fact, Missouri ranks about middle of the pack regarding solar adoption, and there are still plenty of reasons to consider purchasing a new solar system in this state.
Despite the fact that many people think of snow and cold weather in Missouri, the truth is that they get over two hundred sunny days per year and have warm, pleasant weather on average.
The financial landscape in Missouri might not be the most compelling reason to make the leap to solar, but don't worry because you'll still come out ahead in the end. Depending on where you live, however, you might come out way ahead!
#1 Are Solar Panels in Missouri Worth It?
* 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.
For anyone interested in Missouri solar, we are going to take a look at the three main ways to purchase that system and get it up and running in your home. We'll show you how much return you can expect with each option as well as a few cautions that could save you some serious money depending on where you currently live!
No matter your situation, Missouri solar is a net positive both financially as well as for the environment. Let's take a look!
#2 Options for Buying Solar Panels in Missouri
It means throwing down a huge sum of money up front, but paying for your system with cash can offer some of the biggest overall returns on Missouri solar.
Paying cash means that you will own the system immediately and that you will be entitled to all of the perks and incentives associated with it. Once you get that system paid back through credits and energy savings, however, it will literally be a money-making machine for you and your family!
So let’s look at a few numbers and see what it might look like to purchase a system with cash and how long it would take to get it paid off entirely.
On average, it will take about $18,533 to purchase and install a 5 kW solar system in Missouri. At that point, the 30% federal tax credit will kick in and you will get $5,560 in credits on your taxes which will take the price down to $12,973.
Unfortunately, there are no other state-specific rebates or credits to get this initial price down. From this point, we’ll take a few other data points to see how much we can save over the 25-year lifecycle of the typical solar system.
For instance, there will be a .08% drop in production capability on average each year that your system is in operation. But your utility company will typically raise their rates by about 3% per year over time, so you’ll generally save more the longer you are running solar.
Taking all of these things into consideration, your $12,973 system will take about 15 years to pay off, and you’ll end up making about $12,315 in profit over those 25 years.
If you fall within the area of one of the utilities that offer a rebate that we list below, you’ll be able to tack on another $2,500 in savings! With cash, this will bring your payoff time to only 13 years, provide a 7.5% internal ROI, and bring in $14,815 in profit! That’s more like it!
Leases and PPA
Leasing a solar system is usually a decent option for someone that might not have enough cash to spend outright on a quality solar system and also doesn’t have good enough credit or enough equity built up in their home to secure a loan for the solar installation.
In this case, a company will install solar panels on your roof and lease the equipment to you at some set rate. One benefit to getting solar in this way is that the leasing company still owns the system. They are responsible for any maintenance on the equipment, and they often guarantee a certain amount of production each year.
Getting a system through a lease can provide modest savings to your energy bill each year. Because there is no actual system purchased, those savings are available immediately and it’s possible to never be ‘in the red’ on this type of an investment.
Remember, though, that the leasing companies have to turn a profit. Because there are relatively few incentives available to solar purchasers in the state, there might not be many fantastic deals available.
In addition to shopping around for the best deal, there are also some dangers involved with leases. It is important to check the contract for ballooning rates (known as an escalator) and to have a lawyer read the fine print to ensure that you won’t be left holding the bag if something goes wrong down the road.
It is currently illegal to engage in a Purchase Power Agreement (PPA) in Missouri. These agreements would allow big businesses or individuals to bypass the local utility and buy power straight from a renewable company.
More: Solar Leases
If you don’t have a lot of cash, but you own your house and you have some decent equity built up, taking out a loan to purchase your solar system can be a great alternative to cash.
You’ll still end up owning the system once the loan is paid off, and the typical loan time is about 15 years on average. In most states, the savings you will be getting through solar energy production will mitigate your loan payment. However, with Missouri’s low electricity costs, it’s going to be tough to do that here.
Using the same variables as the cash example, you can expect to pay off your 5% loan in 15 years and then have the system pay for itself by the 22nd year, making about $4,460 in profits over the 25-year estimated lifecycle.
As you can see, this is not an incredible amount of money. Unless you can secure an extremely low-interest loan, it will be tough to make a huge profit going solar with a loan in Missouri. Profit is still profit, however, and it’s never a bad thing to be making money while helping to preserve the environment!
More: Solar Loans
#3 Missouri Solar Policy Information
It is usually quite easy to see how a state’s government feels about solar by looking at their regulations and policies.
Through regulations and policies, the state legislature can speed up adoption of solar power generation by doing things like mandating that a certain percentage of electricity should come from solar sources and decide how much money residents should be paid for their excess production.
Depending on how these policies shake out, it could make Missouri solar a very easy or a very tough choice for perspective buyers. Currently, the state’s policy landscape ranks somewhere in the middle of the road – not too great, but not too bad either.
Renewable Portfolio Standard
A state’s renewable portfolio standard (RPS) is a critical element in the foundation of its solar policy. An RPS decides how much of a state’s total electrical production should come from renewable sources. Usually, local utilities aren’t the most enthusiastic when it comes to developing or subsidizing solar production, so an RPS is critical to push renewables forward in the state.
You see, utilities typically produce electricity with fossil fuels which are cheaper at the moment than solar installations and if residents install a solar system on their home, they won’t be paying the utility as much money to boot.
In Missouri, there is indeed an RPS in place (some states are not so lucky), and although it is a little dated and not very aggressive, there are a couple of high points. According to the official state policy, 15% of total power should be generated from renewable sources by the year 2021.
Milestone goals are broken down as follows:
- 2% from 2011 till 2013
- 5% from 2014 till 2017
- 10% from 2018 till 2020
- 15% from 2021 and each year after
Many states have RPSs that extend much further out than 2021, so it is likely that the government will need to update this policy as it gets closer to the final deadline.
An interesting note: We’ll talk about the utility-specific rebates later, but it should be pointed out here that those utilities can purchase renewable energy credits (RECs) in order to satisfy their obligation to the RPS.
Normally, a resident in Missouri that produces excess power will retain the ownership of any RECs produced by their system unless they participate in a solar rebate program offered to them by their utility. Many states do not allow this right to their residents.
Sometimes an RPS will include a separate provision, called a solar carve-out, which further declares a certain percentage of the renewable production should come from solar specifically. These are good news because it will help direct future incentives towards residential solar buyers if the utilities have to scramble to fill their quota.
For Missouri solar, the carve-out is equal to 2% of the total RPS requirement, translating into:
- .04% of ALL electricity sales from 2011 till 2013
- .1% from 2014 till 2017
- .2% from 2018 till 2020
- .3% from 2021 and each year after
As of 2016, only about .17% of the electricity produced in the state was generated by solar, which means there is still some room left in the 2021 requirement.
City of Columbia’s RPS
Cities can sometimes have their own RPS that sits on top of the state’s minimum standard. In the case of Columbia, the local government wants 30% of electricity generated to come from renewable sources by the end of 2028. These cities are an excellent example of the power that determined groups of people have when it comes to helping the environment!
It might seem a little strange to be talking about the electricity prices that the state utilities charge, but if you are looking to generate power of your own, it is a good idea to see how your competition is doing. In this way, the more the utility charges, the better off you’re going to be by producing your own power.
In the case of Missouri, residents pay an average of $.109/kWh, which is about 15.5% less than the national average of $.129/kWh. Being this far below the national average is bad news regarding solar savings, but it is important to remember that these prices tend to go up over time. In fact, prices in Missouri rise by about 3% per year on average – just a bit higher than the national average.
Related News: In a recent decision, the Missouri Public Service Commission ordered the Kansas City Power and Light company to start using a new rate system that utilitizes “inclining blocks.” What this means is that folks that don’t use much electricity will have a modest savings while heavy users will end up paying more per kWh. This is a common rate structure across the country that is designed to encourage homeowners to use less energy. This is good news for solar owners and anyone else thinking of going solar!
Solar systems produce a ton of power during daylight hours and nothing when it’s dark. This fact shouldn’t surprise you, but it is worth noting that this particular weakness can be largely mitigated depending on how the state handles net metering.
These policies typically mandate that a utility company allow a resident with solar power to feed excess power produced during the day back into the grid. It then decides how much the utility company will need to pay the resident for this excess energy.
Unfortunately for those of you living in Missouri, there isn’t a great situation waiting for your here. Although the state does, in fact, force the utilities to allow net metering and to pay users for the energy, that’s about where the benefit stops. If you don’t have your own compliant net meter, then you will have to purchase one from the utility (which is free in some states).
You also will not get anything near the retail rate for your electricity, something more common in the most solar-friendly states. Instead of getting that .109/kWh you pay the utility company for fossil-fueled energy, you’ll get about $.02/kWh for your trouble – a bit of a slap in the face.
In fact, this low net metering rate can be a real hindrance to your savings. If you don’t use much of the electricity you produce, that can drop your total savings and lengthen your return. Be sure to talk to local installers to see how the state’s net metering will affect your installation.
Columbia’s Special Rate: In Columbia, residents are assured to get the current applicable electric rate for any electricity produced. This will make a huge difference in savings!
More: Net Metering
To force some degree of standardization among solar installations, it is important for a state to develop rules that govern how a resident will interconnect their solar system to the local utility grid. Some of these policies are more complicated than others, and some states are also keen to charge certain fees or otherwise increase the resident’s cost in the arrangement.
Luckily, Missouri’s interconnection rules are pretty straightforward and relatively lenient. They state that the solar system should be compliant with all electrical and building codes and that a professional electrician or engineer must sign off on the plans submitted with the interconnection application.
The utility must respond to the request within 30 days for systems under 10kW (this will include most residential systems), and they can, at their discretion, ask the resident to install an external disconnect switch on their system. Another positive is that systems under that 10kW threshold won’t be required to carry any specialized insurance.
Solar Access Rights
It might seem like a given, but the right to sunlight should not be taken for granted. In fact, some states have passed laws banning neighbors from blocking sunlight from hitting solar panels, while others allow solar homeowners to create easements to protect the sunlight hitting their panels.
Missouri guarantees access to sunlight for solar installations as a property right, but specific cases will need to be constructed in writing (ie, an easement) and are treated no differently than any other easement in the eyes of the law. If you have worries about a neighbor building a tree house or adding a third floor onto their house, then you’ll have to see about creating such an easement to protect your panels’ sunshine.
#4 Financial Incentives, Rebates, and Tax Credits
In this section, we normally get into the juicy details of how to save a ton of money on a solar system so that you can ride off into the sunset with your bags of cash, but with Missouri solar, the ending might not be so picturesque.
Unfortunately, there are not a ton of extra incentives for the average resident to take advantage of in this state. Fear not, however, because there are still some good things ahead and, depending on your utility, there might be a nice rebate in store for you as well!
Federal Tax Credit
The center of attention in any discussion involving solar tax credits is always the residential renewable tax credit, otherwise known as the federal solar Investment Tax Credit (ITC). This credit allows for a deduction in personal income tax credit worth 30% of the total cost of any parts and labor associated with purchasing and installing your new solar system. It’s like receiving an automatic discount on the purchase price of your system.
The credit is non-refundable, but can be broken up over several years. This is the single biggest incentive for Missouri solar, and it is important to remember that this credit disappears completely after 2021! Starting in 2019 it will shrink from 30% to 26%, then 22% each year before it goes away, so act now to get the full value!
More: Solar Federal Tax Credit
State Tax Credits and Rebates
Many states like to add state tax credits on top of the impressive federal credit or provide some other subsidized discount to help foster growth in the industry. Unfortunately, there are no state-specific tax credits or rebates for Missouri solar. Depending on where you live, however, some of the utilities offer rebates of their own, so stay tuned below to see if this can benefit you!
Utility Based Incentives
Although statewide incentives are few and far between, several utilities are offering rebates to their customers that install solar!
- Columbia Water and Light – This company offers a $500/kW of installed solar to residents that apply before their yearly allocation is filled. Unfortunately, the quota has been filled for the fiscal year ending in September 2017. Stay tuned for next year’s opening or get on the waiting list in case more funding comes online!
- Empire District Electric – This utility currently offers a similar $500/kW of installed solar and there doesn’t seem to be any indication that they have run out of credits for this year yet!
- Kansas City Power and Light – This company also has a $500/kW rebate on any installed solar system and also doesn’t seem to be full yet! Each of these rebates means that a 5 kW system could end up $2500 cheaper just by living in a particular area!
This list is by no means exhaustive, so be sure to check our your local utility for any Missouri solar incentives!
Property Tax Exemption
If you own your own house, you may have made improvements to your home in the past to help improve the home’s value. Typical examples of these improvements are bathroom renovations, additions, and extensive landscaping.
If you are trying to sell your house, these are great ways to boost the selling price. Unfortunately, the increase in property value usually means a similar increase in the property taxes owed at the end of the year.
Now, adding $15,000 of solar equipment to your roof should certainly improve the value of your home, but an often overlooked perk that many states offer is an exemption for the property tax associated with that value increase. In Missouri, you can expect a 100% exemption on this value when it comes to tax time!
Sales Tax Exemption
Although the government has made exceptions for property taxes, there is no such relief for the tax man’s other weapon: sales tax. Expect to pay the full 4.22% sales tax rate for any costs associated with parts and labor for your solar system. The lack of incentive here is a definite bummer, but it could always change down the road!
General Increase in Home Value
Like we talked about in the property tax section, there are clear benefits concerning home value when adding a solar system. According to a study at Berkeley Lab, researchers find that a home with solar owned by the homeowner will sell for about a $4 per watt premium over a similar home.
For a 5kW system, this could be a $20,000 increase in home value that you won’t have to pay property taxes on! This incentive ensures that you’ll be able to recoup your investment in solar even if you end up selling the house earlier than expected!
If you’d like to dig even more on local incentives and rebates, check out the DSIRE database.
#5 Columbia Solar
In some states, the solar landscape can be dramatically different in particular cities compared to the state as a whole. In the case of Missouri solar, Columbia stands out as a star in an otherwise uninspiring market.
As we’ve mentioned previously, Columbia’s utility company Columbia Power and Light offers an awesome $500/kW rebate on solar system costs (when available). Add to this the fact that their net metering rates are actually at retail and not the measly avoided cost rate and you have a recipe for sweet solar action.
You will typically be able to pay off your 5kW system in about 13 years, and you’ll walk away with $14,815 in profit! That doesn’t even count the extra savings you’ll enjoy from any excess power that you generate and dump back into the grid. It will just be icing on the cake! So if you are wondering, “Are solar panels worth it in Columbia?” The answer is a definite yes!
What To Do Next?
As you can see, there are plenty of opportunities to score a sweet deal with Missouri solar if you are living in the right place. It is clear that some cities within the state are more enthusiastic about adopting renewable solar energy than others, and it shows in their favorable policies.
Hopefully, more places will come on board with this mentality, and the state legislature can figure out if they want some skin in the game or if they should just keep sitting out on the sidelines!
Until then, be sure to reach out to a handful of installers for savings estimates for your own home.