Montana Solar – Everything You Need to Know

montana-solar

Information about Solar Panels in Montana

Residents of Big Sky Country often find themselves looking up at the beautiful night sky, but it turns out that the daytime sky is quite impressive for a different reason! Montana Solar may not be catching a lot of traction yet, but its flexibility in rural areas, coupled with a substantial return on investment, ​indicates that this form of energy could be an excellent choice for interested residents.

We'll take a look at just how much profit you could make in Montana and discuss all of the ins and outs of purchasing, local policies, and potential incentives. Let's see what we have to work with here!

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#1 Are Solar Panels Worth it in Montana?

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Overall Grade
13 years Avg. Payback Time (For Cash Purchase)
7.2 % Estimate IRR (Return on your investment on cash purchase over 25 years)
$15,306 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.

#2 Options for Buying Solar Panels in Montana

Just like buying a car, there are several different ways to go about purchasing your solar system. Each will have its pros and cons. Depending on your financial situation, you might be forced to use one method in particular or none at all. We’ll walk through the basics of each route to see how much profit and savings you can expect.

Cash Upfront

Using cash to pay for an expensive item is always the simplest route and usually provides the best payout in the long run. You won’t be responsible for any loan interest, and you’ll own the system outright from the beginning. You’ll also be able to enjoy all of the various financial incentives yourself and not have to share that money with a third party!

Let’s see what would happen if we decided to buy a typical 5-kW system for a home in Montana. Using several cost averages from the state and national level, we arrive at an average price of about $17,500 for a new system out the door.

Starting from that price, we’ll deduct 30 percent via the federal tax credit, which will bring that number down to $12,250. Subtracting another $1,000 via the state tax credit carries it all the way down to $11,250 for our total cost!

The calculations don’t stop here, however, because we also need to consider the savings side along with the cost side. By avoiding purchasing electricity from the utility each year, you will be saving money with your solar generation, and a couple of variables will affect how that number plays out. First, your system’s performance will degrade by about 0.8% each year just with normal wear and tear.

Don’t worry too much, however, because your utility will likely be raising your rates by an average of 3.2% each year moving forward. The math is definitely in our favor here! Considering all of this, we should expect your system to save you about $790.17 during the first year and a little bit more each year after that.

Using the costs and savings to calculate the numbers over the entire 25-year lifespan of your system shows that we should expect to pay for the system on paper after 13 years, generate $15,306 in profit, and average an internal return of 7.2 percent annually on our initial investment.

Bottom Line: Considering how low Montana’s energy prices are right now, this is not a bad result at all!

Leases

Provided that you own your home, you don’t need a lot of cash or solid equity to lease a solar installation. With a solar lease, you’ll be able to enjoy some of the benefits of solar without having to pay a dime up front or take out a loan.

Here’s how they work: a third-party installer will place a system on your roof to produce power for your home. You’ll use this power and make small monthly payments to your solar installer for use of the equipment (just like a car lease). Any extra energy that you need after that is obtained from the utility. In an ideal scenario, you’ll end up paying less overall for your energy needs and help the environment at the same time!

Since you aren’t actually purchasing the system, you won’t be able to take advantage of any of the credits or rebates – those will go to the installer – but you also won’t be responsible for any of the maintenance or upkeep!

With solar leases, it should be mentioned that they are not all created equally. Just like with any other purchase, you’ll need to do your due diligence to ensure that you are getting a good deal. At the very least, be sure that you can get out of your contract if necessary, transfer the lease easily if you decide to sell your home, are covered in case of any damage to your home, and won’t be faced with ballooning electricity rates.

The hardest part will actually be finding a solar installer who offers solar leases. National installers like SolarCity and Sunrun – who started the whole solar leasing business – have yet to enter Montana, in reality leaving homeowners to choose between cash or loans.

Bottom Line: Be sure to read over your contract carefully and consider seeking legal counsel if you are unsure about anything!

More: Solar Leases

Loans

If you don’t have a lot of extra money lying around to invest in solar, don’t let it get you down too badly because loans represent another reliable option. With proper credit or equity in your home, you’ll be able to qualify for a loan that makes sense financially for this investment. The best part is that you’ll still own the system, so you get to take advantage of the tax credits and property tax exemptions while you pay off your loan!

For those of you that don’t like taking on debt to purchase something, remember that this isn’t some TV or boat that you’re buying but rather an income-producing asset that will help to generate value over the course of its lifespan!

Bottom Line: Using a standard 15-year, 5 percent interest loan means that you’ll pay about $7,000 in interest in total. Despite that, you’ll still be able to enjoy a profit of $8,305 and an annual return of approximately 2.8% all with zero money down!

More: Solar Loans

#3 Montana Solar Policy Information

Let’s take a look at what is happening in Montana to make solar more viable, such as RPS and net metering laws.

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Renewable Portfolio Standard

As far as solar-related policy is concerned, a state’s renewable portfolio standard (RPS) is easily the most important because it will often affect everything else! These rules determine how much of a state’s electricity should be produced from renewable sources and usually include milestones or other specifics that help utilities and residents understand how willing the government is to go solar.

Having goals mandated by law is important because if they are left to their own devices, utilities are often not in any hurry to adopt solar. They are already enjoying hefty profits and cheap production costs with fossil fuels. If they keep chugging along with their current fuel sources, however, we are increasingly damaging the environment.

Deadlines on renewable production mean that they will be forced to invest in their own infrastructure and provide incentives to residents to help share some of the burdens.

In the case of Montana, they started off on the right foot with their first RPS back in 2005, by mandating that 15 percent of their total energy should come from renewable energy by the year 2015. The problem is that 2015 has come and gone, and with it went further motivation for cities and utilities to offer extra incentives to their residents. We would love to see an update on this goal that includes some room to grow!

More: Renewable Portfolio Standard (RPS)

Electricity Prices

The prices that you’re currently paying for electricity play a considerable role in determining just how much money you’ll save over the life of your solar installation. Any power that you produce yourself costs you nothing (beyond the initial installation cost) and in Montana, the average utility rate is currently about $0.11 per kWh (August 2017). Compared to the national average of $.13 per kWh, those prices are actually pretty low.

Low electricity prices aren’t necessarily a bad thing, but it does mean that you won’t be able to save as much money with Montana solar as you might in another state. As we mentioned above, however, you’ll still be able to make a decent profit despite those low rates. And as we mentioned before, Montana utilities are increasing rates around 3.2% each year, higher than the national average of 2.6%, leading to even more savings!

Net Metering

You are probably wondering how the transfer of power will work between your solar panels and the utility’s grid. If you remember the fact that power can flow both into the grid and out of the grid, you’ll quickly realize that your system will probably produce more energy than necessary around noon and none at other times (at night).

The way a state handles net metering will determine whether or not you’ll get any credit for that extra production you don’t use and subsequently put into the grid.

With Montana solar, it’s a bit of a mixed bag. Although the utilities will give you credits for excess energy that you produce and which you can use in the current month or roll over into future ones, you won’t get to keep them into the next year. Any credits you’ve accumulated will be forfeited to the utility with no value. We would love to see a change that cuts a check to residents for the extra power they are producing.

Provided that your system is under 50 kW in size (it almost certainly will be – not to worry), you’ll be able to take advantage of net metering!

With these limitations in mind, it might be worth considering a system size that will produce nearly all of your yearly energy requirements without going over the line too far. Bigger might not be better in this case!

More: Net Metering

Interconnection Rules

Considering the fact that solar systems can be quite dangerous and require considerable knowledge to install, it makes sense that states should be concerned with how everything is getting connected to their grid. These rules, called interconnection standards, stipulate any technical regulations as well as limitations and costs that residents will be responsible for when they pull the solar trigger.

In the case of Montana, the rules are pretty straightforward and won’t require much in the way of hoop-jumping. Although there is not technically a statewide set of adopted rules, many follow a basic blueprint. Any system listed at 10 kW or less is eligible to connect.

There also aren’t any fees involved in the process, but there is also no guarantee that the process will be completed quickly so don’t get too excited after you get the system installed – it might take a little while to get approved!

Although there are no insurance requirements mentioned, you’ll be responsible for installing an external disconnect switch, which will be an added cost (though not a huge one).

Solar Access Rights and Homeowners Associations

It would be a tragic day for anyone that owns a solar system if their neighbor or a next-door business decides to put up a tall structure that blocks the sun from reaching their panels.

To help guard against this, many states have some form of solar access rights that allow residents to craft easements for their particular installations. In Montana, there is basic protection for the right to create these easements, but it will be up to the property owner to ensure that these are handled properly.

As far as homeowner’s associations go, you’ll be on your own in Montana. If the neighborhood that you wish to move into doesn’t allow solar installations because they feel as though they are an eyesore, there isn’t much you can do about it. Forbidding HOAs from banning solar – like many states have done – would be an excellent step for Montana to enact in the future!

#4 Montana Solar Incentives, Rebates, and Tax Credits

With federal rebates and state tax incentives, Montana homeowners can drop their installation costs by thousands of dollars.

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Federal Tax Credit

If you are interested in going solar, you’ve probably already heard about this incredible incentive – but we’ll tell you about it anyway! Known as the residential renewable tax credit, this beast is good for a personal tax credit equal to 30% of your total equipment and installation costs.

As a point of reference, a $20,000 system would end up with a $6,000 credit to be enjoyed the year of installation. Keep in mind that this credit is of the nonrefundable type, which means that you won’t be able to get money back from the government if you owe nothing, but you will be able to take this credit over several years to get the full value if your tax liability isn’t high enough the first year. Not a bad way to start things off!

As with most awesome things, this credit will likely not be around forever in its current state. In fact, it is currently slated to go away in the year 2022. Starting in 2020, the amount will drop down to 26%, then 22% in 2021 before it fades away completely as an incentive – so act fast!

More: Solar Federal Tax Credit

Montana Tax Credits/Rebates

It’s not incredibly common to see states offer their own tax incentives in addition to the federal break, but Montana isn’t letting its old RPS get in the way of a sweet personal tax credit!

Their residential alternative energy system tax credit allows you to get 100% of your purchase as a credit, but it has a relatively low maximum payout of $500 for an individual and $1,000 for a household with more than one taxpayer. If you don’t carry a huge tax burden that’s okay too, because they will allow you to carry over the credit for the four following tax years.

This is a great extra benefit!

Utility Based Incentives

Along with state tax credits, utility-based incentives aren’t incredibly common, especially in places that don’t have an aggressive RPS that makes things difficult for the utility to meet quotas. Without these quotas, utilities would have to be operating out of the kindness of their hearts to give incentives to residents interested in solar.

Since Montana’s RPS no longer has any teeth, these rebates have dried up in the state, and they will not likely return unless there is a significant overhaul sometime in the future!

Property Tax Exemption

Making additions to a home is a common practice, and many people choose to do this to make it more livable or to help increase its value for a better selling price down the road. Bathroom renovations, extra bedrooms, and finished basements will all go a long way towards upping the resale value of a home. A solar system is no different.

We’ll discuss a little later just how much you can increase the value of your home by, but let’s just say that it is a considerable amount! Many states have recognized this additional value and allowed residents to exempt that amount from the value of their homes to evaluate property taxes.

With Montana solar, you’ll be able to exempt up to $20,000 in value for a maximum of ten years. It might not be a huge saving, but it means that you won’t be paying any penalty for owning your system for at least ten years!

Sales Tax Exemption

Similar to a property tax exemption, many states have also decided to allow the sale of solar equipment and installation to be exempt from state sales tax to provide further savings and incentive for residents to jump on board. Montana does not actually have a state sales tax, so you don’t have to worry about paying it either way!

General Increase in Home Value

As we just mentioned, you won’t be responsible for paying extra property taxes on your solar system in Montana, but we didn’t say how much value that could actually be.

A 2015 study from the Lawrence Berkeley National Lab showed that, from 1999 to 2013, solar homes commanded a $4 per watt premium over similar homes that didn’t have solar installed. This premium accounts for the value of the equipment itself as well as the energy savings that it is likely to produce over its 25-year lifespan.

Using that 5 kW system from the purchasing examples earlier, you could be enjoying a $20,000 increase in your home’s value just for installing solar! A great perspective on this is to remember that you aren’t even paying that much for the system, so not only will you be able to take advantage of the energy savings – you might even get your purchase price back should you choose to sell your home down the road.

Not a bad deal!

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.

#5 Helena Solar Informationhelena-montana

Sometimes a city within a state will be a little more progressive than the rest and elect to put extra incentives or goals in place that are related to solar adoption. A high level of enthusiasm at the residential or local government level is usually the catalyst for these incentives, and it is pretty impressive to see these kinds of grassroots efforts in action!

Unfortunately, no cities in Montana fit into this category. That includes the capital city of Helena. Residents here are serviced by the most prominent electric utility in the state, Northwestern Energy, which doesn’t offer anything extra in the way of solar rebates or discounts.

If you are living in Montana and want to see solar taken to the next level, then don’t be afraid to bring your voice to the local government to help start a change!

What to Do Next?solar-montana

Hopefully, by this point, you feel armed with at least the basic knowledge you need about Montana’s solar policy landscape and available incentives.

As with any major purchase, you need to do your own research locally to see who the best installers are in your area and who offers the best value. In this case, local reviews are always the best source of reliable information.

Are you living in Montana and already have solar? Are you just interested in jumping in yourself? Let us know about it all in the comments below!

Image Credits under CC License via Pixabay - 1, 2, 4, 5 & Flickr - 3

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