Ohio Solar – Everything You Need To Know
Information about Solar Panels in Ohio
A blazing sun isn't the first thing that anyone pictures when they think of Cleveland's bitter winters, but the Buckeye State has its fair share of sunny days. Even those cooler days are beneficial though, as lower temperatures increases solar panel efficiency.
When looking at solar savings, Ohio solar ranks somewhere in the vast middle when compared to other states. Despite a relative lack of extra incentives, you'll still end up profiting by going solar in this state while doing something positive for the Earth!
#1 Are Solar Panels Worth it in Ohio?
* 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.
If you are interested in Ohio solar, then the biggest question you're probably asking yourself is "What's the best way to purchase it?" We'll dive into the three most common ways to go solar and see what the financial outcomes look like for each option.
Rest assured, no matter which option you choose you'll find a positive return on your investment in Ohio.
#2 Options for Buying Solar Panels in Ohio
Cash is often the best way to purchase anything of significant value because you’ll get to enjoy all of the benefits and not worry about having to make payments down the road.
In the case of going solar, purchasing your system with cash ensures that you get all of the tax credits and other financial incentives for which you might be eligible. As with any big purchase, it pays to examine the details. Let’s take a look at what you might expect to pay for a typical 5 kW system in Ohio:
After comparing numerous cost estimates, we find that a good average to start with is $16,800 for a system that size. Once you deduct the 30% federal tax credit of $5,040, it will bring the price down to $11,760. Unfortunately, there aren’t many other credits, rebates, or other incentives to expect which brings that system price down any further.
To get the full picture of how your system will perform and save you money over its 25-year lifecycle, we’ll need to remember that the system performance will actually decline by about .08% each year. That’s not too bad, however, when you consider that your utility will likely be raising your rates by about 2.6% each year! You’ll start off saving about $771 per year, which will increase nicely over time.
Running those numbers into the future shows that you’ll be able to pay off that $11,760 system in about 14 years, then walk away with $12,282 in profit over the 25 years your panels should last.
If you don’t have a ton of cash and either can’t or don’t want to get a loan to purchase a new solar system, you can lease it. With this option, you will sign a contract with a solar company like SolarCity to allow them to place solar panels on your home.
From that point, you will pay the solar company monthly to ‘rent’ the equipment (solar panels, inverter, etc) and you’ll get to use all the electricity the installation produces. If the system doesn’t cover your full power needs, then you’ll pay your local utility as well. In this scenario, you are likely to save some money month-to-month, but it might not be a considerable amount. Sunrun, another large solar installer, estimates you can knock about 20% off your electricity costs by installing solar with a lease.
There are other benefits to solar leases beyond just avoiding any upfront costs. With a solar lease, you don’t have to worry about a thing once the panels are on your roof – the installer will be responsible for all of the maintenance. You’ll get the benefit of helping the environment and some modest energy savings for the trouble of letting someone install panels on your roof. In this way, you might never be “out of pocket” for an Ohio solar lease.
You should be aware, however, that those companies looking to sell you on a solar lease have to make money as well, and you should pay particular attention to your monthly payment amount. The rate should be lower than your local utility and be careful that the rate doesn’t go up significantly over time (a common component of solar leases, known as an escalator).
More: Solar Leases
What’s the matter? Don’t have $16,800 in cash stuffed under your mattress? It’s okay, neither do I!
Taking out a loan to buy something isn’t always the best choice, but financing a solar system for your home should be looked at more like an investment than just financing something like a new car or TV. In the end, your solar system is going to be making you money.
Even though you won’t technically own your system until the loan is paid off, you’ll be able to take advantage of the federal tax credit after your first year of ownership. Taking an average loan interest rate(5%) into consideration for the first 15 years, you could end up making about $5,169 in profits over the 25-year life cycle.
That might not look like a lot of profit – it’s only about a 1.8% return on your investment after all – but remember that you didn’t put any money down to get those profits.
More: Solar Loans
#3 Ohio Solar Policy Information
The adoption of solar within any particular state often comes down to how the legislature feels about the situation. Depending on the laws, utilities could be mandated to adopt solar within a given time frame, often spurring incentives for residents. The state itself could also provide tax breaks, rebates, and tax exemptions to make things worthwhile.
Unfortunately for Ohioans, there aren’t a lot of reasons for local utilities to create those incentives. As you’ll see below, everything else follows behind the state’s RPS. If it’s weak, it can be a rough landscape for solar.
Fortunately, robust net metering and interconnection regulations help save an otherwise lackluster environment!
Renewable Portfolio Standard
In the world of renewable energy, the Renewable Portfolio Standard provides the backbone for any progress made in the state. It does this by mandating that a certain percentage of the energy produced come from renewables in general, or a source like solar specifically. Without this mandate, it would be quite easy for the local utility companies to keep chugging along with the burning of fossil fuels to generate electricity because it is cheaper (for now).
Having a specific, mandatory goal forces utilities to devote money towards their own renewable projects as well as provide incentives to residents that help provide some of the production. In Ohio, the Alternative Energy Portfolio Standard is a bit of a mixed bag.
Enacted in 2008, the law created a goal of obtaining 25% of the state’s energy from alternative energy, through gradually increasing amounts each year, by 2024. This included up to 12.5% from retrofitted or otherwise updated fossil fuel plants and 12.5% from actual renewable energy sources.
Compared to some other states, 12.5% is not a very impressive number to shoot for as a standard. What’s worse, in 2014 the state legislature voted to freeze the ramp-up, and it only just resumed in January of 2017. Now that it’s back on track, the final goal will be met in 2026.
Luckily for solar owners, some states go one step further and designate that a certain percentage of the renewable power goal should come from solar energy specifically. This is great news because providing incentives to residential solar operators is an excellent way to help satisfy their production quotas.
Ohio has such a carve-out, and it will be .5% by the year 2026. This might not sound like a lot, but it currently sits at .16%, so there is definitely some room to grow!
If you are interested in going solar to save money, then the amount of money you pay for electricity in your home state is significant. Think about generating solar power as an avoided cost of buying the power from the local utility. If you are avoiding the cost of paying, then you would want the electricity prices to be as high as possible. In fact, the higher they are, the more you’ll be saving!
Unfortunately, prices in Ohio are actually a little below the national average of $.13 per kWh. Sitting at $.125 per kWh, you won’t be saving quite as much as you could be in some other states in the Union.
Don’t worry though because, as you’ve seen, you can still save a lot by going solar right now. Also remember that utility prices tend to increase over time. In Ohio, they increase at about 2.6% each year. That means you’ll save more and more each year with your system!
If your solar system generates more power than your home is using (and trust us, it will), then you’ll need to be aware of your state’s net metering rules. Net metering allows your solar system to feed excess power back into the grid when you are producing more electricity than you need. How your state handles this process determines how you will be compensated for this production.
Your system will be producing all of its energy during the daytime, but we use power 24 hours a day (your refrigerator and AC are always on, for example). If you need electricity when the sun isn’t shining, then you’ll pull energy from the grid. When you produce more energy than you take, your utility will give you a bill credit for that electricity.
Unfortunately, Ohio’s net metering laws aren’t too favorable to residents. Many states will credit solar customers at full retail rate for any excess electricity they add to the grid. If you pay the utility $0.12 per kWh, they’ll pay you $0.12 per kWh. Easy.
But in Ohio, utilities credit you for your electricity at the rate they a generation company for electricity, known as the wholesale cost and typically about 30% to 40% of the retail rate. While installing solar is obviously still worthwhile, your savings can be affected, so be sure to talk to your installer about it. Check out our article Is Life Without Net Metering a Life Worth Living? for more info on solar savings with net metering at wholesale costs.
More: Net Metering
Ohio has a strong showing with their interconnection rules by offering a relatively simple and quick process for small system owners. Provided that your system is less than 25 kW (and it almost certainly will be), you should be up and running in less than a month from a utility-connection standpoint.
It should be noted that the interconnection process can take much longer than the actual installation of your system and it is often the thing that takes the majority of time to complete when going solar.
Other key benefits to going solar in Ohio include not having to hold additional liability insurance on your system and not having to install an external disconnect switch. These features will save you some time and money during the installation process!
Homeowners Associations and Solar Access Rights
Once you get your shiny new solar system up and running, start saving money on your monthly power bill, and pat yourself on the back for doing Mother Nature a favor, it would be a disaster if someone built a giant tree house that blocked the sun from your array.
To prevent these types of things from happening, and to help secure the right to use and enjoy sunlight on their land, many states have created solar access rights to protect their citizens. Ohioans can create legally binding solar easements with their neighbors to protect their sunlight with all of the rights and requirements of other types of easements.
#4 Ohio Solar Incentives, Rebates, and Tax Credits
As we’ve mentioned, it can be tough to find quality rebates and credits in a state if there is not an aggressive goal for renewable energy in the state’s RPS. We see the repercussions of that weak RPS here in the incentive section. Although this is usually the most alluring part of going solar, there isn’t much here to excite you.
Federal Tax Credit
There would likely be way less discussion about solar power right now without the wonderful residential renewable tax credit. Once you purchase and install your system, this federal income tax credit will allow you to take 30% of the price as a personal tax credit on that year’s tax return. This is basically like taking a third off of the price of going solar right off the bat.
You won’t be able to get cash back from this credit if you don’t owe money in taxes, as it’s non-refundable, but you can break it down into chunks and claim portions of it over several years to take full advantage of the amount.
If you are currently on the fence about going solar, remember that this incentive might not be around forever. As of this moment, the tax credit is slated to be phased out over the coming years, starting in 2019. After 2021, it’ll be gone forever.
More: Solar Federal Tax Credit
State Tax Credits and Rebates
If a state wholeheartedly supports solar and other renewables at the legislative level, they will often create special tax credits and rebates to help spur the adoption of those energy sources. Unfortunately, Ohio has not made a clear statement to the positive with their laws, and there are no extra financial incentives to speak of here in the Buckeye State.
Utility Based Incentives
To meet their RPS mandates, utilities will sometimes set up their own incentives for residents to help persuade them to go solar. Residential solar can count towards their mandate, depending on state law, and it requires little or no infrastructure, research, or support, making it appealing to utility companies – they just write the check and collect the SRECS (Solar Renewable Energy Certificates) your system produces.
A typical 5 kW system would produce about five SREC’s per year, and for a while they were an excellent way to make extra money with solar.
SRECs are valuable because utility companies could purchase an SREC from you, instead of producing one on their own, to meet RPS quotas.
Unfortunately, while the price of these SREC’s started at $450 back in 2009, they are currently hovering around $3.50 each thanks to the RPS freeze. Ouch. The SREC’s do last for five years, however, so it might be possible to hold them and sell at a better price if the market ever recovers.
Property Tax Exemption
If you improve your home, it likely increases in value by some amount. Periodically, your home is reassessed for value, and you could end up paying either more or less property tax depending on how it comes out. In the case of solar, it is very likely that your home value will increase because of the actual system cost itself as well as the energy savings that you and future homeowners will enjoy.
Often, states will allow solar purchasers to exclude their solar system from their home’s value to calculate property taxes.
Unfortunately, this is not a statewide deal for residents of Ohio. If you are lucky enough to live in either Cleveland or Cincinnati, on the other hand, you’ll be able to enjoy this perk for 10-15 years after purchase!
Not having to pay extra property taxes on your home’s value is just icing on the cake for a solar buyer!
Sales Tax Exemption
Similar to the property tax exemption above, avoiding property taxes are a great way to save money on going solar. Unfortunately, Ohio does not offer this exemption for solar panel systems, and you’ll have to tack on another 5.75% to the cost of your solar equipment (we’ve already taken that cost into account for the savings estimates above).
General Increase in Home Value
We’ve touched on this already, but now it’s time to turn our attention to the increase in home value that you can expect from purchasing your solar system. The value a kitchen renovation or remodel brings to your home might be easy to calculate, but it’s not so obvious how much you could expect from solar.
According to a study from the federally-funded Lawrence Berkeley National Lab, you can potentially earn about a $4 per watt premium by adding a solar system. This increase comes from the fact that your home will now have drastically reduced energy for the life of the system.
To put things in perspective, at this rate a 5 kW system would add up to $20,000 in home value. Remember, too, that if you are living in Cincinnati or Cleveland, you’ll be able to avoid paying property tax on that addition! Even outside of those cities, your system will pay itself back (plus some) once you sell your home.
This additional value though is only for homeowner-owned solar installations. According to another study from LBNL, solar leases simply don’t add value to the home, though they don’t detract either.
If you’d like to dig even more on local incentives and rebates, check out the DSIRE database.
#5 Cleveland Solar Information
It’s fairly common for some cities within a state to be a little more progressive when it comes to endorsing solar power for its residents. This could come in the form of additional rebates or tax exemptions that cover their city only and are separate from the rest of the state’s mandate.
If you live in Cleveland, you’ll be able to take advantage of the fact that any solar equipment and installation will be exempt from property taxes for 10-15 years depending on the circumstances!
#6 Cincinnati Solar Information
Similar to Cleveland, residents of Cincinnati will be able to enjoy exemption from property taxes on their increase in solar value for 8-15 years as well!
What to Do Next?
As has been the case with some other states, Ohio has been suffering a little lately with their solar landscape. A rough market for SREC’s and a somewhat timid RPS has limited the amount of traction for extra financial incentives.
Hopefully, as the RPS deadlines escalate, some new rebates or credits will pop up, and you’ll be able to make even more money with Ohio solar.
In the meantime, make sure that you are reaching out to local installers for prices in your area, read over all contracts carefully, and most importantly, enjoy saving money and helping the environment!