Austin Solar – Everything You Need to Know

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To help you get started with solar panels in Austin, we’ve created this handy overview.

Read on about the basics of installing solar panels, financing options, and the financial incentives available.

Austin might be the most solar friendly city in the whole state of Texas. The local utility, Austin Energy, is well known across the country for leading the way on utility programs that encourage its customer to take up energy efficiency and renewable energy.

For solar installations, the utility provides upfront rebates as well as net metering - a rarity in the state – which allows homeowners to knock thousands of dollars off their total installation price.

For a broader state overview, see our Texas Solar Energy page.

#1 Are Solar Panels Worth it in Austin?

C
Overall Grade
11 years Avg. Payback Time (Cash, Including Austin Energy Rebate)
5.5 % Estimate IRR (Return on your investment on cash purchase over 25 years)
$14,372 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). This estimate was made for a 5kW solar array for a homeowner using Austin Energy.

#2 Options for Buying Solar Panels in Austin, TX

Like homeowners in most states, Austin residents have a few options available to finance their solar installation. Each option has its own benefits and drawbacks and homeowners can choose between a lower cost installation or a more hands-off, convenient approach.

Cash Upfront

Homeowners who purchase their installation outright typically stand to see the highest savings over the life of their installation. As the owner of the solar system, they are eligible to receive all rebates and tax credits, but homeowners will have to shoulder up an estimated $18,000 in cash at the very beginning – no small peanuts. As the sole owner, homeowners are responsible for all maintenance, monitoring, and repair over the life of the installation.

However, with the federal tax credit as well as Austin Energy’s upfront rebate, you’ll drop your total investment to just $9,240! Now we’re talking!

After you install your system, you’re looking at saving $837 on your utility bill in the first year alone. By year 11, you’ve already paid off your investment! From there on out, you’re producing completely free electricity for the rest of the system’s life. In fact, after 25 years (the typical estimated life of solar installations), you can expect to save around $14,372.

That’s some awesome savings, but if that kind of dough sounds unobtainable or the idea of replacing a solar panel doesn’t appeal to you, take a look at the next option.

Leases

Since 2009, solar leases and power purchase agreements (which are not allowed in Austin Energy territory) have become the dominant financing option for residential solar panels across the country, accounting for around 70% of all installations in 2014. With a lease, you won’t save as much over the life of the solar installation as with a cash purchase, but the ease of the installation and little upfront capital required more than make up for the smaller savings.

With a lease, the solar company installs the system for little to no money down and the homeowner pays off the installation in small monthly increments over a 20-year agreement. As the actual owner of the installation, the solar company (not the homeowner) is eligible to receive most financial incentives, including the federal tax credit, though they usually account for these savings in your monthly bill. As the owner, though, the solar company is responsible for all maintenance and repair. So if you’re looking for an easy installation but still want to save thousands of dollars, you can’t go wrong with a lease.

More: Solar Leases

Loans

Taking out loans to pay for solar installations is becoming increasingly popular and some think that in the next 5 years it will be the dominant financing mechanism.

For solar installations, homeowners take out a loan with a bank, credit union, or dedicated solar loan company to initially pay for the installation, then pay the loan back (with interest) over an agreed upon amount of time, typically between 5 and 20 years. Unlike leases, loans enable homeowners to own the solar installation so they receive all rebates and tax credits. However, as with cash upfront ownership, they are also responsible for all maintenance and repair over the life of the installation.

Austin Energy has partnered with Velocity Credit Union to offer low-cost financing for solar installations and energy efficiency improvements.

Loans obviously add interest, which affects your savings, so let’s do some math real quick. Taking out a 15 year loan with 5% interest to finance the 5kW installation above adds an extra $6,620 to your total investment, for a total of $15,860. So over 25 years, your total savings will be around $7,752.

At half the savings of a cash purchase, you’re probably rethinking if you could somehow foot that bill, but think of it this way: An extra $8k in your pocket, decreased emissions, and a smaller carbon footprint, all for no money down!

More: Solar Loans

#3 Austin, TX Solar Policy Information

Austin residents benefit from some of the most pro-solar policies in the state, thanks to Austin Energy.

Net Metering

For solar homeowners, Austin Energy provides net metering, an extremely rare incentive in Texas, as the state doesn’t require utilities to offer net metering (as with most states with a high amount of solar). The utility provides $0.11 per kilowatt-hour for all excess electricity produced by your solar installation and fed back into the grid. Credits are applied to customers’ bills and carried over month to month.

More: Net Metering

Tiered Rates Mean Big Savings

To encourage residents to use less energy, Austin Energy uses a tiered rate system. As you use more energy in a month (measured in kilowatt-hours), you pay more per kilowatt-hour. For the first 500 kilowatt-hours (kWh), the utility charges $0.03/kWh in the summer. From 500 to 1000 kWh, the price increases to $0.08/kWh and all the way to $0.11/kWh after 1500 kWh!

By producing your own electricity, you decrease the amount of electricity you purchase from the utility, meaning you stay at the lower tier prices, saving you big bucks over the next 20 years!

#4 Incentives, Rebates, and Tax Credits for Going Solar

Homeowners in Austin, TX, are eligible for some of the best solar incentives in the state, sponsored mostly by Austin Energy.

Federal Tax Credit

Homeowners installing solar nationwide are eligible for the federal 30% renewable energy tax credit, which is expected to drop to 26% by 2019 and 22% by 2022. The tax credit goes to the owner of the installation, so if your system is leased, this incentive goes to your solar installer. Unlike deductions, tax credits have a dollar-to-dollar monetary value, so in essence, you’re getting a 30% discount on your installation!

Austin Energy Upfront Rebate

Austin Energy also provides an upfront rebate to customers going solar with an Austin Energy-approved installer. To be eligible for the rebate, homeowners must be the owner of the installation, so homeowners who lease systems aren’t eligible. The rebate is currently set at $0.70 per watt installed which for an average size system of 5.6 kW adds up to almost $4000!

This rebate program was designed to encourage local residents to adopt solar technology by overcoming the main obstacle to going solar – the high cost. So as more people install solar and costs continue to drop, the rebate phases out. When the program began, homeowners installing solar received $1 per watt. The rebate is currently at $0.70 per watt and will drop to $0.50/watt before dropping off completely after 14 cumulative MW is installed through the program.

Property Tax Exemption

To add to all the financial incentives, the state of Texas offers a property tax exemption for the additional value a solar installation brings to your home. So, for example, if your home is worth $100,000 and you install a $20,000 solar system, you are only taxed on $100,000, not $120,000.

With all of the credits, rebates and exemptions available, the final cost of your solar installation can possibly drop by 50%!

What to Do Next?

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With tax credits and rebates set to expire and installation costs at an all-time low, the time has never been better to install solar in the Austin area!

For more information, look over our Solar FAQ and peruse our article Solar Loans: Everything You Need to Know to help choose the financing solution that best fit your needs.

Once you’re ready, get the ball rolling by getting a solar estimate and reaching out to contractors.

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