Dallas Solar – Everything You Need to Know

solar panels dallas

Information about Solar Panels in Dallas, Texas

Texas’ electricity infrastructure is quite an anomaly when compared to most states. Instead of one electricity company both generating the electricity and maintaining the equipment to get it to you (poles, wires, transformers, etc), Texas is a deregulated market.

As such, Texas residents can purchase electricity from any electricity generation company they choose, though one company (Oncor in Dallas) is responsible for maintaining the local electricity grid.

Deregulation was meant to lower electricity prices for customers by introducing competition into an industry that has historically been dominated by quasi-monopolies regulated by the state.

In Dallas, you can choose from dozens of electricity providers. Some provide the cheapest electricity possible, while others are more expensive but offer incentives or bonus programs. Some even sell 100% clean energy (Green Mountain Energy, for example).

All this is great, but what if you want to produce your own electricity by installing solar? In this unique market, what kind of return could you see and how much would it cost? Does Dallas or its utilities offer any special incentives for going solar?

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

#1 Are Solar Panels Worth it in Dallas, Texas?

C
Overall Grade
11 years Avg. Payback Time (For Cash Purchase)
9.0 % Estimate IRR (Return on your investment on cash purchase over 25 years)
$14,936 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 Dallas

If you want to install solar in Texas, you’ve got three options, each with their own benefits and drawbacks.

Cash Upfront

First up is simply paying the full cost of your installation in cash. This is by far the simplest transaction — you pay installer, they install, it’s done — and allows you to save as much money as possible, since there are no leasing or loan companies involved to charge interest.

As the owner of the installation, you receive all the financial perks of your installation, including the federal tax credit, net metering, utility rebates, and added property value when you go to sell (more on all these later). However, just like any appliance in your home, you’re also responsible for monitoring your system’s performance and getting things fixed when they break.

Solar installations are pretty simple systems and solar panels don’t have any moving parts, so everything should last a pretty long time. The most fragile piece of equipment is the inverter, which will likely need replacement after 15 years or so, but other than that, it should be smooth sailing.

Like we said, you see the highest financial savings with a cash purchase, so let’s see how much you can save by financing a moderately-sized 5kW installation with cash in the Dallas area.

Installing solar costs about $3.36 per watt in Texas (when we average out the reported cost from several sources), so a 5kW installation costs $16,816. After applying the 30% federal tax credit as well as Oncor’s rebate (more info on both of these later), that total is now just $9,078. Wow!

That 5kW installation will produce about 7,667 kWh its first year, a value of $851 if you purchased that amount of electricity from the utility at the state average cost. With solar installations lasting about 25 years (except for the inverter, as we mentioned), over the course of its life, your installation will produce 174,354 kWh – worth $24,014 from the utility.

This leaves us with a total savings of $14,936 ($24,014 – $9,078), or just 38% of what you would’ve paid the utility (in other words, a 62% discount)!

Bottom Line: At this rate, you’re seeing an internal return of 9% with a payback time of 11 years. While not as high as you could get with some good stocks, it’s a concrete asset that you can – quite literally – keep an eye on. 9% IRR on such a safe investment seems pretty good to us.

Loans

Paying for your solar installation upfront obviously requires a lot of cash. Although the federal tax credit and Oncor’s rebate program drop the total investment down to just $9k, most of us still don’t have that kind of money lying around waiting to be invested.

Thankfully, as solar has grown in popularity over the last 10 years, so too have organizations that offer loans for solar. If you live in an area with a lot of solar, you can walk into a credit union or bank and discuss what they offer homeowners interested in going solar.

Solar loans allow you to avoid paying all that cash upfront, but you can’t forget that you have to pay interest for the pleasure of borrowing all that cash, and that interest can really dig into your total savings. Exactly how much depends on your interest rate. The higher the rate, the lower your savings.

Let’s say you financed the same 5kW installation above with a 5% loan over 15 years. By the end of the term, you’ll have paid a total of $7,120 in interest. This leaves you with a total savings of $7,816 ($14,936 – $7,120), or a 32% discount on what you would’ve paid the utility!

Of course, you’re still the owner of the system, so you’ll receive the rebates and tax credits for your installation (which you can use to pay off your installation early) as well as the additional value your installation adds to your property. Those perks could even negate your total investment when it comes time to sell your home!

Bottom Line: If you lack the cash to pay upfront, loans are a great Plan B that allows you to save money without putting up that huge initial investment.

More: Solar Loans

Leases

Leases are the last option for financing your solar installation in the Dallas area. Unlike financing in cash or through loans, when you lease your installation, the installer retains ownership of the system. In some ways, this is great for you – you don’t have to monitor the system for issues and the installer even provides an energy production guarantee!

However, since you aren’t the owner of the installation, the federal tax credit goes to the installer – leaving you in the hole. And just like loans, leases also have inherent interest rates calculated in, leaving you with even less savings!

Installers typically claim you can save around 20% with a solar lease. While that’s not terrible for absolutely no money down, it’s still a far cry from the 30%+ savings from a solar loan – which can also be zero money down. Don’t even bother comparing those savings to paying in cash!

Because of all these drawbacks, more and more homeowners are now financing in cash or with a loan, while leases are quickly waning in popularity.

Bottom Line: If you want to go solar and don’t have the money to pay upfront, just go with a solar loan. You’ll see higher savings, added home value, and fewer issues when you try to sell your property.

More: Solar Leases

#3 Dallas Solar Policy Information

Most solar policy is passed on the state level, but that doesn’t mean it doesn’t affect Dallas homeowners any less!

solar panels dallas city seal

Renewable Portfolio Standard

RPSs are mandates passed by the state legislature requiring utilities to dedicate a certain portion of all the electricity they sell from renewable sources. Requirements typically state that somewhere around 20% of all electricity must be renewably sourced by 2025 or thereabouts.

Texas passed an RPS way back in 1999 for 2,000 megawatts of renewably-sourced electricity, which they then updated in 2005 to 5,880 MW by 2015, with 500 MW set aside for non-wind renewable energy (including solar). In addition, they set a voluntary goal of 10,000 MW by 2025.

With wind energy so ubiquitous in the state, utilities actually beat this voluntary goal by 2009! Today, wind accounts for 13% of all electricity sold in Texas, with coal making up 27%, natural gas 50%, and solar a pretty insignificant amount.

Since 2005, Texas has neglected to set any new RPS goals. 5,880 MW might sound like a lot, but consider that Texas’ total net summer electricity capacity is 117,144 MW and you see just how small this renewable sliver really is.

Texas is currently the #1 producer for wind in the country (based on total capacity, not % of total electricity sales), but if they want to keep this crown, the state needs to start thinking about revisiting their outdated RPS.

More: Renewable Portfolio Standard (RPS)

Electricity Prices

We already mentioned that Texas is a deregulated state, so your electricity prices vary depending on the provider you choose. If all the electricity you purchase is 100% renewable, your prices will be higher than other homeowners who simply choose the cheapest option.

That being said, the average electricity price in Texas is $0.11 per kWh (as of August 2017), a bit less than the national average of $0.13 per kWh. Texas sees similar prices to its neighboring states: Arkansas’ and Oklahoma’s average price is $0.11, though New Mexico is a bit higher at $0.13 per kWh.

Why are we talking about electricity prices from the utility in an article about going solar? Well, how much you can save by installing solar depends on how expensive your electricity is. If it’s quite expensive, you stand to gain quite a bit from installing solar and avoiding those high prices.

In Texas, prices are actually pretty low, certainly cheaper than the national average. Low prices are always nice, but it does mean it’ll take longer to recoup your solar investment.

However, there’s another important component. You also need to consider how quickly those prices rise. If you’re spending a scant $0.05 per kWh (much, much lower than any utility you can find in the US), but your utility is raising rates by 20% each year, pretty soon you’ll be spending a fortune on electricity! If you install solar though, you get to avoid this year’s prices as well as all those future raises!

In the US, the average electric utility has raised rates by 2.6% each year over the last 15 years. In Texas, that figure is about 1.8% each year. So unfortunately (or fortunately, if you don’t have solar), it’ll take you longer to see a return on your solar investment than in other states with rapidly increasing electricity prices (consider Hawaii’s rates increase of 4.5% each year!)

Thankfully, there are some great incentives to help lower your solar investment, allowing you to see a faster return. Read the section on incentives for more info.

Net Metering

Texas has no statewide net metering regulations. Instead, it’s left up to the electricity distribution or generation companies to decide how/if they want to go about reimbursing solar homeowners for excess electricity they add to the grid.

A handful of distribution companies offer net metering incentives. El Paso Electric Coop, municipal utility Austin Energy (through a net metering-like ‘value of solar credit’), and CPS Energy in San Antonio, for example, all allow net metering (or at least something very similar to net metering).

In Dallas, you’re not quite so lucky, as Oncor doesn’t offer net metering. If you want a net metering agreement (and if you have solar, you definitely should!), you’ll instead need to find an electricity provider (again, not Oncor, which is your distribution company) that offers net metering.

Green Mountain Power, for example, provides net metering credits for all the electricity you put into the grid at 100% of the retail rate (meaning if you pay $0.11 per kWh for your electricity, they’ll also pay you $0.11 per kWh for your excess solar electricity). To enroll, you need to be a part of their Renewable Rewards program, where they provide 100% wind power for all your electricity needs when your system’s not producing (at night, for example).

Other electricity providers can offer net metering credits, so be sure to call up a couple to see what they offer!

More: Net Metering

Interconnection Rules

In 1999, as part of deregulation, the state decided that all customers should be allowed access to on-site electricity generation, including roof-top solar. The Public Utility Commission of Texas (PUCT, the state organization in charge of regulating utilities) subsequently created a standardized process for electricity customers to connect their solar installations to the grid.

Without this standardization, utilities can require homeowners to pay any sort of fees they deem necessary, work on their own (sometimes painfully-slow) timeline, and require any unusual or complicated application process they’d like.

Under Texas regulations, systems under 500 kilowatts (which includes all residential installations), are eligible for fast-track interconnection using state-wide standardized applications and agreements. Utilities cannot require homeowners to pay study fees as part of the application and they must respond within 4 to 6 weeks.

In addition, utilities cannot require that homeowners have additional liability insurance, contributing to an easier, cheaper installation. All renewable energy credits (RECs) are property of the system owner.

Overall, Texas ensures a pretty standard interconnection process – great news for homeowners.

Homeowners Associations and Solar Access Rights

When you go solar, you need protection from two things: your HOA if they deny your application to install solar on your roof, and your neighbors if they pop the top on their home or plant trees that block the sunlight from hitting your installation. These might sound inconsequential, but they’ve both happened and ended up in court! Thankfully, many states have passed laws protecting solar homeowners in one or both situations.

In Texas, Homeowners Associations are not allowed to prohibit homeowners from installing solar. HOAs can dictate where the solar panels will be placed on the roof, as long as the new location doesn’t lower electricity production by 10% or more. Solar panels must also be parallel to the roof’s surface and not stick out above the roof’s crest. Lastly, HOAs can deny solar installations if the homeowners doesn’t seek written approval beforehand – so get that approval!

While this may sound like quite a few caveats, they’re actually pretty standard and not something you need to worry about.

Unfortunately, Texas has yet to pass any laws protecting the airspace in front of solar panels (typically via property easements). This leaves solar homeowners vulnerable to vertically-inclined neighbors. If you decide to go solar, be sure to talk to all your neighbors on the south-side to tell them your plans and see if they’re planning to add a 2nd story or treehouse in their backyard!

#4 Dallas Solar Incentives, Rebates, and Tax Credits

With the federal tax credit and Oncor’s rebates, you can shave quite a bit off your initial purchase price!

Federal Tax Credit

All homeowners in the US who purchase and install solar are eligible for the federal tax credit, also known as the solar Investment Tax Credit, or ITC. This non-refundable credit is worth 30% of your total installation costs. So if you spent $20k on your installation, you could lower your total owed taxes by $6,000!

If your tax liability isn’t high enough in a single year to claim the entire credit, you can break it out over several years. The credit was initially set to expire in 2016, but lawmakers extended the full 30% credit until the end of 2019. In 2020, the credit drops to 26%. In 2021, the credit drops again to 22%. In 2022, it’s toast. Get it while it’s good!

More: Solar Federal Tax Credit

Texas Tax Credits/Rebates

The state of Texas does not offer any incentives for going solar.

Oncor’s Take A Load Off Texas Rebates

As of 2016, the electricity delivery company serving Dallas, Oncor Electric, has offered big incentives for homeowners and businesses going solar. The company provides $538.53 per kW installed as well as $0.25 per kWh (though they don’t specify how they count the kilowatt-hours. First year? Total production?)

Even without the per-kWh incentives, that’s $2,693 in rebates for your 5kW installation – not bad at all!

Residential installations must be under 10kW in size and the installation must be within 20 degrees of south (in either direction) and the tilt angle must be between 0 (horizontal) and 15 degrees.

Property Tax Exemption

Texas allows homeowners to exempt from property taxes the additional value that solar brings to their home. The appraisal is based on the cost approach and assumes a 10 year useful life.

With Texas’ property tax averaging 1.81%, you’d avoid paying $362 in property taxes your first year after installing a $20k solar installation, with a decreasing amount over the next 9 years. While not a huge amount, it certainly adds nicely to your savings !

Sales Tax Exemption

Texas does not offer a sales tax exemption for solar equipment or installation costs.

General Increase in Home Value

As solar is a concrete asset that both has intrinsic value (you could sell the parts for cash, right?) and saves you long-term money on your electricity bills, installing a system on your roof can add deep financial value to your home.

A 2015 study from the Lawrence Berkeley National Lab found that, on average over the last 20 years or so, homes with solar sold for about $4 more per watt than similar homes without solar. And while the price of solar has dropped significantly over the last 20 years, solar installations’ value still continues as utility prices increase.

At this rate, your 5 kW installation we discussed above could be worth an extra $20k on your home. Even just half this rate ($2/watt) allows you to completely recoup your initial investment if you ever go to sell your home! Of course, remember that this is only if you’re the owner of the installation – no leases!

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.

What to Do Next?dallas solar bridge

We hope you found this overview useful! If you made it this far, you now know just about everything you need to go solar in the Dallas area. The next step is to contact a few installers to get quotes and discuss your roof and available equipment.

While the savings estimates above are useful for comparing the different financing options, your actual savings will vary based on the size and placement of your roof/solar installation as well as your energy use. Reaching out to a handful of companies to get customized estimates lets you see what you could really save!

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

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