Houston Solar – Everything You Need to Know
If you’re looking at installing Solar Panels in Houston, Texas and wondering where to start, look no further!
This city page is specifically about Houston, Texas. For more general state information see our Texas solar energy state page.
We’ve gathered together all the information you need to make an informed decision before moving forward, including information on solar leases, loans, rebates, tax credits, exemptions, and net metering in the Houston area!
Saving money through solar is a little more difficult in the Lone Star State than in other pro-solar states with long lists of rebates and credits, using our tips and information below can help you ensure you get the most out of your solar installation.
Overall Grade for Houston, Texas
We give Houston an overall grade of 4 out of 10 for encouraging homeowners to go solar. We know, not great, but this low score is due more to state-wide legislation (which does little to encourage solar) than the individual city.
Texas provides no net metering, rebates, or tax credits, and the city of Houston does little to make up for gap, besides efficiency requirements for new residential construction. In spite of all this, Texas has the 10th most solar installations of all states in the US - driven mainly by progressive cities like Austin.
Due to the lack of rebates and other financial incentives, if you’re looking to install solar panels in Houston, you need to eke out financial savings where you can! Be sure to claim the state-wide property tax exclusion and absolutely call up your retail electricity provider to see if they offer any net metering agreement (you can read more about these below).
To provide you the most accurate and up-to-date information, we compare the costs of different financing options, and scoured through state and federal government sites for information on all financial subsidies for Houston solar panels, as well as any regulations that homeowners contemplating solar need to be aware of.
#1 Options for buying solar panels in Houston
Just like in any state or city, the rate of return for solar installations in Houston varies depending on the type of financing you choose. Leases see the lowest savings, though the homeowner sees less responsibility through the life of the installation.
Paying Cash Upfront
It’s hard to beat cash upfront purchases if you want the highest financial savings possible, no matter what. Homeowners who choose this route are responsible for all maintenance, repair, and monitoring after the system is complete, but see thousands back over the life of the system.
Purchasing a solar installation in upfront cash was the only option available to homeowners in Houston, as well as any other city in the US, until the early 2000’s. As solar leases have grown in popularity, the most cost-effective financing option is still usually upfront cash (though in Houston loans definitely give cash a run for the money).
While homeowners interested in cash upfront purchase must pay a huge sum at the time of installation and they are responsible for any maintenance and repair during the life of the system, they subsequently avoid any cost hikes from the utility or yearly increases from the solar installer or loan company. Once you purchase the installation, you’re home free! Homeowners who purchase (or take out a loan) also retain the federal tax credit, equal to thousands of dollars in cash directly in your pocket.
If you’re moving to the Houston area and are looking to purchase a new home with solar already installed, in 2014 the city of Houston adopted the new Residential and Commercial Green Building Requirements, which requires all new homes to be 15% more efficient than the requirements set forth in the 2009 International Energy Conservation Code. There are many ways residential developers can meet this 15% requirement, including a Texas A&M-approved energy efficiency installation package that includes a 4 kW solar installation or thermal solar installation.
The good news is that Texas allows solar leasing, unlike many states in the south. The bad news is that savings are likely much lower than with cash or loan financing. However, unlike cash or loans, the solar installer is responsible for all maintenance and repair. So if you want to save some money and don’t want any hassle, you can’t go wrong with a lease!
The surprise winner here. As the actual owner of the solar installation, the homeowner is responsible for all maintenance, repair, and monitoring. However, unlike a cash upfront purchase, which requires anywhere from $15,000 to $40,000 upfront, a loan allows homeowners to reap the most significant benefits from both cash upfront and leases: high financial savings with little money down.
There are many banks, credit unions, and loan companies in Texas that offer loans for solar installations. Financial savings from solar loans is all in the details and greatly changes from one installation to the next – but they can be the perfect mix of high savings with little upfront cash. However, interest rates, loan term, energy production, and any upfront payments can all affect the cost-effectiveness of the installation, so be sure you know the details before signing your name to any agreement.
#2 Houston Solar Policy Information
Outside of the new building efficiency standards, the city of Houston hasn’t taken many steps towards encouraging solar growth in the local area, relying more on state-wide programs to move the industry forward. Below is an overview of different policies affecting solar in the Houston area.
Renewable Portfolio Standard (Mandated Renewable Energy Quotas)
As part of the restructuring of the electricity market in 1999, the state of Texas set a goal that 5,880 MW of electricity must come from renewable sources by 2015 (which covers about 5% of total use in the state) and 10,000 MW by 2025.
By 2009, the state had passed the 2025 goal, with electricity generators operating in the state installing 13,359 MW of renewables, of which 96% was from wind farms providing electricity to the wholesale market (as you can imagine, Texas’ open country is perfect for wind energy production and the wind business is quite lucrative). The goal also set a solar carve-out, requiring that by 2015 500 MW of energy come from renewable sources other than wind. However, there are no penalties for not meeting these carve-out goals, so compliance is largely voluntary.
Electricity prices in Texas are some of the lowest in the country, coming in at an average of $0.109 per kilowatt-hour for residential electricity, compared to the national average of $0.129/kWh and some highs around $0.18/kWh in the northeast and west. Because Texas is a deregulated electricity market, homeowners have the luxury of shopping around for the best deals, so homeowners in Houston can even see rates as low as $0.09/kWh!
As a deregulated energy industry since the 1990s, Texas has outlawed energy utilities from owning the entire electricity market. Now, different private companies can compete by generating electricity or purchasing wholesale electricity and selling it to homeowners or businesses (as an FYI, electricity transmission is still regulated, as no one wants 50 companies each installing their own system of wires across the city). For a great overview of the history of deregulation, check out the Houston Chronicle’s 2016 article.
Net Metering (Will you get paid for extra energy you produce?)
Unlike other states where solar is thriving, Texas has no statewide net metering program, which might come as a shock. The state does not require energy companies to compensate customers for electricity they put into the grid, and very few actually offer net metering incentives.
If you live in the Houston area though, you are in luck! The retail electricity provider Green Mountain Energy offers net metering to customers enrolled in their Renewable Rewards program. As part of the program, Green Mountain Energy provides 100% renewable energy (sourced from wind) to enrolled customers and also credits these customers for all the excess electricity they produce at, and this is the important bit, retail price. In the real world, this means that Green Mountain Energy charges about $0.12/kWh for the Renewable Rewards program, about equal to the national average, and also pays $0.12/kWh for electricity you put back in the grid. Outside of Green Mountain Energy, few companies offer net metering in the state.
Interconnection Rules (For connecting to the grid)
Texas passed distributed generation interconnection rules in 1999 as part of the Texas Public Utility Regulatory Act, which entitles utility customers to distributed generation, including residential solar. This might seem like a fairly basic endeavor, but simply having laws establishing homeowners’ right to distributed generation is a major first step to a flourishing solar industry. To be considered distributed generation, and not a generation company selling power, the system can only provide up to 100% of the owner’s energy production – meaning that homeowners can’t produce more electricity than they use.
Under Texas law, distributed generation systems under 500 kW (the vast majority of residential installations are between 3 and 10 kW) can be fast-tracked through the process and no interconnection study fees are required (which can be quite expensive for larger installations).
Houston-area residents can apply for permission to interconnect solar installations to the grid at Centerpoint Energy’s website. Remember that while connecting to the grid is a necessary first step to enrolling in a net metering program, Centerpoint Energy doesn’t actually offer net metering incentives. As the company that controls the local electric transmission and distribution lines, they only provide approval to connect your system to the grid. If you want to enroll in net metering, be sure to check out programs like Green Mountain Energy’s Renewable Rewards.
Texas has also passed legislation guaranteeing homeowners’ right to solar if under attack by Homeowners Associations (HOAs). HOAs have been a major pain in the past for some homeowners looking to go solar, claiming solar panels are ugly, detract from neighborhood value, and are potentially dangerous.
Most HOAs have Design Review Committees (DRCs) that review property changes, including changes to the exterior of the home, fencing, roof type, and installation of solar panels. Many DRCs see solar panels as an eyesore, detracting from the homogeneous and manicured beauty of the neighborhood. Of course, homeowners looking to go solar would rather break up that monotony and save thousands of dollars! In response to these anti-solar HOA situations, many states have passed laws barring (or severely limiting) the power of HOAs to block solar installations.
In Texas, HOAs cannot block a solar installation, as long as it follows a few stipulations:
- The HOA can dictate where solar panels will be located on a homeowner’s roof. However, if the homeowner can prove that placement is adversely affecting energy production, they can move the solar panels to another section of the roof if they can prove the panels will produce at least 10% more energy. The law states that homeowners must prove this production increase using tools published by the National Renewable Energy Lab, such as their no-cost online PVWatts production estimate tool.
- Solar installation cannot be illegal or violate public health and safety (as decided by court).
- Solar panels must not extend above the roof line (meaning panels can’t stick out past the top of the roof – a safety concern already stipulated in most local building codes).
- Panels must be installed flush to the roof. That is, they can still be raised off the roof (like almost all residential solar installations), but all panels must be the same distance off the roof (usually 4”-6”).
- All electrical conduit, wiring, and solar panels frames must be silver, bronze, or black.
#3 Incentives, Rebates, and Tax Credits for Going Solar
Houston homeowners going solar must rely on the 30% Federal tax credit, state-sponsored property tax exclusion, and any net metering offerings from their retail electricity provider (notably, Green Mountain Power). Neither Centerpoint Energy nor TNMP offer incentives, rebates or net metering to homeowners going solar.
There are currently no upfront rebates available to homeowners in the Houston area. However, homeowners are eligible for the Federal tax credit, state-wide property tax exclusion, and net metering if your retail electricity provider offers it.
Federal Tax Credit
Like homeowners across the US, Houston residents who purchase their solar installation are eligible for the federal renewable energy tax credit. The tax credit goes to the owner of the system, so if you are leasing your installation, the credit goes to your solar installer.
In contrast to a tax deduction, tax credits drop the total amount you owe to the IRS dollar-for-dollar, so in essence the tax credit adds up to a 30% discount on your solar installation! Homeowners who own their installation typically must apply for this tax credit themselves the next time you file your taxes.
Property Tax Exemption
Solar panels can add significant value to your home, which is why it’s important to consider property taxes when going solar.
The state of Texas also offers a property tax exemption for solar, wind, and other renewable energy devices installed on residences. The law, TX Tax Code 11.27 was passed in 1981, on the tail end of the energy crisis of the 1970s. Under this ruling, if a homeowner installs a solar system on their roof, the additional value the solar system adds to the property is untaxed.
So, for example, if Tom owns a $120,000 home and he purchases and installs a $20,000 solar system, the property will continue to be taxed at $120,000, although the actual value of the property is now $140,000.
#6 Overall Consensus
For Houston residents, there are many opportunities to save money going solar. The city sees high solar irradiance, meaning sunshine is quite strong there and solar panels have a lot of fuel to work with. Homeowners are also eligible for the federal tax credit, property tax exemption, and net metering (with certain retail electricity providers).
The general consensus on going solar in the Houston area is… Go for it! The savings aren’t as high as other solar-forward states like California, New Jersey, or New York, but the savings are certainly there and homeowners can save thousands of dollars over the life of the installation!
We hope you found this list helpful! To help you get started with your solar installation, we strive to provide the most up-to-date, accurate, and helpful information on solar in Houston. If you enjoyed the information or have any questions or recommendations, please add them in the comments section below!