What it takes to go solar in 2021

January 6, 2021 | 3min read

If you want to receive the federal tax credit, also known as the Investment Tax Credit (ITC) you must go solar by the end of 2023. As of 1 January 2024, the ITC for consumers will expire unless Congress acts again to extend it. Another consideration is whether or not net metering is available to solar owners in your area. Some utility companies only compensate solar owners for electricity generated by their systems at the company’s export rate, which is considerably less than the compensation rate that solar owners would get under net metering. If your utility company pays at the export rate, then it makes sense to install a smaller solar system.

The federal tax credit for solar in 2021

For 2021 and 2022, the federal tax credit for solar will be 26%. As of January 2023, the tax credit for solar will be 22% of the price of the solar system. To receive any compensation from the credit, you must have paid 2020 income taxes. If you end up not paying income tax in 2020, you can roll the credit forward for 5 more years. You are able to claim the credit if construction on your solar system has had (past tense) substantially begun by New Years’ Eve, 2023. 

You should contact a qualified tax expert and consult with them. Neither Freedom Forever’s family of independent authorized dealers nor Freedom Forever itself can give you tax advice. A qualified tax professional will understand your situation and be able to give you the most relevant advice.

Net metering vs. export rate

With net metering, your utility company pays you for electricity at the same rate that they charge you. You get a one-to-one credit for any electricity your system supplies to the grid. Your compensation rate is less straightforward if you are billed for electricity using time-of-use (TOU) billing because the rate you pay or receive compensation at varies by the time of day. The highest rates charged under TOU plans are often in the evening after your solar has stopped generating electricity for the day.

The utility’s export rate will be lower than what you’d get under net metering regardless of what rate plan your utility company has you on. The export rate is the amount per kilowatt-hour that the utility pays power plants for electricity that they buy from them. Under export rates, you may not even be compensated for the amount that it costs you to produce power from your system. In that case, it makes sense to install a smaller solar system, one that generates only 60% of your average electricity usage. The idea behind a smaller solar system is to use all of the electricity that the system generates, and send little or none of it to the grid.

If you are a solar owner with a system that meets 100% of your needs and you are being compensated at export rates, it may make sense to install home batteries so that you store the extra power your system generates instead of sending it to the grid.

Find out if solar makes sense for you in 2021

There are many factors that you’ll want to consider if you are thinking about going solar in 2021. Some of those factors are unique to your home and the area you live in such as how much sunlight your roof gets. The best way to get answers to all of the questions you need to ask is to consult with an expert. Freedom Forever’s family of independent authorized dealers are experts on solar power in your area. Simply call us or click to get a free quote along with your questions answered.

Ready to go solar in 2021? Call us at 800-685-1850 or click below to get a free quote.