Solar power savings SCE&G’s best incentive for homeowners thinning

More homes, such as this one on the Isle of Palms, are sporting solar panels in South Carolina. The first and most valuable round of incentives from SCE&G for solar installations is already gone.

The economics of solar power dramatically changed in South Carolina last year, and while awareness is still growing, the best incentive for South Carolina Electric & Gas customers who were quick to install solar is already gone.

Rooftop panels are a major investment, so it makes sense to take one’s time and carefully investigate. At the same time, those who go first get the largest incentives, if they are SCE&G customers, because that utility’s incentives become less valuable as more people install solar panels.

The financial details of rooftop solar in South Carolina depend on your electricity provider. Incentives and rates paid for power vary, and that all goes into the question of how long it might take for a solar power system to pay for itself.

For example, Duke offers the best deal, with an upfront rebate that slashes the cost of putting up solar panels. SCE&G offers no rebate, and charges a $100 application fee, but offers a power generation incentive that can be worth several thousand dollars over 10 years for a homeowner. Santee Cooper offers a rebate and attractive financing, but charges a monthly fee to customers with solar panels and does not offer “net metering.”

Let’s review some basics.

Solar panels convert energy from the sun into electricity, and when those panels are connected to the electric grid, power flows both to and from the home. Net metering means that essentially, the homeowners pay only for the utility power they consume, after the power they produce is subtracted.

A solar panel system is typically under warranty for 20 years. So they should be installed only on roofs expected to last at least that long. It would be costly to take down solar panels to replace the shingles underneath.

Residential solar systems pay for themselves, but it can take years to see the financial benefit depending on the upfront costs and financing arrangements. Insulation is less expensive and has a shorter payback, so homeowners should consider improving insulation before buying solar panels.

South Carolina offers a 25 percent tax credit for buying a solar power system, on top of a 30 percent federal tax credit. The tax credits will reduce your income tax bills — the credits can be claimed only if you would otherwise owe income tax — but it could take several years to get the full benefit. The South Carolina tax credit can eliminate no more than half your income tax liability in any one year, with the remaining credit carrying forward.

Net metering was the big change last year in solar regulations in South Carolina, along with goals for solar power production. Investor-owned utilities, such as SCE&G, Duke and Duke Progress offer net metering, with no monthly fees for having solar panels.

In other words, if a home equipped with solar panels generates more electricity than it consumes one month, then those kilowatts would be subtracted from the home’s billable power consumption in the following months.

South Carolina’s electric cooperatives are not required to offer net metering, and neither is state agency Santee Cooper. And some slap a monthly fee on customers with solar panels.

The best deal for residential solar is from Duke Power, which does not serve the Charleston area. Duke customers can receive a rebate from the utility worth one dollar per installed watt of system capacity.

Add that on top of the federal and state tax credits, and if the sticker price for a 4kW residential solar system is $14,000 (assuming $3.50 per watt of installed capacity), for a Duke customer the cost ends up being $2,300 after tax credits.

For an SCE&G customer, the net cost of the same system would be $6,300, because that utility does not offer an up-front rebate. Instead, SCE&G offers an incentive for the power those solar panels produce, for 10 years, and that’s the first-come incentive that’s fast-disappearing.

Here’s how it works: In addition to net metering, SCE&G offered a “performance based incentive” — a cash incentive for generating solar power. It started at 4 cents per kilowatt for residential solar power, for the first 2.5 megawatts of systemwide installed capacity, then 3 cents for the next 2.5MW, then 2 cents, then 1 cent until the 9MW goal is reached.

As of Feb. 5, just over 4.5MW of solar power had been reserved with SCE&G, which means the 4-cent incentive is gone. The 3-cent incentive is close to exhausted.

According to the National Renewable Energy Laboratory’s solar calculator (online at pvwatts.nrel.gov), a 4kW solar system on a house in the Charleston area would generate 5,750 kilowatts yearly.

So, an SCE&G customer with such a system would both avoid paying the utility for the power the solar panels generate, and they would be paid $230 yearly for 10 years, if they got the 4-cent-per-kilowatt incentive.

When the incentive drops to 2 cents soon, that same system would generate $115 yearly for the owner, which doesn’t sound like much, but it’s a 10-year deal that adds up to $1,150.

Reach David Slade at 843-937-5552.