Illinois Solar Power: Check Your Savings, Costs, Tax Breaks Incentives and Rebates
If you live in the state of Illinois, the switch to solar can give you considerable cash savings over its service life.
Although there are sunnier states in the US, Illinois offers an attractive combination of incentives for solar power, in the form or rebates and tax benefits that greatly reduce the upfront cost of owning a PV system.
Once the system is in operation, you are eligible to receive performance payments and have access to a favorable net metering policy. The end result is that a residential PV system becomes a great investment,comparable to a successful business, once you break down the project financials.
According to the US Department of Energy, the state of Illinois receives a yearly average of 4 to 5 peak sun-hours per day, with the highest potential located to the south of the state.
Sure, there are sunnier places in the USA, but this limitation is offset by the great solar power incentives available in Illinois.
Return of Investment for Residential Solar Power in Illinois
As an example case study, let’s break down the project financials for a 5-kilowatt system installed in an Illinois home.
At current prices, you could expect to pay slightly more than $21,000 upfront, equivalent to more than $4 per installed watt.
However, thanks to the rebates and tax credits available in Illinois, it is possible to reduce the first year cost to around $9,500.
That is equivalent to less than $2 per installed what, comparable to utility-scale solar farms!
- - The upfront price of the residential 5kw solar system will be in the range of $21,000.
- - Subtract the 25% rebate available in Illinois, equivalent to around $5,250, and your initial investment is now around $15,750.
- - Now subtract the federal solar tax credit at 30%, and the cost of your PV system has dropped by $4,725 more, achieving an installed cost of slightly more than $11,000.
- - Between year one savings and SRECs (Solar Renewable Energy Credits), you can subtract around $1,500 more from first year costs, so the net cash out of your pocket drops to $9,500.
- - You can expect to get the return on your investment in around 8 years.
- - Your property will also increase in value, and so will your net worth.
Considering that the average lifespan of a solar PV system is 25 years, you will get around 17 years of free energy once your PV system has paid for itself. Expect to save around $750 on electric bills during the first year of operation, which will increase given than energy prices rise around 3.5% per year due to inflation.
You will also be able to continue selling your Solar Renewable Energy credits until the year 2020, further improving your project cash flow.
You will see nearly $23,000 in profit over the entire service life of your PV array!
Keep in mind this is just a general scenario for an average Illinois home.
- The orientation of your rooftop. Ideally it should face south. - Natural or artificial obstacles that might cast shadows on your solar PV array. - Your exact location in the state of Illinois: the south is slightly sunnier!
- The orientation of your rooftop. Ideally it should face south.
- Natural or artificial obstacles that might cast shadows on your solar PV array.
- Your exact location in the state of Illinois: the south is slightly sunnier!
Illinois Solar Power Incentives, Tax Breaks and Rebates
There are plenty of incentives for solar power in Illinois, making a residential PV system an attractive investment.
Private utility companies will give you back 25% of the project cost, and then you will be able to apply the 30% federal tax credit on the solar PV system price after the rebate.
The state also has favorable net metering and interconnection policies, which takes away much of the hassle when installing a PV system for your home.
The Renewable Portfolio Standard (RPS) in Illinois mandates that electric utilities obtain 25% of their energy from renewable energy sources by 2025.
The good news is that rooftop PV systems owned by homeowners count toward the goal, and for electric utilities it’s cheaper to incentive residential solar power instead of developing the renewable power capacity themselves.
Illinois Tax Credit
There is no state-specific tax credit in Illinois, but you can take advantage of the 30% federal tax credit, which means you will get 30% of the PV system cost as a tax credit when you file your next tax declaration.
Are there Rebates for Solar Power in Illinois?
Illinois has one of the best solar rebate frameworks in the entire US.
Whenever you install a solar PV system, private electric utilities will give you back 25% of the project cost.
Illinois Tax Exemptions
Illinois has a property tax exemption for solar, but it is not applied on the full price of the system. Instead, the tax exemption is calculated as if you had purchased a conventional energy system of equivalent capacity.
There is no exemption with respect to sales tax.
Illinois Electricity Rates
If you live in Illinois, you can expect to pay $0.13/kWh on average, roughly equal to the average US price.
Although higher electric rates allow to achieve higher cash savings from a solar PV system, you can still make a lot of profit from a solar PV system in Illinois thanks to the great incentives available in the state.
Is There Net Metering in Illinois?
Illinois has an excellent net metering policy for solar power, where you are allowed to carry over any surplus production to the next month, and save the full price of each kWh.
The only drawback is that credits expire at the end of the year, so you must be careful not to oversize your residential solar PV system or you will be giving away energy to the utilities for free!
Are There 0 Down Payment Financing Options in Illinois?
If you are unwilling to assume the upfront cost of the PV system, there are two attractive options you can look into:
- Getting a HELOC (home equity line of credit) and financing your PV system through a loan.
- Illinois allows solar leasing, where a third party installs and owns the PV system and you pay a monthly fee.
Installing a solar PV system in Illinois with a HELOC is a great option, because you will see positive cash flow right away after year one!
The combination of the 25% rebate, the 30% ITC, the year one savings and the performance payments will ensure that you finish year one with a positive cash flow of around $5,000, which will be very useful to ease up the loan payments over the first few years of PV system ownership.
In the long run, you will obtain less savings than if you purchase the PV system upfront in cash, but being able to achieve a one-year payback period is great.
Solar Lease in Illinois
If you don’t have access to favorable loan terms, you could also consider a solar lease, where a third party installs and owns the PV system on your rooftop, and you pay them a monthly fee.
The difference between the monthly savings and the lease payment goes to your pocket, and you get solar power for $0 down and without taking a loan.
PPA Options in Illinois
A PPA, or Power Purchase Agreement, can be considered an alternative version of a lease where you purchase the energy output of the solar PV system instead of paying a monthly fee.
Of course, the price you pay is below utility rates, so you start saving cash right away from the first month.
The option of getting a PPA is available in Illinois, and over the duration of the agreement you can expect to save approximately the same amount of money as if you had leased the PV system.
Cash Purchase VS Loan VS Lease: What’s Best for Illinois Homeowners?
Each alternative has pros and cons, and the final choice is up to you. However, some options may be better than others depending on your current situation:
Purchasing a PV system
Purchasing a PV system in Illinois in cash offers the highest lifetime savings of all alternatives, but you have to wait 8 years to break even.
If you have the cash availability and are willing to assume the payback period to maximize total savings, this is the option for you.
Taking a solar loan
Taking a solar loan in Illinois allows you to achieve a positive cash flow during year one, so it can be a very attractive option if you own equity on your home and have access to attractive loan terms.
Leasing a solar PV system
Leasing a solar PV system in Illinois also gives you positive cash flow during year one, but you will save much less over the agreement’s duration because you are splitting the savings with a third party.
What is the Solar Power Installation Process in Illinois?
Talking to solar installers we trust is the best way to know the exact cost and savings potential of a residential PV system in Illinois.
Once you sign the agreement, the installation process only takes from three to four days.
Although other states receive more sunlight and have higher energy rates, Illinois has an excellent combination of incentives that make solar power a great investment for homeowners. This is further compounded by a favorable net metering policy and being able to sell SRECs to utilities to further boost your project cash flow.
Regardless of how you decide to acquire your PV system, you will see savings.
A cash purchase provides the highest lifetime savings and entitles you to all state and federal incentives, while a lease allows you to go solar for $0 down.
Purchasing a solar PV system with a loan can be considered the middle ground: you get intermediate savings between purchasing in cash and leasing, you get a one-year payback period, and are entitled to all PV system ownership benefits!