Iowa Solar Power: Check Your Savings, Costs, Tax Breaks, Incentives and Rebates
Iowa is rich in solar power potential, receiving up to 5 peak sun-hours per day at many locations, especially to the southwest.
The state capital of Des Moines averages at 4.7 peak sun-hours per day throughout the year, and may go above 6 peak sun-hours during June and July.
This makes residential solar power an attractive investment, capable of savings thousands of dollars over the 25-year service life of a photo-voltaic system.
Installing a PV system in Iowa also entitles you to a wide variety of tax benefits: you get the 30% investment tax credit from the federal government, a 18% tax credit from the state government, 100% property tax exemption for 5 years, and a full sales tax exemption on the purchase of your residential PV system.
On top of that, there is a favorable net metering and interconnection policy to reduce the hassle of installing a new residential PV system.
Return on Investment for Residential Solar Power in Iowa
In order to illustrate what you can expect when you invest in solar power in Iowa, let’s assume you will be installing a 5-kW photo-voltaic system at your home.
Although the sales price of such a system is in the range of $21,000, the great tax incentives available in Iowa will take away nearly half of the cost.
The combination of tax benefits and energy savings brings down your first year cost to about $10,300, which is equivalent to around two dollars per installed watt. This is a great deal when you consider that residential PV systems typically cost between $3 and $4 per watt!
- Without tax breaks, the upfront cost of solar panels is $21,000. - The 30% ITC and the 18% state tax credit for solar power immediately take off more than $10,000 from your initial investment, which you will see as positive cash flow within one year. - Subtract around $750 more thanks to first-year savings, and the net outlay for your residential PV system is just about $10,300. - The payback period you can expect is around 13 years. - The value of your property will increase by around $15,000. - The environmental benefit is equivalent to planting more than 110 trees per year, for 25 years!
- Without tax breaks, the upfront cost of solar panels is $21,000.
- The 30% ITC and the 18% state tax credit for solar power immediately take off more than $10,000 from your initial investment, which you will see as positive cash flow within one year.
- Subtract around $750 more thanks to first-year savings, and the net outlay for your residential PV system is just about $10,300.
- The payback period you can expect is around 13 years.
- The value of your property will increase by around $15,000.
- The environmental benefit is equivalent to planting more than 110 trees per year, for 25 years!
The payback period would be better if it wasn’t for the local coal plants producing cheap energy; Iowa has energy prices of around $0.12/kWh, which is below the national average.
However, solar power does not have the carbon footprint of coal, so there is also an environmental reason to go solar.
Anyway, considering the 25-year service life of PV systems, you will have 12 years of free energy once your solar power system has paid for its own price after year 13.
Your total savings will exceed $18,000, which makes owning solar panels comparable to owning a business!
Keep in mind that the above scenario is based on the general conditions for solar power found across Iowa.
There are always site-specific differences from project to project, and they can either enhance or reduce the performance of a residential PV system, for a more accurate evalution go to our solar energy calculator.
- A property with a south-facing rooftop and no significant obstacles blocking a portion of incident sunlight.
- Located to the southwest of Iowa, the part of the state which receives the most sunlight on average.
If you don’t meet these conditions, don’t worry, you can still get a lot of clean energy from solar power. They are the optimal site conditions, but their absence is not necessarily a deal breaker.
The NASA Atmospheric Science Data Center website is an excellent resource where you can input your coordinates to know the exact sunshine you can expect throughout the year.
Iowa Solar Power Incentives, Tax Breaks and Rebates
Iowa has a very weak Renewable Portfolio Standard whose targets were met years ago with wind power alone, and as a consequence there are no rebates when you purchase a PV system.
However, this is compensated by the great tax benefits in the state.
Adding up the state and federal tax credits, you’re allowed to deduct 48% of your PV system’s cost from taxes.
To further incentive homeowners to go solar, Iowa has established a favorable net metering and interconnection policy that all utilities are forced to comply.
If you choose to go solar, you will not have to worry about complex interconnection requirements and paperwork.
Iowa Tax Credit
Regardless of where you are in the USA, you are entitled to the 30% federal tax credit when you go solar.
In the case of Iowa, there is an additional 18% tax credit capped at $5,000. You shouldn’t worry about the cap, however, since it will only apply if your PV system is unusually large for a home.
Iowa Tax Exemption
As if a 48% percent tax deduction wasn’t enough, Iowa also grants two tax exemptions when you purchase a residential PV system:
- A full sales tax exemption. This represents direct cash savings right away when you purchase a PV system.
- A 100% property tax exemption for five years.
The great thing about all of these tax benefits is that they show up during the first years of PV system ownership, greatly enhancing your project cash flow if you decide to go solar.
Iowa Electricity Rates
Cheap electricity is the main factor that extends the payback period of a solar PV system in Iowa, for the simple reason that your savings are equivalent to solar kilowatt-hours multiplied by local electric rate. However, there are a lot of power plants fired by coal in the state, which means that the energy is cheap but not clean.
Solar photo-voltaic technology offers you energy at a cost below the local average electric rates, and on top of that it’s a carbon-free power source.
Is There Net Metering in Iowa?
Iowa was among the first states to introduce a net metering policy, in the year 1984. Utilities were originally required to give you a cashback for any surplus generation, but now they are allowed to carry it over as a credit for subsequent months.
Don’t worry, however, because your savings are only delayed, not lost. Unless your PV system is drastically over-sized, this factor shouldn’t affect you.
An honorable mention goes to the Farmers Electric Cooperative in Kalona, who will buy the energy from your solar PV system at $0.125/kWh, which is above average utility rates for the state. After you have sold an amount of energy equal to your monthly consumption, the price drops to $0.06/kWh, but it is still a great program to incentive solar power.
Are There $0 Down Payment Financing Options in Iowa?
Unfortunately, the legal framework in Iowa doesn’t allow third-party ownership of solar PV systems, so there is no access to leases and power purchase agreements (PPAs). The only cost-effective way to go solar for zero down is to get a home equity line of credit, or HELOC.
If you own a lot of equity in your home, you can cover the whole cost of a 5-kW solar PV system at a very low interest rate.
The great thing about taking a HELOC to install a solar PV system in Iowa is that you are immediately entitled to all the tax benefits, just like if you had purchased the system in cash.
Thanks to the net effect of all the tax benefits, you will finish year one with a positive cash flow of nearly $9,000.
Of course, going solar with a loan means paying interest, and this will reduce the total lifetime savings of your PV system. For a 5-kW photo-voltaic system, the $18,000 in savings drops to around $9,000. The savings are still great, however, when you consider that you went solar for $0 cash down.
Cash Purchase VS Loan: What’s Best for Iowa Homeowners?
This question does not have a straightforward answer, since each option has its pros and cons. The main factors that determine which is the best option are cash availability and home equity owned.
Purchasing a PV system in cash
Purchasing a PV system in Iowa in cash results in the highest possible savings over the lifetime of the project.
If you have the cash availability and are willing to assume the payback period to maximize total solar panel savings over 25 years, this is the recommended option. You can expect over $18,000 in total savings.
Purchasing a PV system through a loan
Purchasing a PV system in Iowa through a loan is recommended if you are willing to give up 50% of the total lifetime savings in exchange for getting immediate positive cash flow during the first year.
You will save around $9,000 over the project’s lifetime should you decide to go for the loan. If you are an investor and have a lucrative business, this option is a great way to go solar for $0 down and invest that cash in your business instead.
What is the Solar Power Installation Process in Iowa?
If you have already taken the decision to install a PV system in Iowa, we recommend you get in touch a reliable solar contractor near you to know the exact price and expected performance according to your site conditions.
1. Fill our solar installation form, providing basic information on your property.
2. Talk with trusted solar contractors near you to get accurate quotes.
3. Compare quotes and choose the best option for you, we recommend comparing at least three.
4. Have your contractor install the PV system, and enjoy clean power while helping the planet.
In this article, we have assumed a 5-kW system operating under average conditions for the state of Iowa. However, your home is unique and your ideal PV system size may be different.
A trusted solar installer can create a detailed proposal that fits your budget and site conditions, and once you sign the agreement the process, typically lasting from three to four days.
Iowa offers an impressive combination of tax benefits to incentive solar power: you have the 30% ITC from the federal government, an 18% tax credit from the state government, full sales tax exemption and a 5-year property tax exemption.
This greatly reduces the cost of going solar compared to that in many other states.
The RPS is very weak in Iowa, and as a consequence there are no solar rebates from local utilities. Energy is also cheap, extending the payback period. However, the great tax benefits help offset these negative points.
As explained above, going solar with a loan helps you avoid the 13-year payback period at the cost of paying interest and reducing total savings from $18,000 to $9,000.