Guide to Solar Incentives in America's 12 Biggest Cities

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published 25 June 2015

Uncle Sam and many state and local governments and utilities offer financial incentives to homeowners who install a solar power system. The federal Residential Renewable Energy Tax Credit will reduce your federal income tax bill dollar for dollar for 30% of the up-front cost of a system (the system must be in service by December 31, 2016). States may also offer a tax credit, and states and cities often offer rebates as well as sales and property tax exemptions.

We asked EnergySage.com, which provides comparisons of estimates from solar-panel installers, to estimate the size and cost—before and after incentives—of a solar power system that would cover a $100 monthly electricity bill in America's 12 biggest cities. (If you use more than that, you will have to buy electricity directly from your electric utility to cover the excess.) The site also estimated annual and total savings for both a purchased system and one leased over 20 years, plus the payback period—that is, how long it would take to recoup the up-front cost of a solar power system.

Disclaimer

State household monthly electricity use: U.S. Energy Information Administration Hours of full sun daily: National Renewable Energy Laboratory Metro-area cost per kilowatt-hour (kWh), estimated system cost after incentives, estimated annual savings over 20 years and time to recoup investment: EnergySage.com Financial incentives: Database of State Incentives for Renewables & Efficiency (dsireusa.org)

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Lists

Atlanta

State household monthly electricity use (national avg. = 909 kWh): 1,088 kWh

Homeowners here, on average, need a large, 11.4 kilowatt (kW) system to offset a $100 electric bill each month. Assuming you installed an average-cost system (the range runs from $34,000 to $43,000), you’d pay $28,000 after the federal tax credit and other incentives. You’d save $9,000 over 20 years once you recouped the cost of the system—but it would take 17 years to earn back the up-front cost. Of the 12 cities, Atlanta has the highest system cost after incentives, the least savings annually, and the longest payback period. Why? Electricity is cheap and, partly because leasing has only recently been allowed by state law, demand hasn’t ramped up yet.

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Boston

State household monthly electricity use: 638 kWh

Solar is a surprising bargain in Beantown, despite numerous cloudy days and long winters. Boston’s expensive electricity and Massachusetts’ generous incentives make solar work. To eliminate a monthly electric bill of $100, a Boston homeowner would need a midsize, 5.3 kW system. After incentives, the net cost of an average system would be $13,000, saving a total of $35,000 over 20 years. (System costs run from $18,000 to $25,000.) If you leased a system (with no up-front cost), you would save $550 annually, or $11,000 over 20 years.

STATE AND LOCAL FINANCIAL INCENTIVES: State personal tax credit of 15% of system cost (after subtracting the federal tax credit), up to $1,000. State sales tax and property tax exemptions. Eligible to earn Solar Renewable Energy Certificates, worth $300 apiece. Homeowners receive credit from their utility for every megawatt-hour (MWh) of electricity that their system produces, which they can sell periodically to utilities that are trying to meet state standards for electric supply from renewable sources. For more on these programs, see www.srectrade.com.

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Chicago

State household monthly electricity use: 755 kWh

It would take more than twice as long to earn back the investment in a typical solar power system in the Windy City compared with Boston. Chicago residents use more electricity than Bostonians, electric rates are cheaper, the typical system is larger, and state and local incentives are stingy. To eliminate a monthly electric bill of $100, you’d need an 8.3 kW solar system with an up-front cost of $27,500 to $33,000. After applying incentives, the net cost of an average system would be $19,800. You’d save $16,000 over 20 years.

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Dallas

State household monthly electricity use: 1,174 kWh

Homeowners here, as elsewhere in the southern central U.S., use a lot of cheap electricity to cool and heat their homes. To eliminate a monthly electric bill of $100, a Dallas homeowner will need a large system, at 11.4 kW, with an up-front cost of $32,000 to $42,000. After applying generous utility incentives, the net cost of an average system would be $17,000. The homeowner would save $13,400 over 20 years. (Leasing has just come to Texas, so data isn't available.)

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Houston

State household monthly electricity use: 1,174 kWh

The business of energy dominates the economy of Houston, and cheap electricity runs its home cooling and heating systems. To eliminate a monthly electric bill of $100, a Houston homeowner would need a 9.5 kW system, with an up-front cost of $26,000 to $35,000. After applying incentives, the net cost of an average system would be $18,000. The homeowner would save $12,700 over 20 years. (Leasing has just come to Texas, so data isn't available.)

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Los Angeles

State household monthly electricity use: 557 kWh

Californians use less electricity per capita than residents of any other state. Almost half of homeowners don’t have or don’t use air conditioning. That’s a good thing, because electric rates are high. California has the most installed solar capacity of any state, but unfortunately for homeowners, many of the incentives for going solar have expired. To eliminate a monthly electric bill of $100, a homeowner needs a small, 3.65 kW system, with an up-front cost of $11,000 to $16,000. After applying incentives, the net cost of an average system would be $7,900, for a savings of $23,000 over 20 years. A homeowner who leases a system would save $450 annually and a total of $9,000 over 20 years.

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Miami

State household monthly electricity use: 1,078 kWh

The Sunshine State ranks third in the U.S. for untapped potential for rooftop solar. The state doesn't allow leasing, so homeowners haven't had a way to get into the game without an initial outlay of cash. Even so, homeowners would save $15,600 over 20 years with a system large enough (7.8 kW) to eliminate a monthly electric bill of $100. After applying incentives, the net cost of an average system would be $15,000 (up-front cost: $20,000 to $23,000).

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New York City

State household monthly electricity use: 602 kWh

The state of New York and New York City offer homeowners generous incentives for going solar. The state hopes to soon meet nearly one-third of its need for electricity from renewable sources. To eliminate a monthly electric bill of $100, a homeowner needs a modest-size, 4.7 kW system, with an up-front cost of $15,000 to $20,000. After applying incentives, the net cost of an average system would be just $7,000—the lowest cost among the 12 cities. You’d save $26,000 over 20 years. A homeowner who leases a system would save $420 annually and $10,000 in total over 20 years.

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Philadelphia

State household monthly electricity use: 857 kWh

Homeowners in the City of Brotherly Love pay the highest electric bills, on average, among the dozen largest U.S. cities. To eliminate a monthly electric bill of $100, a homeowner there needs a moderate-size, 5.7 kW system, with an up-front cost of $17,500 to $25,000. After applying incentives, the net cost of an average system would be $14,000. The homeowner would save $22,000 over 20 years. A homeowner who leases a system would save $445 annually and $8,900 in total over 20 years.

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Phoenix

State household monthly electricity use: 1,049 kWh

Weather reports in Phoenix are predictable: Sunny and hot. Arizona ranks second in the U.S. for installed solar capacity. However, the financial benefits for homeowners have dimmed because of the imposition of fees on utility customers who have grid-connected solar systems by the state’s utility regulator. To eliminate a monthly electric bill of $100, a homeowner needs a moderate-size, 5.6 kW system, with an up-front cost of $18,500 to $23,000. After applying incentives, the net cost of an average system would be $11,400. The homeowner would save $21,900 over 20 years. A homeowner who leases a system would save $475 annually and a total of $9,500 over 20 years.

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San Francisco

State household monthly electricity use: 557 kWh

Even the electricity is expensive in this high-cost city. But with relatively low consumption (not much need for heating and cooling) and plenty of California sunshine, homeowners can cover their monthly electric bill with a relatively small system. To eliminate a monthly bill of $100, you’d need a 3.7 kW system, with an up-front cost of $11,000 to $16,000. After applying incentives, the net cost of an average system would be $8,500. The homeowner would save $23,100 over 20 years. A homeowner who leases a system would save $440 annually and a total of $8,800 over 20 years.

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Washington, D.C.

State household monthly electricity use: 720 kWh

You can thank Congress for the generous, soon-to-expire federal tax credit, but solar systems are a win-win in the nation’s capital mostly because demand for Solar Renewable Energy Certificates is high and their value has increased, says Vikram Aggarwal, CEO of EnergySage.com. (That happens when electric utilities lag in their development of renewable sources and, to meet their state-mandated quota, must buy SRECs. Homeowners receive the benefit of the SRECs over time as their system produces electricity, according to srectrade.com.) To eliminate a monthly electric bill of $100, a homeowner needs a moderately large, 7.5 kW system, with an up-front cost of $22,000 to $30,000. After applying incentives, the net cost of an average system would be $17,900. You’d recoup the system cost in four years, and over 20 years you’d save $46,100—the greatest savings and quickest payback among the 12 cities.

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Esswein joined Kiplinger in May 1984 as director of special publications and managing editor of Kiplinger Books. In 2004, she began covering real estate for Kiplinger's Personal Finance, writing about the housing market, buying and selling a home, getting a mortgage, and home improvement. Prior to joining Kiplinger, Esswein wrote and edited for Empire Sports, a monthly magazine covering sports and recreation in upstate New York. She holds a BA degree from Gustavus Adolphus College, in St. Peter, Minn., and an MA in magazine journalism from the S.I. Newhouse School at Syracuse University.