How Much Can You Save on Solar in Arkansas?
Arkansas is one of the top ten sunniest states. It receives 4,725 kilojoules of sunlight per year, which is higher than the national average of 4,234 kilojoules per annum. In comparison, Arizona receives the most sunlight with over 5,755 kilojoules of sunlight per year.
Arkansas Solar Tax and Incentives at a Glance
|Arkansas Solar Incentives||State or Federal||Program Overview|
|Net Energy Metering||State||A state-sponsored incentive that pays solar users for excess solar energy.
Solar users must connect to an investor-owned electric company to be eligible for the program.
Furthermore, the PV system must have a lower capacity than 25 kWh.
|Property Assessed Clean Energy (PACE) Financing||State||An affordable and low-interest loan to mitigate the cost of solar panels.
The loan repayment plan is added to the property tax.
|Federal Solar Investment Tax Credit (ITC)||Federal||Covers 30 percent of the total cost of solar installation.
This is a one-time offer and it comes as a tax credit.
Arkansas has an active and rapidly growing solar industry. According to the SEIA Report, as of 2023, the Natural State had installed 632 megawatts of solar energy-producing facilities. These facilities include industrial-scale solar plants and small-scale residential or commercial solar panels. The notable solar plants in Arkansas include:
Arkansas also plans to add an additional 3,004 MW by 2030.
How Much Can You Save on Solar in Arkansas?
As of 2021, the retail cost of grid electricity was $0.9 per kilowatt-hour. On the other hand, it costs $3.07 per watt to install a solar panel. Keep in mind that the cost does not include the deductions in the form of solar energy incentives.
For example, the Arkansas tax credit for solar panels will reduce the cost per watt by 30 percent. After factoring in these incentives, a solar panel should cost less than $2 per watt.
|State||Number of solar Installations||MW Installed||Average cost for grid power (2021)||Average cost per watts|
|Arkansas||Nine||632 MW||$0.9 per kWh||$3.07 per watt (before solar incentives)|
The cost of solar installations has also decreased by 53 percent within the last decade. This means more residential and commercial facilities can set up solar panels as a cheaper alternative to fossil-based electricity.
For a state with high sunlight hours, a 6 KWh PV system can generate enough power for an average-sized household. As of 2023, it costs about $18,420 to install a 6 KWh solar system in Arkansas. However, solar users can drive down the costs via various solar incentives.
The federal solar tax credit covers 30 percent of the cost of solar installation. So, you'll receive $5,526 as tax credits for installing a 6 kWh PV system.
Note: You will only receive a 30 percent discount for PV systems installed between 2022 and 2032. For PV systems installed in 2021, solar users will get a 22 percent discount.
|State||Cost of installing a 6kw system||Federal tax credit value 2023 (30%)|
|Arkansas||$14,460 - $18,420||$4,338 - $5,526|
According to the US Department of Energy, Arkansas consumed 46.9 terawatts per hour of energy in 2021. On the other hand, the state generated 65 TWh of energy in the same year. Its energy production accounts for two percent of the total energy generated in the US.
Arkansas generates energy from non-renewable and renewable energy sources. About 75 percent of its energy production comes from non-renewable energy sources. Natural gas and coal power nine out of the 10 largest power plants in the state. In addition to this, nuclear energy powers the remaining power plant. It generates 22 percent of the state's energy output.
Hydroelectric power, biomass, and solar are the major renewable sources. More so, these energy sources generate 10 percent of Arkansas' energy output.
As of 2023, the state has 19 industrial-scale hydroelectric power plants. It also has a storage plant for storing excess hydroelectric energy. Each power plant has a capacity to generate more than 1 MW.
Biomass generates 16 to 17 percent of the state's renewable energy output. Methane and crop residues from livestock manure are the fuel sources for biomass power plants. There's also a wood pellet manufacturing plant that provides fuel for these facilities.
Industrial solar farms and small-scale solar installations generate 10% of renewable energy. The Chicot Solar Farm and Searcy Solar Farm are the two major solar installations in the state. Each facility has the capacity to produce 100 megawatts of energy.
Note: Arkansas does not require residents to purchase all their energy from renewable energy sources. Also, it does not impose a renewable energy portfolio on investor-owned electric utility companies.
Arkansas consumed a total of 343.5 million BTUs per capita in 2021. Each sector—transportation, residential, commercial, and industrial—contributed to this total energy consumption. Here's a breakdown of their impacts:
The solar tax credit is a federal initiative that aims to encourage the use of solar energy. It refunds a portion of the expenses incurred while installing a solar system. Furthermore, solar users will receive the refund in the form of tax credits. To get the federal solar tax credit, solar users must include the costs on their annual tax return.
Note: Not all solar users will receive the same rate for this solar rebate. T
The solar tax credit has different phases, and each phase offers a specific discount. For example, you'll get a 22 percent discount if the system was installed in 2021.
Here are the rates for other phases of this program:
In most cases, the solar tax credit will cover all expenses required for solar installation. Specifically, the solar tax credit will cover these expenses:
Arkansas residents are eligible for the solar tax credit if they fulfill these criteria:
Follow these steps to claim the Arkansas solar panel tax credit:
Check the previous section to see if you qualify for this incentive.
Step 1. Visit the IRS website and download the Form 1040 and Form 5695. The latter is specifically for claiming tax credits for using non-renewable energy sources. You can also download the instructional guides for these forms.
Step 2. Fill out the different sections in the Form 5695. For instance, line 1 section is where you calculate the cost of all eligible solar equipment. You can also include all additional expenses, including labor costs in line 2 to 5.
Step 3. Fill out your annual tax report on the Form 1040. Move to page 4 to view how much credit you can claim.
Step 4. Subtract the tax credit from your annual tax payment. Your tax credit must be lower than your annual tax. If it exceeds the tax liability, you can roll over the remaining amount to the next tax year.
Step 5. Write down the remaining tax credit in line 16 of Form 5695.
Step 6. Deduct the tax credit from your tax liability. If the credit is greater than the tax liability, write down the remaining figure in line 16 of Form 5695.
Step 7. Add the renewable energy tax credit to line 5 of the Schedule 3 form.
Step 8. Send the completed tax forms and other necessary documents via mail to:
Department of the Treasury
Internal Revenue Service
Kansas City, MO 64999-0002
Internal Revenue Service
P.O. Box 931000
Louisville, KY 40293-1000.
Net metering is a financial contract between a renewable energy user and an investor-owned electric utility company. The company pays the user for generating excess electricity from renewable energy sources like solar, wind, biomass, and hydroelectric.
In a net metering program, you get paid in energy credits, which are stored on the net meter. You may convert the credits to power when you exceed your renewable energy output. In most cases, solar users accumulate credits during the summer when solar energy production is high. And they use the credits in months with a low number of sunlight hours.
Carlton installed a 6 kWh solar system and connected it to Entergy Arkansas, LLC. The system generated 8,000 kWh in August. However, he only used 4,500 kWh of power in that same month.
Since he's on a net metering plan with Entergy, the company will pay him for the excess solar power. This payment is stored as credits on the net meter. Arkansas' net metering policy enables users to exchange the credits for cash amounts after a 24-month period.
Note: The eclectic company will pay you based on the current wholesale cost of grid electricity. Also, you can order more than one net meter for different properties and split the earned credits among the different meters.
Nevertheless, not all renewable energy users can qualify for this incentive. You need to fulfill these criteria to qualify for net metering in Arkansas:
Each electric utility company in Arkansas has a set of guidelines for net metering enrollment. In this section, we'll explore how to enroll for net metering with Entergy Arkansas LLC and Ozarks Cooperative.
Follow these steps to enroll with Entergy Arkansas, LLC:
Before you sign up for net metering, the renewable energy system must meet these safety and performance standards:
How to enroll for net metering with Ozark Electric Cooperative, Arkansas
Read the rules for net metering in the Arkansas Public Service Commission's documents.
Fill out and sign these documents:
Send the completed documents via email to: email@example.com
On the other hand, you may send the documents via mail to the contact address below:
Attn: Manager of Energy Services
P.O. Box 848
Fayetteville, AR 72702_
Ensure you submit a Standard Interconnection Agreement for Net Metering Facilities at least 30 days before the system is connected to the grid. Also, send the application to the address provided above.
After installing the renewable energy system, reach out to Ozarks Electric for an on-site inspection. You can contact them at (800) 521-6144 or firstname.lastname@example.org.
Once approved, the company will set up the net metering connection.
As of March 2023, there was no state-level property tax exemption for solar users in Arkansas. However, some municipalities or counties may offer local property tax exemptions. So, always check with the local tax assessor's office for any available exemptions.
In the absence of a tax exemption, your property tax will increase after solar installations. Nevertheless, you can take advantage of other Arkansas renewable energy rebates to reduce the burden.
The AOG residential rebate program offers a financial incentive to users who install energy-efficient equipment. To access this incentive, you must qualify for one of these sub-programs:
The heating equipment rebate program offers a $300–$500 cash amount to customers that install a highly-efficient gas furnace. This incentive is accessible to both residential and small-scale commercial system users.
On the other hand, the water heating equipment rebate program offers a $500 incentive.
To access this rebate, complete an online form for the specific sub-program. Next, you may submit the form online or send it via mail to the:
Summit Utilities Rebates
6350 Felton Rd.
Lansing, MI 48906
Entergy Arkansas offers cash amounts and rebates to help its customers manage energy more efficiently. The residential efficiency program covers customers living in personal residences, apartments, and manufactured homes. Furthermore, it provides a set of energy efficiency programs for each type of residence. Customers can receive incentives like the Summer Advantage and Appliance Recycling. The Summer Advantage pays users for regulating their air conditioners during the summer.
This is a financial incentive for those who want to upgrade the energy efficiency of their living spaces. Here's what to expect with this loan offer:
The NAECI loan program offers low-rate loans to customers who want to increase the energy efficiency of their homes. As of 2022, the interest rate was set at 1 percent. To access these loans, you must fill out an online application form on the NAECI website. That said, you can apply for one or more of these loan types:
For most loan types, you can get a minimum amount of $500. Furthermore, you'll need board approval before you can obtain loans higher than $20,000.
This Arkansas renewable energy rebate program offers incentives to customers who invest in energy-efficient products. You are eligible for the program if you have at least one of these products:
Customers can get between $6 and $500 for possessing this equipment. You'll obtain a $500 rebate for using a heat pump water heater. On the other hand, you'll receive $6 for every LED bulb installed on your property.
Although Arkansas offers sales tax exemptions for certain products, it doesn't offer a state-level sales tax exemption for residential solar purchases as of 2023. Residents must pay a 6.5 percent sales tax when they purchase a PV system.
However, there are solar energy incentives to help reduce the financial burden. The Arkansas tax credit for solar panels is one of the popular options.