Montana Solar Rebates and Incentives

How Much Can You Save on Solar in Montana?

Key Details

• Homeowners can take advantage of Federal incentives like a 30% solar tax credit
• The tax credit covers installation costs such as panels, batteries, and inverters.
• As of 2022, the average cost per watt for solar panels is $2.42.
• Eligible households are also provided property tax exemptions up to $20K for 10 years

Montana Energy Profile

Montana is the fifth least sunny state in the US. The state receives 3,847 kilojoules per square meter (kJ/m2) of average annual sunlight.

As of 2023, the Treasure State has three installations totaling 133 megawatts (MW). The state’s projected solar energy installation growth over the next five years is 718 MW, which would raise the state’s ranking to 40th in the US by 2029.

State and Federal Solar Incentives in Montana

How Cheap or Affordable is Solar Energy in Montana?

The US Energy Information Administration (EIA) reported in 2021 that the average retail price for grid energy in Montana was 9.50 cents per kilowatt hour (kWh). The average price per watt for solar panels is $2.42 in the state.

The average cost of installing a 6 kilowatt (kW) solar system in Montana is $14,520. If you apply the Federal solar tax credit of 30%, the average cost reduces to $10,164, which helps you save $4,356.

According to the EIA, Montana’s total energy per capita was 115,850 kWh in 2020. The state’s residential energy usage was 27,109 kWh, commercial energy consumption was 22,244 kWh, and industrial energy consumption was 35,139 kWh.

Federal Solar Tax Credit in Montana

The Federal Solar Tax Credit, (also called the Residential Clean Energy Credit), is a program available to all taxpayers who own a solar energy system. It provides property owners in Montana with a 30% tax credit on their income tax liability for that assessment year. There is no limit to the amount. The tax credit covers the cost of the panels, solar batteries, inverters, and labor.

The federal solar tax credit for businesses comes in two types:

• The investment tax credit (ITC): It reduces a taxpayer’s federal income tax liability for a percentage of solar system installation cost.
• The production tax credit (PTC): This is a ten-year per kilowatt-hour (kWh) tax credit for electricity generated by a taxpayer’s solar system/devices.

ITC and the PTC cannot be claimed for the same property. However, project owners can claim ITC and PTC for co-located systems. The table below shows the value of the federal solar tax credit by installation year:

The credit was first offered in 2005 at a 30% rate and was initially scheduled to drop to 26% in 2022 and then to 22% in 2023. The scheduled conclusion date of the program was 2024. Fortunately, the Inflation Reduction Act (IRA) was passed in August 2022 to extend the applicability of the program. Now, the solar tax credit is 30%. Here is a breakdown of the applicable tax credit:

• Solar systems installed on or before 31 December 2019 are eligible for a 30% solar tax credit;
• Solar systems installed between 2020 and 2021 are eligible for a 26% solar tax credit.
• Solar systems installed between 2022 and 2032 are eligible for a 30% solar tax credit;
• Solar systems installed in 2033 are eligible for a 26% solar tax credit;
• Solar systems installed in 2034 are eligible for a 22% solar tax credit;
• The tax credit will expire in 2035.

Eligibility

To qualify for the Federal Solar Tax Credit in Montana, you must:

• Install your solar system between 1 January 2017 and 31 December 2034.
• Install your solar system in your residence in the United States.
• Own the solar system through cash payment or loan financing.
• Be operating a solar system that is new or being used for the first time.

Only project owners whose solar systems meet the following criteria can claim federal solar tax credit for businesses:

• The solar PV system must be located in the United States or U.S. territories
• The solar PV system must be new. Solar equipment limited used for a while is eligible.
• The solar PV system must not be leased to a tax-exempt entity

Note that not all solar system expenses are eligible for federal solar tax credits. For instance, ITC and PTC do not cover roof installation costs. Below are common expenses eligible for federal solar tax credits:

• Solar PV panels cost
• Sales taxes on eligible expenses
• CSP equipment costs for commercial properties
• Solar equipment costs including inverters, wiring, and mounting equipment
• Solar installation labor costs including permitting, inspection, and developer fees
• Cost of step-up transformers, circuit breakers, and surge arrestors for commercial properties
• Solar energy storage devices costs. For residential properties, the solar energy device must have a capacity of 3 kilowatt-hours (kWh) capacity or greater. For commercial properties, the energy storage devices must have a capacity rating of 5 kilowatt hours or greater

The State Department of Revenue can allow a property owner to apply for Montana tax credit for solar panels while applying for federal solar tax credits. This is because Montana solar panel tax credit does not affect federal tax credits. However, a property owner's taxable income on federal taxes may be higher when receiving Montana renewable energy tax credit.

How Do I Claim the Federal Solar Tax Credit in Montana?

Residents can claim the Federal Solar Tax Credit in Montana by following several quick steps:

• Buy and install the solar system.
• Complete IRS Form 5695 with the relevant information, like your solar system size, cost details, and information about the installation company or contractor. You can check out instructions on completing the form here.
• File the completed form with your taxes or give the form to your accountant to file it on your behalf.

Net Energy Metering in Montana

Montana offers net metering to its residents. Net metering is a system where consumers connect their solar systems to a public-utility power grid, and excess electricity is transferred to the grid, allowing them to offset their electricity costs.

Generating electricity from your solar system allows you to decrease the amount of electricity you buy from your utility provider. It also reduces your recurring high electricity costs. If your system generates more electricity than you need, you can sell the excess electricity to the grid. This will either reduce your monthly bill or give you credit for your future bill.

Net metering is mandated by the Montana Public Service Commission (PSC), but restricted to systems 50 kW or below. All investor-owned utilities must apply credits for any excess energy transmitted to the grid. These credits continue over from month to month, but they run out at the end of the annual billing circle.

Customers have a choice of four different months to terminate the billing year: January, April, July, or October. You can use up more credits by choosing a year end that comes after the months with the highest use.

Montana-Dakota Utilities Co. provides net metering to its customers according to the above. NorthWestern Energy provides a one-time annual billing date change.

Rural electric cooperatives are not regulated by the PSC. As a result, these utility providers are able to and do define their own net metering policies, providing for greater flexibility and generosity.

According to state legislation, the Montana Electric Cooperatives Association (MECA) provides its members with net metering/interconnection standards. The cap is simply 10 kW for each individual system. Many MECA members provide net metering in some way, including:

• Beartooth Electric
• Fall River
• Fergus Electric (though this coop charges you $8 a month extra as a solar customer)
• Flathead Electric
• Marias River
• Missoula Electric
• Park Electric
• Sun River Electric
• Tongue River
• Yellowstone Valley (which also offers up to $1,000 in rebates for “solar stock watering systems”).

How to Enroll for Net Energy Metering in Montana

You can take the following steps to enroll for net metering in Montana:

Step 1. Get in touch with your utility provider to find out if you have a bidirectional meter installed in your home. A bidirectional meter is needed for interconnection with the grid and monitoring the flow of electricity between your solar system and the grid. If you do not have a bidirectional meter installed, you should apply for one.

Step 2. Select a reputable solar installer in your municipality or the state to install your solar system. Ensure that they file an application for net metering on your behalf.

Step 3. Install your solar system.

Step 4. Monitor the credits that accrue to your monthly utility bills after installation is complete to confirm that your connection is net-metered.

Montana Property Tax Exemption

Montana has a local property tax exemption for residential owners with solar installations. The state’s law offers residents a property tax exemption on qualifying renewable energy systems for up to $20,000 (single-family residential dwelling) or $100,000 (multi-family residential dwelling or non-residential structure) over 10 years after installation.

To get the property tax exemption, you must complete the Property Tax Exemption Application For Installation Of An Alternative Energy System (Form AB-14). The completed application should be mailed to the local Department of Revenue field office servicing the county where your property is located.

Homeowners can use property tax exemptions to deduct their solar system’s added value from the valuation of their property for tax purposes. A solar system can increase the value of your home by a multiple of 20 times, which increases your property tax liability.

Property tax exemption makes it economically feasible for a taxpayer to install a solar system on a residential property.

Montana Property-Assessed Clean Energy (PACE) Financing

Montana offers Commercial Property-Assessed Clean Energy (C-PACE) financing. This financing program provides property owners with low-interest loans to cover up to 100% of the total upfront cost of their renewable energy or energy efficiency projects.

Residents can repay the loan through bi-annual assessments of their property taxes. Since the energy savings from the projects often exceed the assessments, this financing option can improve property owners’ bottom lines and make their projects cash positive from the start.

This funding strategy ensures that the project investment and its benefits transfer ownership by allowing the assessments to move onto a new owner if the property is sold, like other property taxes.

Montana enacted the enabling legislation for C-PACE in 2021, making the program accessible through municipal governments. The program covers projects from solar systems to high-efficiency HVAC systems and is available to any property for general commercial purposes like retail, industrial, office, non-profit, agricultural, and hospitality uses and certain multi-tenant buildings with four or more units.

C-PACE projects are eligible for rebates and incentives offered at federal, state, and local levels. Property owners are advised to take advantage of all available government, utility providers, manufacturer incentives and rebates, or other upfront cost reductions to reduce the total C-PACE project cost to determine the cost of the financing.

To qualify for C-PACE, the property owner must submit an Energy Assessment or Renewable Energy Feasibility Study that assesses the changes the owner proposes to finance and complies with the Program Guidelines. The C-PACE project must be cost-effective, meaning the estimated monetary savings of the projects outweigh their cost throughout the evaluation.

Clearwater Credit Union Home Energy Loans

The clearwater credit union provides unsecured loans for homeowners to help finance their solar projects or energy-efficiency improvements. The union offers two types of home energy loans:

• Home solar loan: The annual percentage rate of this loan is 4.90%, and the maximum amount is $75,000. The term for a home solar loan is usually 15 years.
• Home energy efficiency loan: The annual percentage rate of this loan is 8%, and the maximum amount is $10,000. The term for a home energy efficiency loan is usually 6 years.

Helena Residential Energy Efficiency and Renewable Energy Loan Program

The Helena City Commission offers loans to homeowners for alternative/sustainable energy improvement purchases. Solar projects eligible for Helena's solar loan program include but are not limited to:

• Wind turbines
• Greywater systems
• Solar water heating systems
• Solar photovoltaic systems
• Geothermal and ground source heating systems

The maximum amount of Helana solar loan is $12,000 per residential property. The term for this loan is ten years. The Helena residential loan is placed as an assessment on annual property tax bills with 0% interest.

The loans are made on August 31 of each year. The annual assessment payments will be certified to the Department of Revenue to be included in the property tax records for eligible properties annually.

To apply for the Helena solar loan, eligible homeowners must mail a completed Loan Application Form and the Lender Acknowledgement Form to the Community Development Department at:

**Community Development Department **
316 N. Park Avenue
Room 445
Helena, MT 59623
Phone: (406) 447-8490
Email: citycommunitydevelopment@helenamt.gov

Other supporting documentation to be submitted alongside the application form includes plans from the contractor, contract dollar amount, and an approval form from the current mortgage holder. After submitting the necessary forms, the application will be reviewed and approved. The homeowner must sign the loan agreement and pay the filing fee.

The applicant’s contractor will have to submit plans for approval and will be given a building permit upon approval. The homeowner must submit a payment request for half cost to the City (based on the contract bid amount). When the work is completed, the Helena city Building Division will inspect it for approval. T

Homeowners are expected to submit all invoices from the contractor to the Community Development Department, and final payment will be made. The loan agreement should be filed with the Lewis and Clark County Clerk & Recorder.

State Sales Tax Exemptions in Montana

As of 2023, Montana has no sales tax at the state or local levels. Sales tax exemption exempts solar system owners from paying sales tax at the point of purchasing the system.

Montana Household Profile

Based on the U.S. Energy Information Administration data, Montana had about 395.3 Million Btu total energy consumption per capita in 2020. About 92.5 Million Btu was consumed by residential properties, while commercial properties consumed approximately 75.9 Million Btu.

As of 2021, Montana had a population of over 1.1 million residents living in nearly 530,000 housing units. About 69.1% of these housing units were owner-occupied, and 30.9% were available for rent. 436,481 households were in Montana, with 2.41 persons per household. Montana local town or city Building Departments issued about 7,272 building permits for new buildings and alterations, additions, and repairs.

Renewable Energy in Montana

As of 2021, Montana ranks 10th in the largest share of electricity generated from renewable energy resources like hydropower, wind power, biomass, and solar.

Hydropower accounted for about 52% of Montana's in-state electricity. Montana was the seventh-largest hydroelectric power producer in the U.S. in 2021. The state has 24 utility-scale hydroelectric plants, mostly located in the western part of Montana. Six of the ten largest power plants in Montanna are hydroelectric facilities.

The first utility-scale wind farm in Montana came online in 2005. Two of Montana’s 10 largest generating plants are powered by wind energy. The 184-megawatt Rim Rock wind farm is the largest wind facility in Montana, located close to the Canadian border.

As of late 2021, nearly 900 megawatts of wind power generating capacity were active in the state. About 1,000 megawatts are still in the planning and construction stages.

In 2022, solar accounted for about 1% of Montana's in-state electricity. Before 2017, solar power was mainly obtained from small-scale (less than 1 megawatt) solar panel installations. In 2017, Montana's first utility-scale (1 megawatt or larger) power facilities began generating electricity.

In 2021, Montana had six utility-scale solar power facilities with 17 megawatts of capacity combined. The state projected that an 80-megawatt solar farm would come online in late 2022. Also, two solar projects totalling 24 megawatts were planned to come online in late 2023.

Montana has very little electricity coming from biomass resources. Only about 7 in 100 households in the state use wood to heat their homes. Montana has only one utility-scale wood biomass-fueled generating facility with 3 megawatts of capacity.

A lumber company owns this utility-scale biomass-fueled generating facility. There is a 1.6-megawatt generating unit fueled by landfill gas owned by an electric cooperative.

Montana has no utility-scale geothermal-fueled generating facilities. However, the state has geothermal resources in the mountainous southwest. Nearly all areas in Montana have low- and moderate-temperature geothermal resources.

Montana enacted a renewable portfolio standard (RPS) in 2005. The RPS achieved its goal of ensuring that 15% of the electricity sold by retail suppliers came from renewable energy sources by 2015. Eligible renewable resources include geothermal, solar, landfill gas, wind, anaerobic digesters, small hydroelectric facilities, biomass, and renewable fuel cells. The RPS requirements also include electricity suppliers buying a certain amount of electricity from smaller, community-based renewable energy projects. Montana provides homeowners and businesses with low-interest loans for energy-saving measures and alternative energy systems expenses.

Renewable Energy in Montana

As of 2023, Montana has about two dozen utility-scale hydroelectric plants, and seven of 10 of the state’s largest power plants are hydroelectric. According to the EIA, in 2021, hydropower generated 40% of Montana’s in-state electricity. The state was the nation’s seventh-largest producer of hydroelectric power.

Wind energy was the third highest contributor to Montana’s electricity generation at 12%. Wind energy powers two of the state’s 10 largest generating plants by both capacity and actual yearly generation.

The largest wind facility is the 184-megawatt Rim Rock wind farm, and the second-largest wind facility is the 135-megawatt Judith Gap wind farm. Montana currently has nearly 900 megawatts of wind power generating capacity in operation. Another 1,000 megawatts are in various stages of planning and construction.

Solar energy generated less than 1% of Montana’s in-state electricity. Solar power in the state was provided only by small-scale (less than 1 MW) residential and business solar panel installations until 2017 when the state’s first utility-scale (1 MW or larger) power facilities began generating electricity.

In 2021, Montana had six utility-scale solar power farms with a combined generating capacity of 17 MW. An 80-MW solar farm and two solar projects totaling 24 MW are scheduled to begin operations in the near future.

Biomass and geothermal resources contributed very little to the state’s electricity. They were mostly used at small-scale levels.