Nebraska Solar Rebates and Incentives

Key Details

• Net Energy Metering (NEM) is available in Nebraska with a rated capacity not exceeding 25 kW
• To qualify for the Federal Solar Tax Credit or Residential Clean Energy Credit a property must be the applicant’s primary or secondary residence with new solar devices installed and in use for the first time.
• In 2021, the average retail cost of grid energy in Nebraska was 8.84 cents per kWh, while an average solar panel cost $2.83 per watt.

Nebraska Energy Profile

Nebraska is the 14th sunniest state in the U.S. and receives an average of 4,685 kilojoules per square meter (kJ/m²) yearly. There are two solar energy plants and 83 Megawatts (MW) installed in the state with more utility-scale solar projects in development, especially the 81MW installation expected to be operational by the end of 2023.

State and Federal Solar Energy Incentives available in Nebraska

How Affordable is Electricity in Nebraska?

According to the EIA, in 2021 the average retail cost of grid energy was 8.84 cents per kWh. In comparison, an average solar panel costs $2.83 per watt.

A 6kw solar system installation should cost around $16,980 without claiming any Nebraska renewable energy rebate or incentive. However, the persons may offset the initial cost of installing a solar PV system by claiming a renewable energy benefit like Nebraska solar panel tax credits and tax exemptions.

While these incentives do not immediately reduce the cost of buying or installing solar panels, they can be claimed later to speed up the solar payback period with the amount of money saved.

For instance, after installing a solar PV system, a homeowner in Nebraska can get up to 30% of the panel and installation cost credited against owed income tax with the Federal Solar Tax Credit. Hence, a 6kw solar system installed in 2023 can save you up to $5,094 on income taxes, reducing the cost of the system to $11,886.

According to U.S. Energy Information Administration, almost 30% of Nebraska’s net electricity generation in 2021 was derived from renewable energy. These renewable energy sources included wind, solar, biomass, and hydroelectric power. The state does not produce electricity using geothermal energy, although geothermal heat pumps are being used to cool and heat several commercial buildings and residences.

Federal Solar Tax Credit in Nebraska

The Federal Solar Tax Credit was created by the Energy Policy Act of 2005 and later renamed the Residential Clean Energy Credit by the Inflation Reduction Act of 2022.

This incentive provides tax credits to homeowners who install solar energy devices (and other renewable resources) to offset the cost of the system and encourage the adoption of clean energy sources.

However, claiming the federal solar tax credit does not mean lesser upfront solar payment as it does not reduce the initial cost of a solar device or installation. Rather, it reduces a percentage of the solar system cost from the person’s federal income tax liability (owed tax) for the installation year and rollovers any remaining credit to subsequent years.

Homeowners in Nebraska with installed solar PV systems can claim this renewable energy tax credit, but the tax credit percentage depends on the system’s installation year. The following are the rates that can be claimed for eligible solar devices installed in these years:

• From 2017 to 2019: 30%
• From 2020 to 2021: 26%
• From 2022 to 2032: 30%
• 2033: 26%
• 2034: 22%
• 2035: 0%

Additionally, the Residential Clean Energy Credit also covers eligible battery storage systems installed from 2022 to 2032. From January 2023, stand-alone storage devices also qualify for this tax credit. Hence, it is no longer necessary to connect battery storage with solar panels within one year of each other for the battery storage to qualify for this solar energy incentive.

Claiming this solar tax credit can help homeowners in Nebraska offset the initial system cost, increase savings from the system, and speed up the solar payback period by several months or a few years.

Eligibility

Nebraska residents have to meet the following requirements to qualify for the federal solar tax credit or residential clean energy credit:

• Applicants must own the solar system and the house where it is installed
• The property where the solar PV system is installed should be the applicant’s primary or secondary residence in the U.S.
• The applicant should have paid for the solar panels upfront or funded the purchase with loans or valid financing programs. Leased solar devices do not qualify for this credit.
• Only new solar devices that are installed and in use for the first time qualify for this credit. Previously used equipment should not exceed 20% of the eligible value of the solar system.
• The installation should be complete during the tax year for proper calculations and application
• Solar energy and/or storage devices installed from January 2023 should have at least a 3kWh capacity rating for residential systems. This includes stand-alone batteries. Storage systems installed before this date need to meet the minimum 5kWh capacity for their installation date.

Additionally, the tax credit only covers expenses for the following devices:

• Solar photovoltaic (PV) panels or PV cells that power an attic fan, excluding the fan cost
• Solar water heaters and other concentrated solar-thermal power (CSP) equipment excluding heating for swimming pools and hot tubs
• Balance-of-system tools such as mounting equipment, wiring, and inverters
• Stand-alone or connected energy storage devices with the minimum required capacity.
• Labor costs like the contractor’s fees for assembling components, onsite preparation, and installing the eligible solar devices. This includes the inspection cost, developer fees, and permit fees.
• Sales tax on eligible solar devices and expenses

How do I claim the Federal Solar Tax Credit in Nebraska?

Eligible persons in Nebraska can claim the federal solar tax credit by including a filled Residential Energy Credit application form as part of their tax returns to the Internal Revenue Service (IRS). The filing process may include the following steps:

Step 1. Download form 5695 and the instructions. Form 5695 is the IRS form for claiming the residential energy credit. and the instructions provide guides to filling each line and section of the 5695 form.

Step 2. Follow the instructions to fill out the form. Use documents from your solar contractor (solar contract fees) with the “Residential Clean Energy Credit Limit Worksheet” in the instructions to calculate your credit amount and fill lines 14 and 6b.

Step 3. Refer to other worksheets and instructions to complete the form, especially lines 1, 15, and 17 a-c. Fill line 16 for credit carryover.

Step 4. Include the figure from line 15 in form 5695 to line 5 of form 1040. Taxpayers use this form to file an annual income tax return.

Step 4. Complete form 1040 as you usually do in your tax process

Step 6. Review the forms, especially the figures

Step 7. File all relevant forms as part of your tax return

Like the name suggests, the federal solar tax credit only covers federal income tax liabilities. Additionally, you can only make the most of this incentive when you owe a substantial amount.

Net Energy Metering in Nebraska

Net metering or net energy metering (NEM) is a program or billing mechanism that allows persons with renewable energy systems to send their surplus generated electricity into their utility’s grid in exchange for credits.

Homeowners can use these credits to pay for electricity gotten from the grid when the system does not produce enough electricity to cover the home’s consumption, for instance, at night or during winter.

In May 2009, net metering was established in Nebraska with the enactment of Legislative Bill (L.B.) 436. This law mandates utilities in the state to offer net metering and interconnection services to customer-generators whose system has a rated capacity not exceeding 25 kilowatts. However, the utility is no longer mandated to offer net metering if it has customer-generators with total generating capacity equaling or exceeding 1% of the utility’s electricity demand. Hence, net metering is offered at a first-come, first-serve basis.

Unlike other states that pay credits at the retail rates (or a close option), net metering in Nebraska pays customer-generators at the avoided-cost rate - the calculated amount the utility saves by not having to produce that power - which is substantially lesser than retail rates.

Avoided-cost rates also vary monthly, which makes it hard for homeowners to estimate their potential savings. Nonetheless, getting credits for net excess generation (NEG) is still beneficial in reducing electricity bills and speeding up the payback period.

How to Enroll for Net Energy metering in Nebraska

Enrolling for net energy metering in Nebraska is usually included in the solar installer or contractor’s duties. Depending on the utility, interconnection to the grid and net metering enrollment may involve the following steps:

Step 1. Contact the electricity utility directly or through your contractor to know the requirements for interconnection and net metering. These requirements may include the solar system’s capacity, interconnection agreements, and customer eligibility. Also, ask if the 1% threshold has been reached and if the utility still offers net metering services.

Step 2. Get, fill, and submit the application form with the necessary agreement, contracts, or documents.

Step 3. Await approval and confirmation.

Step 4. Get the bidirectional meter provided by the utility. This should be at no cost to the homeowner.

Step 5. Have the meter installed by the utility or solar contractor if permitted

Step 6. Conduct system inspections, performance tests, and monitoring to ensure that the meter works and that you are getting credits on your bill.

Apart from bill payments, customers of net metering are also subject to other facility charges.

Nebraska Property Tax Exemption

Property tax exemption helps homeowners avoid the potential property tax increase that may happen as a result of installing a solar PV system. With this exemption, the added property value from the solar installation shall not be assessed for tax purposes.

However, Nebraska does not offer property tax exemption for solar residences in the state, except to depreciable tangible personal property with solar systems with a nameplate capacity of 100kw or more. Properties that meet this requirement are exempted from property tax under Legislative Bill 424 and Directive 23-3 (2023) as long as:

• the renewable energy facility is owned by eligible parties, such as electricity customer-generators, cooperatives, government bodies, or an electric membership association.
• the depreciable tangible personal property is used to produce energy using solar, wind, or other eligible sources
• it was installed from January 2016.

Eligible residents can get this incentive after filing the nameplate capacity with the Nebraska Department of Revenue.

State Sales Tax Exemptions in Nebraska

As of March 2023, Nebraska does not provide sales tax exemptions for the sales or purchase of solar panels in the state. The sales tax exemption for renewable energy devices under Nebraska Rev. Statutes 77-5725 stopped being available for new applications after December 31, 2020.

Hence, businesses and homeowners in the state may pay a percentage higher for their solar devices than others in states with solar sales tax exemption. However, note that the federal solar tax credit also covers sales tax imposed on eligible solar devices. This can offset the sales tax a little.

Renewable Energy in Nebraska

Out of Nebraska’s total net energy generation in 2021, the majority of the electricity generated with renewable energy was from wind energy (25%), followed by hydroelectric power (3%), then solar (0.2), and biomass (0.2).

However, nonrenewable energy resources still dominated Nebraska’s net electricity generation. Coal provided the largest share of the state’s electricity generation, with coal-fired power plants supplying 49% of net electricity production. Meanwhile, nuclear-powered plants and natural gas fueled 18% and 4% of the state’s power, respectively.

With the state’s high wind power potential, there are 33 utility-scale wind farms and almost 3,300 MV of installed wind capacity as of early 2022. Additionally, there are 10 utility-scale conventional hydroelectric power plants in the Cornhusker State.

Nebraska Household Profile

Total energy consumption data by the U.S. Energy Information Administration (EIA) indicates that Nebraska had the 9th highest total energy consumption in the country. According to EIA, the state’s total energy consumption per capita in 2020 was 440.3 million British thermal units (Btu).

The industrial sector had the highest energy consumption (191.5 Btu), followed by the transportation sector (97.5). Meanwhile, energy consumption for residences and commercial establishments was 81.6 BTU and 69.8 Btu, respectively.