How Much Can You Save on Solar in Texas?
Texas receives 2850 hours of sunlight each year (of a possible 4383) with an average of 7:48 hrs of sunlight per day. In 2021, renewable resources accounted for almost one-fourth of in-state power net production.
Texas used 461 Million British Thermal Units (Btu), making it 6th in the ranking of total energy consumption per capita in US states for 2020.
The Lone Star state generated around 14% of the nation's total renewable power output. Besides that, Texas generates around one-fifth of the nation's power from non-hydroelectric renewable sources.
Texas Solar Tax Credit and Incentives at a Glance
Texas Solar Incentives | State or Federal | Program Overview |
Federal Solar Tax Credit (ITC) | Federal | Texas residents may take advantage of the Federal Solar Tax Credit and obtain a savings of 30% applied to their tax returns. |
Texas Solar Property Tax Exemption | State | Texas will exclude the increase in house value resulting from installing a solar energy system from property taxes. |
Solar Energy Devices Franchise Tax Exemption | State | Texas permits businesses to deduct the cost of solar energy equipment from their franchise taxes. |
Texas Solar Rights | State | This law provides equitable access to solar panel installations and renewable energy for all Texans. |
Net Metering | Local | Net metering permits Texas residents who generate extra energy to apply it to their next electric payment as a credit. All energy suppliers must give this choice to households. |
TXU Energy Home Solar Buyback Plan | Local | Consumers might be compensated for the extra energy produced by their solar installations. |
American Electric Power | Local | (AEP) Solar Rebate AEP customers in Texas are eligible for a financial incentive ranging from $2,500 to $8,500 per kW of solar electricity put on their property. |
CPS Energy Solar Rebate | Local | Clients are able to receive a financial incentive for each kilowatt-hour of solar energy put on their properties. |
Austin Energy Solar Rebate | If you reside in Austin, you may be eligible for a solar rebate program that provides between $2,500 and $8,500 for every kW of solar power put in your home. |
The federal residential solar energy credit is a tax incentive that a taxpayer can claim for the cost of a solar PV system installation. This renewable energy tax credit is also referred to as the Investment Tax Credit (ITC).
Parties who install solar PV systems in 2020 and 2021 are qualified for a 26% tax credit. In August 2022, Congress extended the ITC, increasing it to 30% for installations between 2022 and 2032. Systems installed by December 31, 2019 or earlier were also eligible for a 30% tax credit.
This will decline to 26% in 2033 and 22% in 2034. The tax credit will expire in 2035 unless Congress renews it.
The federal solar tax credit applies to both residential and commercial properties, and there is no limit on its total value.
When you purchase a solar photovoltaic (PV) system during the tax year, you are able to claim a Federal Solar Tax Credit on your federal income taxes for a portion of the system's cost.
The ITC offered a 26% tax credit in 2021 for systems installed between 2020 and 2022. The program currently offers 30% off for systems installed between 2022 and 2032. Hence, while determining whether to install solar panels, consider a 26% to 30% reduction.
It is important to remember that homeowners can only claim the credit once. If the taxes they owe are less than the credit they earned, their credit will carry over to the following year.
Texas homeowners can take advantage of the full credit even if their income taxes owed are lower than the credit value when the system was installed. This is because the program allows them to roll over any unused credit for five years.
As a result, they can still take advantage of the full amount of the credit, even if their income tax liabilities are too low the year they install the systems.
Installing a photovoltaic system before the year 2032 will qualify you for a federal tax credit equal to 30% of the cost of your solar panel system. This 30% discount applies to the total system cost (equipment, labor, and permits).
An individual who installs a $20,000 solar energy system would be eligible for a federal tax credit of $6,000 ($20,000 multiplied by 30%).
The Texas renewable energy tax credit will be reduced to 26% in 2033.
The federal credit tax rate is currently fixed at 30%. With the passage into law of the Inflation Reduction Act, this rate was hiked to 30% from 26% in 2022. The planned changes to the rates are as follows:
The administration of George W. Bush established the federal solar investment tax credit under the Energy Policy Act of 2005.
The ITC was established to encourage the use of sustainable energy. It began as a 30% credit capped at $2,000 for residential projects, but in 2008, the cap was dropped. The rate was scheduled to decrease to 26% in 2022, then to 22% in 2023, before expiring in 2024.
However, as earlier mentioned, the federal government extended the credit and reinstated the original credit rate through the Inflation Reduction Act.
Tax credits worth 30% of the following are available to homeowners in 2023 who have recently installed solar panel systems:
To be eligible to claim the federal solar tax credit, you have to meet the following requirements:
Required Forms: You will need four IRS tax forms to claim your solar tax credit.
Complete Form 1040 as you usually would. At line 5 of Schedule 3 (Form 1040), you should move to Form 5695.
Your Texas solar tax credit can now be claimed on Form 1040 to lower your tax bill.
Net metering, also known as buyback plans in Texas, is typically used to manage excess electricity from solar energy. There are no statewide rules for solar net metering in Texas. But, there are numerous Retail Electricity Providers (REPs) and municipal power companies that will purchase or credit you for your extra solar energy.
In net metering, solar generation is subtracted from electricity usage, and only the difference is paid. If generation surpasses consumption, the rules vary according to the energy company: in most situations, you receive a credit carried over to the next month, and in rare cases, you are compensated for excess energy.
Feed-in tariffs (FITs) are the prices applicable to excess electricity exported to the grid. A feed-in tariff gives a different price for surplus generation, whereas net metering rates consumption and production equally. FITs are typically less than the retail price per kilowatt-hour, although utility companies may set them higher to promote solar generation in new markets. If the FIT and retail kWh prices are the same, net metering is effectively implemented.
Performance-based incentives provide compensation based on output, even if there is no surplus supply. This means that the incentive is awarded regardless of whether the electricity generated is consumed or exported.
Remember that utility firms may implement hybrid plans. You may, for instance, discover a company that provides you with complete net metering for all electricity generated below your consumption, transitioning to a reduced feed-in tariff when payment balances are in your favor.
In many parts of the United States, net metering rates are set by state legislation. However, solar buyback rates are set by utility providers. Utility companies in Texas are responsible for providing net metering and setting the rates there. Most utility providers in the Lone Star State market bi-directional metering but refer to it as net metering.
Net metering lets you pay the retail price for power and sell back extra power for credit at the same retail price. You end up paying the difference between what you bought and what you got back in credit. Your bill will go down by the number of credits you earn. Companies in Texas offer a buyback option that they call "net metering" but is really "bi-directional metering."
With solar buyback, you purchase your electricity from the Texas electric grid at retail price and receive credit at a solar buyback price. The buyback price is determined by your utility provider for your surplus power. Buyback rates for solar systems are often cheaper than retail prices and vary amongst utility companies.
Due to deregulation, Most Texans have the freedom to choose their power provider. Electricity plans tailored to solar panel owners can often result in greater cost reductions. There are a wide variety of power companies operating in Texas. Each of these companies offers a wide variety of different rates and packages.
Some of the best buyback packages for solar system owners in Texas are offered by the following energy companies:
Almika Solar
Austin Energy is the city's (Austin) utility provider. The utility company administers distinct solar buyback schemes for residential and commercial customers.
Household energy consumers receive a Value of Solar (VOS) credit of 9.7 cents per kWh produced. This incentive is for the complete output of your photovoltaic system, not just the excess. The value is subsequently deducted from your total electricity bill. Austin Energy also offers a $2,500 cash refund for residential solar systems with a minimum capacity of 3 kW.
The VOS credit became available to commercial consumers in January 2018. There are three alternative options depending on the type of service and system capacity.
Along with the Value of Solar (VoS) credit, commercial electricity users with solar arrays may select from the following incentives:
For those who participate in CPS Energy's net metering scheme, the stipulations are as follows:
Small businesses, educational institutions, and charitable groups can all benefit from CPS Energy's solar rebate program. Incentives are $0.60/watt up to 25 kW and $0.40/watt above that. One project can get a maximum of $80,000 in incentives, or 50% of total costs (whichever is less).
Houston and Dallas-Fort Worth have a deregulated market where electricity consumers can select their providers. This contrasts Austin and San Antonio, where solar power regulations are determined by a single municipal utility. The primary retail power suppliers (REP) with solar buyback schemes will be the subject of this section. These REPs are Rhythm, Shell Energy, Green Mountain, TXU, and Reliant.
Texas residents can take advantage of Rhythm Energy's famous one-for-one kWh solar buyback program. The Rooftop Solar Buyback Plan is a fixed energy rate 12-month contract. This implies that regardless of what the Texas power market does, your rate will not change.
The Solar Buyback program is offered by Shell Energy in the Oncor and CenterPoint service zones. All excess solar photovoltaic system generation is credited at the current wholesale price. This surplus is then deducted from subsequent power bills. There is no maximum solar buyback amount. Any unused credits are carried over to the following month until needed. Nevertheless, cash payments are not a possibility.
This energy provider's program credits surplus generation at the retail rate. You cannot, however, accrue more credit than you can use (no rollover to the next month).
You are eligible for the Renewable Rewards program if you have a bi-directional electric meter. Also, your solar system's capacity must be under 50 kW. Wind turbine owners can also benefit from this program.
The Home Solar Buyback program from TXU Energy allows you to receive credit for excess generation at the retail energy rate. However, your usage determines the maximum monthly credit.
One of Texas' REPs with the fastest growth is Champion Energy. They provide a number of electricity programs that include a solar buyback option and also provide other advantages:
Net metering solar power systems up to 50 kW are available from El Paso Electric (EPE), which essentially covers all household systems. You cannot, however, oversize your solar PV system because it must be sized based on the amount of electricity you use in the year before installation.
Almost 6,300 commercial customers and approximately 50,000 residential customers are served by the Brownsville Public Utilities Board. For solar power and mini-wind turbines, Brownsville PUB provides a net metering program.
The City of Brownsville Building Permit Division must approve both system types, and extra electricity is credited toward the Fuel & Purchase Energy Fee (FPEC). A one-time fee of $100 covers the cost of changing to a bidirectional power meter.
The Texas Solar Rights Laws are state-level statutes that prohibit or limit solar installation regulations. The adoption of HB-362 reduced the ability of homeowners associations (HOAs) and property owners associations (POAs) to outrightly prohibit solar panels.
To comply with this law, homeowners who reside in HOA-governed communities must continue to follow the standard procedures for requesting modifications, such as submitting a written request or application to an appointed Architecture Review Committee or comparable council. HB-362 changed Section 202.010 of the Texas Property Code as detailed below.
Section 202.010 of the Texas Property Code states that HOAs and POAs cannot prohibit or restrict a property owner from installing a solar energy device, as defined by Section 171.107 of the Texas Tax Code. The following exceptions, however, do give HOAs the authority to restrict solar panels:
HOAs may also regulate the placement of solar panels on a homeowner's roof.
However, homeowners may petition for an alternative location if they demonstrate that the alternative location would increase the estimated annual energy production of the solar panels by more than 10% using a National Renewable Energy Laboratory modeling tool, such as the PVWatts Calculator.
SB 1626 closed previous gaps by allowing developers to prohibit homeowners in residential subdivisions from putting solar panels on their homes during the course of construction if the subdivision has 50 or fewer units.
There are a few tax exemptions and deductions that can be claimed in Texas. However, there is not yet a tax exemption scheme that helps individuals pay for renewable energy equipment.
The state exempts 100 percent of the appraised value of an on-site solar, wind, or biomass energy-generating device from property taxes. In addition, solar energy gadget producers, dealers, and installations are exempt from the franchise tax. Moreover, Texas enables a deduction from the state's allocated margin for the procurement and usage of certain solar energy systems in Texas.
Texas grants its citizens a property tax exemption that exempts them from paying taxes (using form 50-123). This exemption pertains to the portion of the property's assessed worth that results from the installation or development of solar or wind energy equipment. The primary purpose of the device must be the generation, distribution, or storage of thermal, mechanical, or electrical energy for on-site usage. A variety of biomass technologies are included in the wide definition of "solar."
For example, if your property is appraised and taxed at $150,000 and you install a $15,000 system that improves the property value, the exemption applies to the extra value, so you will only be taxed on the property value prior to the addition of the system.
The Texas Comptroller's Office offers Solar and Wind-Powered Device Exemption Guidelines, which detail the qualifying solar and wind-powered devices, valuation methodology, and application criteria.
An organization that produces, sells, or installs solar (wind) energy devices, meeting the requirements of Section 171.107, or certain component components of such devices, may be eligible for the franchise tax exemption provided by Section 171.056.
In Texas, a business can deduct the expense of installing a solar energy system in one of two ways. either all of the money spent on the system can be subtracted from the taxable capital, or 10% of the cost can be taken off the top of the company's income. The franchise tax, which is the corporation tax equivalent in Texas, is levied on both a company's taxable capital and its income.
In 2021, renewable resources accounted for almost one-fourth of in-state power net production in Texas. The state generated around 14% of the nation's total renewable power output. Besides that, Texas generates around one-fifth of the nation's power from non hydroelectric renewable sources.
Around 80% of Texas' renewable energy power comes from wind. More than a quarter of all U.S. energy in 2021 came from wind farms in this state. This makes Texas the leader in wind-powered electricity production. Many regions in Western Texas have abundant wind resources.
These areas have been recognized as Competitive Renewable Energy Zones (CREZ) by the state's regulatory body. Transmission service companies designed and constructed transmission lines in the CREZ to transmit power from isolated wind farms in the west to metropolitan market areas in the state's east.
Texas became the first and only state to exceed 10,000 megawatts of wind electricity production in 2011. As of January 2022, Texas' wind capacity was more than 35,000 megawatts. This figure accounted for** almost 25%** of the state's total generating capacity and about 80% of its renewable generating capacity.
Texas has the sixth-highest potential for solar energy in the country. After California, the state produced the most solar photovoltaic (PV) energy in the nation in 2021. Between December 2020 and December 2021, solar capacity at the state's large- and small-scale (less than 1 megawatt) plants almost quadrupled.
The total installed capacity rose from 5,987 to 10,329 megawatts. 128 Solar energy contributed around 3% of total power production in the state. Small-scale solar plants accounted for about 14.3% of the total.
In 2021, biomass provided about 0.3% of Texas utility-scale in-state energy output. About 67% of this energy came from wood or wood-derived fuels. In addition, the state has a huge wood pellet mill that converts wood waste into pellets.
This factory has a yearly production of around 500,000 tons. Texas also boasts several biogas plants that convert organic waste into green energy.
A significant proportion of these are wastewater treatment plants and landfills. Two anaerobic digesters convert manure and agricultural waste into methane at the state's periphery. In the agriculturally rich high plains area of the Texas Panhandle, four fuel ethanol facilities create liquid biofuels. Using maize and sorghum feedstock, these facilities can create around 400 million gallons of gasoline-ethanol per year.
The state also has eight biodiesel facilities capable of producing around 380 million gallons of biodiesel per year. In Newton County, Texas, a new refinery will convert one million tons of wood waste into a range of biofuels, including environmentally friendly aviation fuel and renewable diesel.
There are less than two dozen hydroelectric power plants in Texas. These facilities provide less than 0.3% of the state's energy because of the state's mostly flat topography and little annual precipitation. As a result, there is minimal opportunity for further hydroelectric development in Texas.
This is in spite of the state's vast number of unpowered dams. Non-potable water in the form of billions of barrels is a byproduct of crude oil and natural gas production in Texas. The water's high temperature—up to 200 degrees Celsius—makes it a promising geothermal resource for power generation.
Low-temperature geothermal resources are used in various areas around the state. Such usage focuses on direct-use applications like ground-source heat pumps.
Guidelines for the state's renewable energy requirement were established in 1999 by the Texas Public Utility Commission. By 2025, the state must have installed renewable energy capacity equal to 10,000 MW, 500 MW of which must come from sources other than wind.
Wind farms in Texas were largely responsible for the state's 2009 achievement of the 2025 target. In January 2022, the state had a non-wind renewable generating capacity of over 9,900 MW at utility scale and approximately 11,500 MW when small-scale solar was included in.
In 2020, the total energy per usage of Texas was** 461 Million British Thermal Units (Btu) (Btu).** This put the state in the 6th position in the list of US states' total energy consumption per capita.
Further analysis of this data by end-use sector indicated that residential and commercial sectors contributed 59.7 and 55.8 Million Btu, respectively. As a consequence, Texas's total energy per capita consumption placed 41st (residential) and 23rd (commercial) in the list of US states. The industrial sector had the biggest overall energy usage per capita, with 248.7, and placed 6th among US states. Another sector with a high total energy usage per capita was transportation, with 97.2 Million Btu. This put Texas in the 6th position among US states.
In 2021, Texas had a total of 11,869,072 housing units. The owner-occupier housing unit for five years (2017-2021) was 62.4%, while the median value for owner-occupied housing units for the same time was $202,600. In terms of building permits granted, there were 265,955 housing permits issued in Texas in 2021. This data ranks the state first among the top 10 states with the most construction permits.