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Understanding Solar Incentives

January 16, 2020

Whether you are considering solar for your business or solar for your home, you have probably heard about various types of incentive programs that can help you make the decision to invest in solar and realize the benefits.

Understanding the different incentive types and how they work can be a little confusing so here is a basic breakdown:


Perhaps one of the most appealing to the consumer, rebates provide cash toward the up front capital cost of a PV system. Rebates may be available from your utility company as a way to encourage customers to install solar on their homes and help the utility company achieve the Renewable Energy Standard (RES) for their state.

Some jurisdictions also have an energy office or non-profit group to promote and educate the public on energy choices. They may also provide rebates to help speed up the adoption of clean energy production.

Performance Based Incentive (PBI)

Unlike rebates that provide cash up front, PBI’s provide cash over the life of the system and are paid out based on how much energy your PV system produces. Once a PV system is installed the utility company will install a bidirectional meter that can track how much energy you purchase from the grid and how much your PV system supplies to the grid. The customer enters into a contract with the utility specifying how much money the utility will pay the customer for PV supplied energy and for how many years.

Feed-in –Tariffs (FIT)

A popular incentive mechanism in Europe and Canada, feed in tariffs allow solar developers to build and interconnect PV systems to the utility grid and sell the energy produced by the system to the utility company. Unlike the PBI where the PV system is producing energy on the customer side of the meter the FIT system is interconnected on the utility side of the grid.

Net Metering

Net metering is a policy that allows a PV customer to use the energy they produce when they need it and not necessarily at the moment of generation. The PV produced energy can be effectively banked and used for future credit. Most importantly the PV produced energy receives a retail credit i.e. it is assigned the same value per kWh as the utility charges the customer.

Investment Tax Credit (ITC)

In place until 2016, the Solar ITC allows investors to recoup 30% of their investment as a tax credit. For a residential PV system the credit is calculated on total system cost after any rebates, but the homeowner is not required to pay income tax on rebates. For a commercial system the credit is calculated on total system cost before rebates, but the business owner is liable to pay income tax on rebates.

Overall, there are several incentive mechanisms in place to help consumers transition to clean energy, many of which could apply to you.