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Solar Energy

Solar energy is a good option for Hoosiers to create electricity and heat water and air in their homes and businesses. As of January 2016, Indiana homes and businesses have connected about 143 megawatts (MW) of solar PV to the electric grid, most of which is sold to Indiana utilities through purchase power agreements. This map shows Indiana's solar resource potential. This page features brief explanations of how solar technology works and lists local and federal funding and incentives for solar technologies.

Solar Energy Technology

Solar Panels for electricity: A photovoltaic (PV) cell, commonly called a solar cell or PV, converts solar energy directly into electrical power. Individual PV cells are grouped into panels and arrays of panels that produce electricity to power single home or businesses. The average home array is sized between 4 to 7 kilowatts (kW). Learn more about installing solar arrays here. The National Renewable Energy Lab has created the In My Backyard (IMBY) calculator that shows how much electricity you can generate through Photovoltaic (PV) solar power at your home or business. Access the IMBY Calculator by clicking here.

Solar Systems for heating: Low-temperature solar collectors also absorb the sun's heat energy, but instead of making electricity, use the heat directly for hot water or space heating in homes, offices, and other buildings. Solar systems can dramatically reduce the amount of energy you need to purchase from a utility, because space and water heating are normally the largest uses of energy in a home. Solar space and water heating systems can be classified as passive or active.

  • Active heating systems use solar energy to heat either liquid or air and then transfer the solar heat directly to the interior space or to a storage system for later use. Fans or pumps circulate the heated air or heat-absorbing fluid throughout the home. Learn more about active space heating systems here 
  • Active solar water heaters use the sun to heat either water or a heat-transfer fluid in the collector, and they involve circulating pumps and controls. Learn more about solar water heating systems here.
  • Passive space heating systems allow a home to collect heat from the sun shining through south-facing windows and retain it in materials that store heat. For space heating systems, air in the home circulates past a solar heat surface and through the home by convection (less dense, warm air tends rises while denser cool air moves downward). Learn more about passive space heating here.
  • Passive solar water heaters allow water to flow through the system when warm water rises and as cooler water sinks. The collector is placed below the storage tank so that warm water will rise into the tank. No mechanical equipment is needed for passive solar space or water heating. Learn more about passive solar water heaters here.

How to Pay for Solar Projects over Time

Due to technology costs, solar energy systems usually have large upfront costs which will then be recovered over time as the system lowers your monthly energy bills. This section describes several ways to lower your upfront costs, earn a little money over time, and ultimately reduce your project's payback period.

  • Invest in Energy Efficiency First

If you reducing the amount of energy your home or business needs by increasing the efficiency of your appliances and thermal insulation, you will need a smaller solar system and hence will need to spend less money. An energy audit for your building is a good first step.

  • Loans Geared Towards Solar

Solar loans can help customers avoid high upfront costs and pay for their solar panels over time. Customers who finance their solar panels via loans are still eligible for the federal tax credit. Admirals Bank offers flexible solar loans across the US with terms ranging from 5-20 years. It's possible that local lenders in your area may offer flexible loan terms for solar projects as well. Finally, your solar contractor may be able to connect you to other loan or financing options. Be sure to compare loan terms, origination fees, interest rates, and other important details when comparing loan options.

  • Utility Incentives  

Net metering programs allow customers who install panels on their property to receive credit on their utility bills for the energy that their solar energy system produces and that their home does not consume. Meters essentially run backwards to track your energy production and result in lower monthly energy bills. System capacity size must be equal or less than 1 megawatt (MW). The following utilities offer net metering programs that reimburse customers at the retail rate: Duke Energy, Indiana Michigan and Power Company (I&M),  Indianapolis Power and Light (IPL), Northern Indiana Public Service Company (NIPSCO), and Vectren. Net metering policies vary amongst municipal utilities and rural electric cooperatives.

Feed-in-Tariff: NIPSCO customers with systems between 5kW to 200 kW in size can sign up to sell NIPSCO all the electricity that their solar systems produce. NIPSCO has a limited number of spots available for its program, and the last day to submit your application request form is June 1, 2015. NIPSCO will hold a lottery in July to decide who can participate in the first round of the program.

Community Solar: Tipmont REMC has built a 240 panel array and allows its customers to lease up to 10 panels, which equals about 4.1 kilowatts total. This program allows customers to pay for the panels over time and receive solar energy without having panels on their home. 

  • State Incentives

Renewable Energy Property Tax Exemption: For any solar thermal, photovoltaic, and other solar energy systems installed after December 31, 2011, the assessed value of the system is exempt from property taxes. Property owners that wish to claim this deduction must fill out Form 18865 and file it with the local county auditor. Questions about this incentive should be directed to the local auditor or assessor. The Department of Local Government Finance outlines the incentive.

Indiana Sales Tax Incentive for Electrical Generating Equipment: equipment, machinery, and tools used in the production of renewable electricity are eligible for this exemption.

Indiana Income Tax Deduction for Solar-Powered Roof Vents or Fans: The amount of the deduction is equivalent to the lesser of either 50% of the installed cost or $1000. For more information, please see Indiana Department of Revenue’s Information Bulletin #105.

  • Federal Incentives

The Rural Energy for America Program (REAP) provides grants and loans for energy efficiency and renewable energy projects in rural communities and on farms. Contact your local USDA office for more information.

Business Energy Investment Tax Credit: The credit is equal to 30% of expenditures, with no maximum credit. Eligible solar energy property includes equipment that uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat. Passive solar systems and solar pool-heating systems are not eligible. The credit covers utility-scale, commercial, and residential sized projects. The company that installs, develops, or finances the project uses the credit. This credit falls to 26% of expenditures after 12/31/19 and 22% of expenditures after 12/31/20. The credit will be 10% permanently after 12/31/21.

Modified Accelerated Cost Recovery System (MACRS): allows businesses to recover investments in certain property through depreciation deductions. Qualifying solar energy equipment is eligible for a cost recovery period of five years. For equipment on which the Business Energy Investment Tax Credit is claimed, the owner must reduce the project's depreciable basis by one-half the value of the 30% ITC. This means the owner is able to deduct 85% of his or her tax basis.

Residential Renewable Energy Tax Credit: Tax credit of 30% of cost with no upper limit. Applies to solar water heaters and to solar PV systems. Structural improvements to roofs to accommodate solar panels are included in the 30% tax credit. This credit is used when homeowners purchase solar systems outright and have them installed on their homes. This credit falls to 26% of expenditures after 12/31/19 and 22% of expenditures after 12/31/20. The credit expires after 12/31/21.

Energy-Efficient Mortgages: Homeowners can take advantage of energy efficient mortgages (EEM) to either finance energy efficiency improvements to existing homes, including renewable energy technologies, or to increase their home buying power with the purchase of a new energy efficient home.

  • Solar Renewable Energy Credits (SRECs)

The solar renewable energy credits (SRECs) trading system allows your solar energy system to earn a small amount of money for each kilowatt-hour (kWh) it produces. Owners of small systems can enter into a long-term contract with third-party aggregators who will then sell SRECs to utilities in states like Ohio. Once a solar energy system is certified and registered, one SREC can be awarded for 1000 killowatt-hours of electricity produced. Large solar producers can opt to sell their credits directly to utilities. OED does not endorse any one SREC third-party aggregator, but some common ones are as follows: SRECTrade, Sol Systems, Midwest Solar Aggregation Group, and Flett Exchange. You can also ask your solar installer which SREC trader he or she recommends.  

  • Grants

Check OED's Energy Grant Resources page periodically for grant opportunities that fit Indiana businesses and nonprofits. This grants opportunities are not provided by OED; instead, they come from the local, state, and federal level. Some grants are from private foundations and utilities, while other opportunities are government grants. 

Choosing a Solar Contractor

The following websites list solar contractors in your area, and some of the sites give user reviews of the contractors' work. Be sure to shop around to get the best price.