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Frequently Asked Questions
 

What is Net Metering?

Net metering is a policy that allows your distributed generation (on-site) solar project to create additional economic value. Net metering allows you to receive credits on your electricity bill for extra electricity that your solar project generates and sends to the grid. If you are located in Ameren, ComEd, or MidAmerican service territory, you are eligible for full retail rate net metering (also called 1:1 net metering) as long as (1) you are a residential or small business customer that purchases electricity from your utility, (2) you submit your application prior to January 1, 2025, and (3) you do not take the smart inverter or distributed generation rebate (only available in Ameren and ComEd service territories). If your solar project makes more electricity than you are using, the electricity flows to the grid. On the other hand, if you use more electricity than your project is generating at any specific time, you will pull electricity from the grid. Your electric utility will “net out” the extra electricity that your project sends to the grid against the electricity that you pull from the grid. The electric utility will then only charge you supply, delivery, and other volumetric fees (fees that are based on kWh usage) on the netted amount of usage. For example, if your solar project sends 400 kWh of extra electricity to the grid, and you use 500 kWh of electricity from the grid, the utility will only charge you for using 100 kWh of electricity. (For electricity that is produced directly from your solar project that you use onsite, there are no utility charges or credits.) Thinking about it another way, you will receive credits on your electricity bill for electricity that you send back to the grid. Full retail rate net metering means that you are compensated at the same per kWh rate that you pay for electricity (that is, the full retail rate) when your solar project produces more energy than you use. If you overall send more electricity to the grid in a month than you pull from the grid, the utility will not charge you any volumetric fees (fees that are based on kWh usage), and the extra net metering credits (in kWh) will “roll over” to the next month. You will still have other charges on your bill, such as the customer charge. If you receive energy supply from an Alternative Retail Electric Supplier (ARES) but your electricity is delivered by Ameren, ComEd, or MidAmerican, the utility will provide net metering of the delivery charges and other volumetric charges (charges based on kWh usage) from the utility. The ARES will be responsible for net meter crediting for supply and transmission charges. Large commercial and industrial customers generally do not pay the retail rate for electricity supply, and therefore receive fewer net metering credits; instead, they receive credits equal to the electricity provider’s avoided supply cost, rather than the full retail rate (which includes both delivery and supply service charges). Net metering policies will change on January 1, 2025, but solar projects that have submitted net metering applications prior to that date will be grandfathered in with full retail rate net metering.

What is the Federal solar tax credit?

What is the federal solar tax credit? The federal residential solar energy credit is a tax credit that can be claimed on federal income taxes for a percentage of the cost of a solar PV system paid for by the taxpayer. (Other types of renewable energy are also eligible for similar credits but are beyond the scope of this guidance.) The installation of the system must be complete during the tax year. Solar PV systems installed in 2020 and 2021 are eligible for a 26% tax credit. In August 2022, Congress passed an extension of the ITC, raising it to 30% for the installation of which was between 2022-2032. (Systems installed on or before December 31, 2019 were also eligible for a 30% tax credit.) It will decrease to 26% for systems installed in 2033 and to 22% for systems installed in 2034. The tax credit expires starting in 2035 unless Congress renews it. There is no maximum amount that can be claimed. Am I eligible to claim the federal solar tax credit? You might be eligible for this tax credit if you meet the following criteria: Your solar PV system was installed between January 1, 2017, and December 31, 2034. The solar PV system is located at a residence of yours in the United States. Either: You own the solar PV system (i.e., you purchased it with cash or through financing but you are neither leasing the system nor nor paying a solar company to purchase the electricity generated by the system). Or, you purchased an interest in an off-site community solar project, if the electricity generated is credited against, and does not exceed, your home’s electricity consumption. Notes: the IRS issued a statement (see link above) allowing a particular taxpayer to claim a tax credit for purchasing an interest in an off-site community solar project. However, this document, known as a private letter ruling or PLR, may not be relied on as precedent by other taxpayers. Also, you would not qualify if you only purchase the electricity from a community solar project. The solar PV system is new or being used for the first time. The credit can only be claimed on the “original installation” of the solar equipment. What expenses are included? The following expenses are included: Solar PV panels or PV cells (including those used to power an attic fan, but not the fan itself) Contractor labor costs for onsite preparation, assembly, or original installation, including permitting fees, inspection costs, and developer fees Balance-of-system equipment, including wiring, inverters, and mounting equipment Energy storage devices that have a capacity rating of 3 kilowatt-hours (kWh) or greater (for systems installed after December 31, 2022). If the storage is installed in a subsequent tax year to when the solar energy system is installed it is still eligible, however, the energy storage devices are still subject to the installation date requirements). Note: A private letter ruling may not be relied on as precedent by other taxpayers. Sales taxes on eligible expenses How do other incentives I receive affect the federal tax credit? For current information on incentives, including incentive-specific contact information, visit the Database of State Incentives for Renewables and Efficiency website. REBATE FROM MY ELECTRIC UTILITY TO INSTALL SOLAR Under most circumstances, subsidies provided by your utility to you to install a solar PV system are excluded from income taxes through an exemption in federal law. When this is the case, the utility rebate for installing solar is subtracted from your system costs before you calculate your tax credit. For example, if your solar PV system installed in 2022 cost $18,000, and your utility gave you a one-time rebate of $1,000 for installing the system, your tax credit would be calculated as follows: ($18,000 - $1,000) * 0.30 = $5,100 However, payments from a public utility to compensate for excess generated electricity not consumed by the taxpayer but delivered to the utility’s electrical grid (for example, net metering credits) are not subsidies for installing qualifying property and do not affect the taxpayer’s credit qualification or amounts. PAYMENT FOR RENEWABLE ENERGY CERTIFICATES When your utility, or other buyer, gives you cash or an incentive in exchange for renewable energy certificates or other environmental attributes of the electricity generated (either upfront or over time), the payment likely will be considered taxable income. If that is the case, the payment will increase your gross income, but it will not reduce the federal solar tax credit. Note: A private letter ruling may not be relied on as precedent by other taxpayers. REBATE FROM MY STATE GOVERNMENT Unlike utility rebates, rebates from state governments generally do not reduce your federal tax credit. For example, if your solar PV system was installed in 2022, installation costs totaled $18,000, and your state government gave you a one-time rebate of $1,000 for installing the system, your federal tax credit would be calculated as follows: $18,000 * 0.30 = $5,400 STATE TAX CREDIT State tax credits for installing solar PV generally do not reduce federal tax credits—and vice versa. However, when you receive a state tax credit, the taxable income you report on your federal taxes may be higher than it otherwise would have been because you now have less state income tax to deduct. (The Tax Cuts and Jobs Act of 2017 placed a $10,000 limit on state and local tax (SALT) deduction through 2025. Therefore, if a homeowner is still paying more than $10,000 in SALT after claiming a state tax credit, the state tax credit benefit would not effectively be reduced by the federal tax rate, as it would not impact federal taxes (due to the SALT limit).) The end result of claiming a state tax credit is that the amount of the state tax credit is effectively taxed at the federal tax level.

What is Illinois Shines?

Illinois Shines provides incentives for solar projects through the purchase of Renewable Energy Credits, or RECs, from Distributed Generation and Community Solar projects. RECs are widely used in energy markets and represent the environmental value of energy generated by renewable sources, including solar. With RECs, the amount of renewable energy sent to the utility grid is tracked, and a REC is issued when one megawatt-hour of electricity from a renewable energy source is produced. Illinois Shines has set incentive amounts that are paid for RECs produced by solar projects participating in the Program. The incentives are paid to participating Approved Vendors and savings are passed on to customers. Approved Vendors are entities approved by the Program Administrator (as an agent of the Illinois Power Agency), to submit project applications to the Illinois Shines Program and act as a counterparty to the Illinois Shines contracts with utilities. Designees are third parties (i.e., non-Approved Vendor) entities that have direct interaction with end-use customers; they include installers, marketing firms, lead generators, and sales organizations. Approved Vendors often work with Designees to manage various portions of solar system development. How does a customer participating in Illinois Shines see savings from REC incentives? 1. Each Program Year, the IPA sets the price for RECs for various types of projects that apply to Illinois Shines in that Program Year. 2. Solar providers calculate the estimated RECs that an individual project will produce over a period of time. 3. With Illinois Shines, Distributed Generation customers agree to transfer ownership of RECs to their solar vendor, who then receives payment for them from utilities. Solar vendors pass the value of these payments to the customer in the form of reduced purchase prices, installation costs, lease payments, or other methods agreed upon in a contract. Solar vendors will disclose the REC values for a project to the customer, through the required use of Disclosure Forms, allowing customers to compare multiple offers from multiple vendors. Projects and contracts may be structured in different ways by different vendors, allowing consumers to consider the offer that best meets their needs. 4. With Illinois Shines, customers who don’t wish to or can’t install solar directly on their property can subscribe to a large solar project called a Community Solar project. Approved Vendors that develop these large projects get paid for the large amount of RECs the projects produce, then pass on that value to the customers who subscribe to these projects. Watch this video to learn more about what a REC is. Illinois residents interested in solar power don’t have to participate in Illinois Shines and can work directly with installers to develop projects outside of the program. But Illinois Shines offers several key benefits for both customers and participating Approved Vendors. The Illinois Shines program: Brings costs for solar installations down through incentives Brings cost of energy down for subscribers to Community Solar projects Develops a diverse and inclusive workforce through the requirements of the Climate and Equitable Jobs Act, such as the requirement of the payment of prevailing wage to project installers and equity requirements for the companies that operate as Approved Vendors and Designees in the Program. Offers consumer protection through a project approval process that requires project and cost disclosures to be made to customers prior to contracting, and provides consumer protection resources, including a hotline and online form, to accept consumer inquiries and to investigate and resolve complaints, as well as the maintenance of vendor and designee complaint and disciplinary action reports Vets and approves Approved Vendors and Designees that participate in the Program Illinois Shines Project Types Illinois Shines supports solar energy across two main project types: Distributed Generation: Solar panels installed directly on the roof or land of a home, school, house of worship, business or other customer site. Community Solar: A large, centralized solar project providing solar bill credits to subscribers who don’t have access to their own solar panels. This is a great option for renters or homeowners for whom installing solar panels isn’t practical or cost-effective.

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