Shifting to clean energy with solar energy panels and electric cars: Benefits and time horizons

By Vincent Birardi

Here at Halbert Hargrove, we frequently talk about embracing a long-term perspective in your investing life. The same can be said for making an investment in clean energy. Whatever your motivation – financial, environmental or both – there are strong advantages to purchasing or leasing a residential solar panel system and/or clean energy vehicle.

My family recently made those leaps – both installing a solar panel system for our home as well as leasing a fully-electric car. We anticipate that our solar panel system will have paid for itself within the next five to seven years. Moreover, thanks to our leased vehicle, we’re no longer captive to the vagaries of the energy markets and rising gas costs.

I speak for all of my fellow HH wealth advisors in saying we’d be happy to assist you in assessing the various cost options to help you make the best decision on a purchase or lease of a residential solar panel system or clean energy vehicle. This includes research on the federal and state tax credits available to you.

The remainder of this article is an overview of clean energy trends, pricing, and incentives – including tax credits that are due to expire over the next few years. If you’re interested in making the leap yourself, this is a great time to do so.

An accelerating trend

Not surprisingly, purchases of both residential solar panel systems and clean energy vehicles have continued to accelerate in the U.S. in recent years.

Earlier this year, the number of solar photovoltaic (PV) installations in the U.S. reached two million. Three years ago, that number was one million. The 4 million mark is expected to be reached by 2023. For you Californians reading this, take pride: 51 percent of the first million installations were in California, along with 43 percent of the second million.[1]

And we now have more than 1 million electric vehicles (EVs) on U.S. roads, a milestone reached in October 2018. By 2030, that number is projected to top 18 million.[2]

[1] https://www.cnbc.com/2019/05/09/solar-installations-in-us-exceed-2-million-and-could-double-by-2023.html

[2]http://www.eei.org/resourcesandmedia/newsroom/Pages/Press%20Releases/EEI%20Celebrates%201%20Million%20Electric%20Vehicles%20on%20U-S-%20Roads.aspx

 

Another welcome milestone recently occurred. In April 2019, for the first time ever, the renewable energy sector (including solar, wind, and hydro) was responsible for generating more electricity in the U.S. than coal.[1]

Super-charged

This overall trend towards cleaner technologies has been super-charged (pun intended) by the following:

  • Prices have significantly dropped. According to EnergySage, U.S. solar installation costs have fallen by 70 percent over the past 10 years.
  • Federal and state tax credits alongside other incentives have helped buyers save money on the initial purchase of solar panels and cars.
  • Other incentives, for example those offered by local utilities, can help homeowners earn money by delivering their excess power back to the grid.

Solar Investment Tax Credits and Other Incentives:  This federal tax credit has stood at 30% for some time, but on 12/31/2019, that savings will drop to 26%. It will sunset through 01/01/2022, when it falls from 22% to zero. (FYI, this applies to solar water-heating and fuel cell properties too.) For more information on these federal credits, start here: https://www.energy.gov/savings/residential-renewable-energy-tax-credit.

Twelve states, including Arizona, California, and Colorado, offer an array of credits and/or rebates for solar energy. For example, Arizona’s incentives include property and sales tax rebates as well as a residential solar energy credit. Other states, like California, offer rebates from local utilities. We’d be happy to help you research what might be available to you based on where you live.

Electric & Plug-In Hybrid Vehicle Tax Credit and Other Incentives:  The federal rebate on your income taxes for purchases of these vehicles is currently as much as $7,500 but phase-outs do apply. These credits are based in part on the capacity of the battery used to power the vehicle.

At the launch of the federal rebate program, each car manufacturer was only allocated 200,000 credits. Thus, the more vehicles sold, the lower the rebate. Popular vehicles like Teslas and Toyota Prius Primes are already seeing significantly lower rebates. All Teslas delivered after 12/31/19 will come with no rebate at all.[2] Some states and local jurisdictions also offer rebates on the purchase or lease of these vehicles.  To see which federal rebate is available for a specific vehicle, here’s a Dept. of Energy site: https://www.fueleconomy.gov/feg/taxevb.shtml.

Obviously, your savings are not just about rebates on the initial cost. Every time you drive, you save. And many states, counties, and other jurisdictions offer of range of other incentives, like financing for purchasing electric vehicle supply equipment for your home. For more on state and local laws and incentives, please look here: https://afdc.energy.gov/laws/state.

Net Metering:  With regard to solar panel systems, net metering helps save money once the system is functional. This is a solar incentive through which you receive monthly credits from your local utility company if your system produces more energy than you use. These credits can build up quickly and can rapidly accelerate in helping you reach your breakeven cost – the price point at which you recoup the full cost of your solar system through the cost savings you’ve incurred after its installation.

If you live in Southern California (as my family and I do), your breakeven should be between five to seven years. Five years ago, that same breakeven point was closer to a dozen years.  And those monthly credits? It’s a great feeling to see them appear on my So Cal Edison statement and to have them cut us a check.

We’d be delighted to help you with a cost/benefit analysis of purchasing a solar panel system for your home based on where you live – and your goals and finances. The same goes for leases or purchases of clean energy vehicles. Particularly with so many rebates expiring in the coming years, this is the perfect time to make this commitment and start reaping the benefits.

[1] https://www.cnn.com/2019/04/29/business/renewable-energy-coal-solar/index.html

[2] https://electrek.co/2018/07/12/tesla-tsla-federal-tax-credit-threshold/

For more information or questions, please contact Halbert Hargrove at hhteam@halberthargrove.com.

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