As an Iowa homeowner, you may be wondering if installing solar panels can actually save you any money compared to traditional utility electricity. By taking advantage of solar incentives, many Hawkeye State residents are slashing their electric bills and recouping their investment in as little as 10 years. This guide provides you a customized roadmap for maximizing savings with solar panels in Iowa.
Why Consider Going Solar in Iowa?
Before digging into specifics on payback periods and incentives, let‘s briefly discuss why solar panels deserve consideration in the Hawkeye State.
Iowa ranks 16th nationally for solar energy potential, with an average sun exposure of 4.55 hours per day. As the graph below illustrates, a solar array sized appropriately for your home could generate enough clean power to significantly offset your electricity purchases from the grid.
However, out of over 7,000 megawatts (MW) of total renewable energy in Iowa, just 105 MW comes from solar photovoltaics. So only a tiny fraction Iowa‘s 750,000 households have rooftop systems installed.
You have an opportunity to take control of your energy costs, minimize your carbon footprint, and get compensated for supplying excess electricity back to the grid.
This guide details just how lucrative going solar could be on your Iowa property by leveraging all possible savings.
Financial Benefits of Installing Solar Panels
Iowa offers a suite of policy incentives that improve solar power‘s return on investment compared to other states. These benefits fall into five main buckets:
- 30% federal solar tax credit through 2032
- Up to 50% back in state tax credits
- Bill credits from net metering policies
- Property and sales tax exemptions
The following sections quantify these benefits with data from Iowa government sources and actual solar installation examples.
Federal Solar Tax Incentives
The 26 U.S. Code § 48 federal solar tax credit remains at 30% of your system cost through 2032 before phasing down.
System costs include solar panels, racks and mounts, inverters, electric work and interconnection hardware — plus installation labor. Sales taxes also qualify.
For residents purchasing an after-tax average 6 kilowatt (kW) solar array for $15,120 in Iowa, the current 30% federal credit will amount to $4,536 back on your taxes immediately after installing.
The table below summarizes the phase out schedule and savings through the end of the program in 2034.
| Year | Federal Credit | Savings on 6 kW System |
|---|---|---|
| 2022-2032 | 30% | $4,536 |
| 2033 | 26% | $3,931 |
| 2034 | 22% | $3,326 |
| 2035+ | 0% (expired) | $0 |
Iowa State Tax Credits and Rebates
On top of the federal credit, Iowa provides an additional 50% state tax credit calculated from the federal amount.
So if you received $4,536 from the 30% federal credit, Iowa tacks on another $2,268 for a combined $6,804 in upfront tax credits from a 6 kW rooftop solar installation. That covers nearly 50% of the total cost!
Iowa‘s solar rebate program administered by the Iowa Energy Center has been so popular that funds dried up quickly. Unless the state legislature approves a budget extension, these rebates will remain unavailable.
Utilities also pitch in occasionally like Ames Electric Department‘s former $300 per kilowatt rebate up to $5,000, but these local incentives can disappear or change annually.
Net Metering in Iowa
Net metering policies require your electric utility company to provide credits on your bill for any surplus solar electricity sent back to the grid from your rooftop panels.
Unfortunately, Iowa does not allow yearly cash-outs of accrued credits. Instead they roll over month-to-month. Still, net metering enables you to shrink electricity bills dramatically by self-supplying power.
As you can see in the following table, net metering value varies significantly between utility service territories:
| Utility | Net Metering Credit | Annual Payout |
|---|---|---|
| Alliant Energy | Retail electric rate | No |
| MidAmerican Energy | Avoided cost (~7.5¢/kWh) | No |
| Linn County REC | Retail electric rate | Yes |
| Independence Light | Retail electric rate + 25% | No |
So depending on your provider, credits either apply at the full retail volumetric rate or their lower wholesale avoided cost—and may or may not cash out any extra credits annually.
Tax Breaks on Solar Equipment & Installation
Unlike assessments for hot tubs or swimming pools that increase property taxes, Iowa exempts the value added by solar panel systems. This prevents your property taxes from rising.
Iowa also offers a 100% sales tax exemption on solar equipment and installation costs. With the state sales tax at 6% as of 2022 and average local rates around 1%, the combined sales tax exemption saves you at least 7% off the final installed price.
Between tax credits slashing nearly 50% upfront and exemptions avoiding later tax hikes, installing solar panels in Iowa makes good financial sense.
Solar Panel Payback Period in Iowa
Now that we‘ve covered the various solar incentives and policies that enable savings, what does the return on investment actually look like for a residential solar installation?
Assuming the after-tax, after-incentive price of $8,316 for a typical 6 kW systemGenerates about 7,200 kWh of electricity in Year 1With annual output degrading 0.5% per year over 30 yearsWith MidAmerican‘s net metering rate at 7.5¢/kWh offsetting your retail volumetric electricity rate of 12¢/kWh…
You would break even on your solar panel system within 10-12 years in Iowa.
The table below summarizes the projected lifetime savings.
| Year | Solar Output | Electricity Offset | Cumulative Savings |
|---|---|---|---|
| 1 | 7,182 kWh | $862 | $862 |
| 5 | 6,924 kWh | $831 | $3,737 |
| 10 | 6,675 kWh | $801 | $7,363 |
| 15 | 6,433 kWh | $772 | $11,156 |
| 20 | 6,197 kWh | $744 | $15,298 |
| 25 | 5,967 kWh | $716 | $19,937 |
| 30 | 5,743 kWh | $690 | $24,977 |
Accounting for rising retail electricity rates over that period would shorten the payback period. And if your utility credits solar generation at full retail volumetric rates rather than their avoided cost, you would break even even faster.
Over 30 years, a 6 kW rooftop solar array could provide over $25,000 in electricity savings after paying for itself in under 12 years.
Key Takeaways on Iowa Solar Panels
- With federal and state tax credits covering nearly 50% of solar installation costs, payback periods now range from 10-12 years
- After breaking even, households can save over $24,000 over a 30-year solar panel lifespan
- Actual savings depend on system size, electricity rates, and specific utility incentives
- Call your solar installer for quotes and savings estimates customized for your property and energy usage
I hope this guide has shown that going solar could be a smart investment for many Iowa homeowners wanting to take control over electricity costs. Please reach out with any other questions!
