How to Save Money on Solar Panels In Montana

Transitioning to solar energy is an excellent option for many Montana homeowners to save money over the long term. But between upfront equipment costs and confusing incentives, it can be hard to calculate actual savings.

This comprehensive guide will break things down step-by-step so you can determine if solar panels make financial sense for your home. We‘ll be looking at this from an average Montana resident‘s perspective and using relevant examples to show real cost savings.

1. Overview of Solar Savings Potential in Montana

Let‘s start with the basics – how much can the average Montana homeowner actually save by switching to solar panels? While Montana has very affordable electricity rates that might make solar seem unnecessary, there are still outstanding potential cost savings over 20+ years that make solar worth considering if you plan to stay in your home long term.

According to the Solar Energy Industries Association (SEIA), Montana ranks 13th in the nation for rooftop solar potential thanks to abundant sunshine and low equipment costs. [1] Specifically:

• Solar equipment costs in Montana ring in at just $2.42 per Watt – far below the national average of $2.77 per Watt. [2]
• When accounting for all incentives and bill savings, Montana solar owners can recoup their initial investment in around 12 years.
• Over the 25 year lifespan of a typical solar panel system, Montana homeowners can expect to save $15,000 or more in energy costs by going solar.

So while payback periods are a bit longer compared to sunnier states due to cheap grid rates, solar panels in Montana can still provide excellent long-term energy savings for residents.

2. Details on Montana‘s Solar Incentives

When calculating savings for solar panels in Montana, there are a few key financial incentives to factor in that can positively impact your return on investment.

2.1 Federal Solar Tax Credit

The biggest incentive helping offset the cost of solar panels comes from the federal government. The solar investment tax credit (ITC) offers homeowners a 30% tax credit for installing residential solar arrays. [3]

For a real example, let‘s look at the potential savings from a 6 kilowatt (kW) solar panel system installed in Montana in 2023:

• Gross System Cost: $14,520
• Federal Tax Credit (30%): $4,356
• Net Out-of-Pocket Cost: $10,164

As you can see in this case, the 30% federal solar credit saves a Montana homeowner $4,356 right off the bat. Key things to note with this program:

• Applies to all equipment, labor, permit fees, and sales tax
• Phases down to 26% in 2024, 22% in 2025, and expires in 2034
• Homeowner must own the solar panel system

So locking in a solar array now in Montana means maximizing the current 30% federal tax incentive before it starts stepping down each year.

2.2 Recently Expired Montana Tax Credit

While Montana no longer offers a state tax credit or rebate for solar panels, it came close in recent years.

In 2021, Montana repealed its state solar tax credit which offered residents a $500 annual tax refund for installing renewable energy systems including solar panels or solar water heaters. [4]

And back in 2015, Montana‘s major utility NorthWestern Energy proposed punitive monthly charges for homeowners with solar installations. This threatened the economics of home solar. [5]

Fortunately, in a 3-2 decision, Montana‘s Public Service Commission rejected the new fees on solar customers. Regulators took steps to maintain the state‘s net metering policy as well (see section 2.3).

So while recent solar incentives have expired in Montana, the fundamental economics of residential solar were upheld through key policy decisions.

2.3 Current Net Metering Policy

One area where Montana maintains strong support for rooftop solar is net energy metering (NEM). This policy allows solar panel owners to earn bill credits from their utility when they export excess power back to the grid.

Specifically, Montana has full retail rate net metering: [6]

• Solar customers earn credits equal to the retail rate of electricity (10.4 cents/kWh)
• Credits roll over month-to-month indefinitely
• At the end of each year, any excess credits are granted to the utility

These bill credits for surplus solar generation are crucial to achieving faster payback periods on solar panel systems. Back in 2015, NorthWestern proposed adding monthly charges and extra fees on net metered customers – but fortunately regulators rejected this proposal. They also took action to maintain net metering rates until solar penetration hits 5% of Montana‘s total generation. [5]

So Montana solar owners can rely on the current net metering structure for years to come when considering solar investment return.

3. Key Solar Regulations in Montana

To predict the future outlook for solar incentives in Montana, we can look to state regulations like renewable portfolio standards (RPS) and tax policies. These help shape the regulatory landscape that impacts the economics of installing solar panels.

3.1 Renewable Portfolio Standards

Montana previously had an RPS target to reach 15% renewable electricity by 2015. While this goal has since expired, it shows that Montana has made attempts to support the growth of clean energy in the past. [7]

And in 2017, minor changes were made to Montana‘s RPS, leaving the door open for future updates as renewable energy technology continues advancing. Solar advocates could lobby for a solar-specific carveout during the next revision.

3.2 Property Tax and Sales Tax Exemptions

Even without direct cash incentives in Montana, current tax policies provide financial benefits for homeowners transitioning to solar energy:

• 100% Sales Tax Exemption – Solar equipment and installation services are exempt from Montana‘s statewide sales tax. [8]
• Property Tax Exemption – Increased home values from adding solar systems are excluded from state property taxes, saving homeowners money over time. [9]

So while not as significant as an upfront rebate, these tax exemptions make solar installations more affordable over their usable lifespan.

4. Analysis of Buying vs Leasing Solar Panels

When weighing options to go solar, Montana homeowners have to consider whether to purchase solar panel systems outright or lease panels through a solar company. Let‘s compare the pros and cons of each option:

Solar Panel Purchase

• Lower long term costs
• Eligible for federal + state tax credits
• Full ownership after payoff period
• Works with net metering

Solar Leasing

• Little to no upfront cost
• Monthly payments may exceed energy savings
• No eligibility for tax incentives
• Cannot benefit from net metering bill credits
• No system ownership – lease renewal required

Given Montana‘s low solar equipment costs and the inability to qualify for the critical federal tax credit when leasing solar panels, purchasing tends to make the most financial sense for Montana solar shoppers in most cases. While leasing arrangements involve less initial outlay, they end up costing substantially more over a 20 year period compared to owning an array in Montana.

And when calculating overall Montana solar savings, it‘s a better long term move take full advantage of federal tax credits, net metering bill credits, property tax exemptions, and low local equipment pricing.

5. Solar Panel Cost Savings Overview for Montana

Now that we‘ve covered all the details on various Montana solar incentives and policies, let‘s summarize everything into a quick reference table to visualize the total potential cost savings available:

Total Montana Solar Savings over 25 Years: $15,000+

The key takeaways here are the combined savings from the 30% federal tax credit saving thousands upfront plus 25+ years of net metering credits helping offset expensive utility bills.

Solar shoppers in Montana won‘t find quite as generous state cash incentives compared to regions like California or New Jersey. But factoring in all available credits and policy exemptions, residents can still save big on electricity costs over a solar array‘s lifetime.

6. Frequently Asked Questions

Let‘s wrap up this guide by addressing some common questions Montana homeowners have about switching to solar power:

How quickly is it possible to recoup your investment in solar panels in Montana?

Given solar costs of $2.42 per Watt, the average Montana home using 11,700 kWh of electricity per year at 10.4 cents/kWh can break even on solar panels in about 12 years when accounting for all incentives. [1] [10]

What is the total cost to install solar panels in Montana after tax credits & incentives?

The typical gross cost to purchase and install solar panels in Montana works out to roughly $14,520 for a 6 kW system before incentives. After applying the 30% federal solar tax credit and sales tax exemption, the net cost drops to $10,164.

Can you explain net metering simply?

Net metering allows solar owners to earn bill credits from their utility whenever they export surplus power back to the electric grid. So on sunny days when your solar system produces more than you need, your utility meter spins backwards, lowering your electricity costs during nighttime hours.

What are the negatives or downsides to switching to solar power?

The main potential downsides of installing solar panels include:

• High upfront equipment cost of $10,000+ even after tax credits
• Approximate 10-15 year investment payback period
• Roof shading or orientation issues reducing solar production

For some Montana residents, the long return timeframe may not justify the capital expense. But for homeowners planning to occupy their property long term, the 20+ year savings from locking in lower electric rates make solar a sound investment.