Solar installation prices fall, but policy changes could thwart the decrease

To cut down on the cost of utilities and lower their carbon footprint, Eric Chesebro and Kelly McKinnie in 2017 decided to install 12 solar panels on their house in Missoula's Slant Street neighborhood.

A big tree in their front yard blocked part of the roof from the sunshine, but otherwise their house was pretty suitable for solar.

The 5.4 kilowatt-hour system installed by Jordan Solar was projected to provide all their electrical use and then some.

Chesebro and McKinnie felt solar was the right thing to do, despite the $9,500 price tag. The cost was after subtracting a Montana state tax incentive of about $5,500.

The tax incentive helped, and the two University of Montana math professors had some money set aside, but Chesebro had concerns about state rules that address how people producing their own solar power are charged for power, which were in flux.

According to the Solar Energy Industries Association, solar installation costs have decreased by 70% over the past 10 years, and residential installation prices have been cut in half. Despite this, soft costs—like labor and permitting—keep out-of-pocket payments high, and policy changes add a shade of uncertainty to what happens with the extra power a rooftop may generate.

Chesebro and McKinnie’s system is called a distributed generator because the power their system produces is primarily used by the couple and their children. Distributed generation systems use net metering to square production and consumption of electricity.

In the summer, when their system produces more energy than they need, Chesebro and McKinnie get credits toward their bill from NorthWestern Energy that can be used in the winter when there is less sunlight.

“NorthWestern is like our battery,” Chesebro said.

McKinnie used to write down the kilowatt hours they used and produced with the intention of keeping track of how long it would take to recover their investment. Her efforts dwindled, but energy bills show that from June to November, they did not use any electricity from NorthWestern, and their December 2021 electricity bill was under $5.

There have been numerous attempts by NorthWestern to change the policy for energy produced by distributed generation systems, which is known as net metering, said Andrew Valainis, executive director of the Montana Renewable Energy Association.

The current value of a credit is the same as the cost of electricity, Valainis said, but in 2018—right around the time of Chesebro and McKinnie’s installation—NorthWestern tried to make the credits worth less. Legacy customers, who would have included the couple, would not have been affected by the changes.

This was ultimately unsuccessful, but the change could have made it much harder for families to invest in solar by decreasing the value of electricity they generate, Valainis said.

“The long and short of it is if the credit value is lower, the amount of money that you can save on your utility bills is lower, and this benefits the utility because their business model is focused on selling you kilowatt hours,” Valainis said. “So, if you’re not buying kilowatt hours, they lose money.”

Janelle Ramaker, a project manager with Jordan Solar, said the systems the company sells usually pay for themselves within 10 years. If net metering policy changed and the value of a credit was half the price of electricity, it could take twice the amount of time for Chesebro and McKinnie to start to see savings.

“I think it would be pretty hard to justify a system that takes 20 years to pay back,” Ramaker said. This type of increase could be devasting for small solar installation companies, she said.

What's more, the state tax credit was repealed as part of the tax reform bill. Valainis said the state tax credit's limit is $1,000, so that number can't be completely attributed to the state credit. And while the state tax credit will expire at the end of the year, the federal tax credit will not be expiring. 

A current federal investment tax credit pays 26% of total installation cost. Valainis said language in the Biden administration’s reconciliation bill would move that percentage back up to 30, where it once was, and keep it there until 2031.

Chesebro and McKinnie’s system has been mostly issue-free since the installation four years ago. Their electricity bills have fallen, and they are producing their own energy for about half the year. According to estimates from Google’s Project Sunroof, they also reduced the amount of carbon dioxide they would have produced by 6.4 metric tons.

For Chesebro and McKinnie, it was worth it.

“When you spend money … it feels like a big deal, and then later it’s hard to tell the difference,” Chesebro said.