Illinois offers strong financial motives to install solar panels

A pair of solar panels with a building and sky in the background

Waste is associated with the capture of energy, however, policy analyst Quinn Biever said people are trying to find ways to minimize solar panel waste through recycling. (Laura Simmons)

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By Laura Simmons

Businesses in Illinois are increasingly looking to solar panels to cut down on operational costs. 

Anthony Turano, the owner of Turano Baking Company, said the installation of solar panels on the company’s fleet maintenance facility in Berwyn, Illinois where they maintain delivery vehicles, was completed mid-December, 2021. 

“We’re always looking to continually improve,” Turano said. “Our organization looked at different ways that we can try different technologies. Solar, wind have continually come up.” 

Solid income tax incentives drove the decision rather than environmental concerns, Turano said.

The current financial incentives to install solar panels in Illinois are strong, prompting people and businesses to install solar panels without strong environmental motivations. 

Homeowners and commercial businesses installing solar systems on their property are entitled to 30% of the entire project cost as a federal income tax credit under the Solar Investment Tax Credit, extended under the 2022 Inflation Reduction Act. Illinois has a further financial incentive through Renewable Energy Credits, or SRECs. Under this program, the individual or company earns an SREC for every megawatt-hour of solar energy produced. A megawatt-hour is equal to 1,000 kilowatts of electricity used continuously for one hour. Energy companies then buy these SRECs so they can claim renewable energy production and offer it to people looking for renewable energy alternatives. 

According to policy analyst Quinn
Biever, renewable energy, especially
solar, is ​​the future of energy
production. (Laura Simmons)

“There are a lot of financial incentives that help people go solar,” said Jack Johannesson, director of sales and business development at Windfree Solar, based in Chicago. “Everyone’s concerned about money.”

Together, the Solar Investment Tax Credit and the SREC can make up for about 60 to 70% of solar panel installation costs, with the rest being made up within the next two and a half to 10 years through money saved on electricity, Johannesson said. 

With the standard life of a system being 25 years, Johannesson said every system he’s designed would pay itself off well before its end. 

“I’m basically saying that it’s free to [install solar panels] if you do it the right way,” Johannesson said. “It’s absolutely available to anyone who has a reasonable credit score who can get financing.”

Turano said tax incentives were not the driving reason Turano Baking Company wanted to go solar. Their major incentive was accelerated depreciation, which is when a capital asset, in this case solar panels, reduces in value at a faster rate than usual depreciation. Accelerated depreciation helps with tax deductions. 

“The technology has challenges,” Turano said. “But it’s operational. It’s functional. It’s providing some payback, although it’s less than we had expected.”

Turano said initially the expected period for the panels to pay for themselves was 10 years. Now, it’s looking like it will be closer to 15 years. 

Still, the company is planning to expand solar panels in 2023 to one of its office buildings. 

Commercial and residential clients seem to have different motivations for installing solar panels. Johannesson said usually his residential clients do it for environmental reasons, while his commercial clients often install solar after looking at the numbers. Usually, the financial incentives for commercial businesses are stronger because they will save more on energy costs, Johannesson said.

“I definitely have had commercial clients who don’t care about the environmental aspects, really at all,” Johannesson said. “They’re just looking to make their building more efficient and more cost-effective.”

Johannesson said he thinks Illinois and the federal government are currently working well together to make solar accessible. However, he said other states should have SREC programs. For example, Indiana doesn’t have an SREC program, meaning it will take longer for the solar panels to pay for themselves. 

Good for the earth, good for the purse

A 2020 study, “The heterogeneous preferences for solar energy policies among US households,” shows the strength of financial incentives when installing solar. The study conducted by the University of Florida and the Industrial Technology Research Institute surveyed United States homeowners. Not all surveyed homeowners had solar panels or were interested in installing them. 

Some 69% of study respondents said one of their top motivations for installing solar would be to reduce electric bills. The study concluded that policies with direct economic benefits would be more effective in incentivizing people to install solar panels. 

“I think the key message from our study is that those financial incentives are very important to motivate people to adopt solar energy in their household,” said Zhifeng Gao, coauthor of the study and a professor at the University of Florida. 

Environmental motives for solar panel installation were still strong, with 58% citing this reason as a top motivation. 

Data from  “The heterogeneous preferences for solar energy policies among US households.”  (Graphic by Laura Simmons) 

Government programs that financially incentivize solar panel installation get their money from taxpayers. The study found that consumers in general are willing to pay a higher electricity bill to support solar energy policies that provide financial incentives for consumers to install solar. 

Expanding access to solar panels

Despite the current Illinois financial incentives to install solar panels, it is still not accessible to everyone. 

Elevate, a nonprofit organization based in Chicago is seeking to connect low-income people and communities to clean and renewable energy. 

Elevate’s Policy Analyst Quinn Biever said, although he can’t speak for everyone, financial reasons are a major driver for his customers wishing to install solar. He said recent inflation and the rising price of natural gas prompted people to find ways to cut costs. Biever said environmental concerns are often justifiably outweighed by more immediate economic concerns. 

“Having environmental concerns or being able to think 10, 20 years down the road is a privilege and a lot of people don’t realize that,” Biever said. “When you are lower income or when you live in affordable housing, you don’t really have the privilege of thinking that far ahead. Your needs are much more immediate.”

Biever said the Inflation Reduction Act created immediate tax credits and rebates, which will make it easier for low-income people to meet the high upfront costs of solar panel installation. 

Financial incentives for solar that become too strong may have consequences, according to the Harvard Business Review article “The Dark Side of Solar Power.”  The article states that it would make financial sense for consumers to replace solar panels before their 30-year life cycle. But, without a strong financial incentive to recycle, the solar panels will end up in the dump, creating mountains of waste.  

Solar panels contain mostly silicon along with lead and cadmium, which are harmful to humans and the environment. Some solar panels are considered hazardous waste, according to the EPA

The article’s data was pulled from the Lawrence Berkeley National Lab’s Tracking the Sun database, according to Serasu Duran, article co-author and assistant professor of Operations and Supply Chain Management at Haskayne School of Business. Although the database pulls data from residential solar system installations, Duran wrote in an email that she also spoke to commercial installers. 

“Some [commercial installers] shared that they indeed had upgraded or had plans to upgrade solar farms they had installed in the last 10 years or so,” Duran wrote. “With commercial installations or large-sized solar farms, the financial motive would be the norm.”

In 2019, 85 to 88% of solar panel installations were non-residential. Duran concluded the majority of these installations were driven by financial motives. 

Duran then pointed to the shortening warranty periods as an indicator that early solar panel replacements are happening. Duran wrote that early installations had a 25-30 year warranty, while newer ones are offered with a 10-15 year warranty. 

As of now, there is no legislation in Illinois that tackles solar panel waste, according to Jake Archbell, a member of Elevate’s solar team. Archbell predicts a solution will come from regulation and industry initiatives. 

Despite the waste, solar panels in their lifetime generate about 100 times the amount of energy that went into the production of the panel, Archbell said. 

“I’m environmentally motivated to make choices that I think are good for the planet for future generations,” Archbell said. “But not everybody is in my underlying thought processes. If you can win someone over on the economic arguments of clean energy, you don’t have to win them over on the environmental attributes of the problem. Money talks.”

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