Illinois Solar Incentives
Illinois has a law requiring its utilities to source 25% of their energy from renewable sources by 2025. The law requires a significant portion of that energy come from residential solar. To achieve this goal, Illinois’s largest utilities must make incentive payments that benefit homeowners who invest in solar. These payments are on top of a longstanding federal solar tax credit (which we explain later on this page).
Introducing Illinois SRECs
The Illinois solar incentive payments utilities make are technically payments for Solar Renewable Energy Credits (or “SRECs”, which is pronounced “ess-wrecks“) your system will generate.
One Illinois SREC represents the renewable attributes of one megawatt-hour of electricity generated by a solar system. Utilities such as ComEd must purchase these SRECs on terms dictated by the Illinois Power Agency, a unit of State of Illinois. For most residential systems, the utilities must pay for 15 years of estimated SREC production in advance, usually within six months of when you first install your system.
How Much Are SRECs Worth?
The Illinois Power Agency sets the prices for Illinois SRECs. The price per SREC depends on when a homeowner signs up; originally, the price was $72.97 per SREC. Contact SRP Solutions to understand current pricing.
The number of SRECs a home solar system will produce over 15 years depends on the size of the system (measured in kilowatts), the position of the panels on the home relative to the sun (south-facing is best), shading, and a few other factors.
Please contact SRP Solutions to understand current block pricing, but here is an illustrative example of a fairly typical system using expired Block 1 pricing:
System size. = 8.4 kWdc
Est. production over 15 years = 146 MWh
Est. SRECs produced = 146 SRECs
Block 1 Price per SREC = $72.97
Price of SRECs to utility: = $10,654
SREC Prices Will Decline Over Time
To ensure Illinois solar installers have an incentive to reduce costs, Illinois requires the prices of SRECs to decline as more solar systems are installed. The initial blocks of systems have already been filled. Each block lasts about 5,000-10,000 systems. Once that block of systems has been installed, the price will decline. For each subsequent block of systems, the price will decline further. If you want the largest incentive, you should install your solar system now.
We'll Do The Math and File Your Application
You don’t have to do any of these estimates or calculations. When SRP Solutions designs a solar system for you, we estimate the value of your Illinois incentive, taking into account the current SREC price and how many SRECs your system will produce. When you decide to move forward with an installation, we make a reservation with the state to ensure you get the payment we quote and you expect.
The best way to estimate the size of the incentive you can receive for your home is to consult with a residential solar expert like SRP Solutions. Fill out the form below for a completely free, no-obligation consultation!
Federal Solar Tax Credits
The federal government also offers an incentive for residential solar, in the form of a tax credit. For systems installed in 2021, the credit is 26% of the cost of the system. It declines to 22% for systems installed in 2023.
A Tax Credit is Not a Tax Deduction
A tax credit is a direct reduction in the amount of tax you owe. If you have a $10,000 credit you would pay $10,000 less in taxes than you would otherwise owe. Many taxpayers are more familiar with tax deductions, which reduce the amount of income that is taxed. A tax credit is much more valuable.
Residential Solar Tax Credits and Estimated Taxes
If you are required to file quarterly estimated taxes, you can take advantage of the federal incentives almost immediately after installing your system. (If you are required to file estimated taxes, you already know who you are. If you don’t know what estimated taxes are, you can skip this section.) Estimated taxes are based on the amount of tax liability you expect to have for a given year. Let’s assume our taxpayer above is required to make estimated tax payments. Since our taxpayer would expect to owe $5,200 less in taxes than she otherwise would because of the tax credits, she could reduce her estimated payments by $1,300 each quarter.
Two Tax Credits?
There are actually two tax credits that apply to solar, although you can only benefit from one or the other. The Section 25D credit described above applies to homeowners who install solar on their own homes. The other solar tax credit is available to businesses that install solar equipment, whether or not it is in their place of business. It is defined in Sections 38 and 48 of the Code. If you lease your system, the lessor will use these business investment tax credits.
The Inevitable Disclaimer
You had to know this was coming, right? SRP Solutions is not your tax preparer, accountant, or lawyer. We are not giving you individualized tax advice. You should consult your own advisors about your particular situation.