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Loss of state tax credit could nearlydouble net costs for homeowners who hope to put panels on their roofs

COURTESY ABUNDANT SOLAR - An Abundant Solar installer attaches a solar panel to a residential roof. Such projects could cost Oregon homeowners nearly twice as much next year with the loss of a state tax credit. Portland homeowners' cost to add rooftop solar panels could nearly double next year, not long after the city and county adopted an aggressive goal to transition their communities off the use of fossil fuels that cause global warming.

The price increase was triggered by state lawmakers during their recent legislative session, when they allowed Oregon's longstanding Residential Energy Tax Credit to expire by year end. That tax credit provides up to $6,000 to lower the price of home solar installations, as well as subsidize insulation and other energy-efficiency improvements. Final projects approved by Dec. 31 must be completed by next April 1.

As a result, solar installers expect a rush to complete projects over the next seven months, followed by a downturn and likely industry layoffs.

"Six thousand off the price of a solar system is a big deal," says Chad Ruhoff, a vice president of Portland-based Neil Kelly Co., which employs 12 to 14 people in its solar division. "I believe that we'll end up seeing half to two-thirds of the business that we would see in 2017," Ruhoff says.

The Residential Energy Tax Credit, also known as RETC, "has been somewhat of an anchor for the industry here in Oregon," says John Miller, board member of the Oregon Solar Energy Industries Association.

That trade group will ask lawmakers to approve a new residential solar tax break at their February short session.

However, lawmakers declined to extend the tax break this year in the wake of the state's huge budget shortfall, and residual fallout from scandals at the Oregon Department of Energy, which administers the tax break. Neither of those issues is likely to go away by February.

Green-minded customers will continue to invest in solar panels in Portland, Ruhoff predicts. But "it's not going to be mainstream" households that go solar, he says, because of the steeper net costs.

James Reismiller, owner of Abundant Solar in Corvallis, echoes that view.

"If there's no new RETC, it just becomes a rich person's hobby," Reismiller says.

Prices in flux

Solar panel prices have plummetted the past several years, making solar more affordable to a broader swath of homeowners. But federal tax credits for residential solar also are slated to shrink and ultimately disappear in the next five years or so, eliminating another key subsidy.

Some solar installers also worry a pending international trade complaint could drive up prices on imported Chinese solar panels. Critics accuse the Chinese government of unfairly subsidizing solar panel makers to undercut other competitors, including the financially strapped SolarWorld plant in Hillsboro.

"With this trade case, you could double the price of modules," Miller says.

Solar panels might represent 30 percent of the total costs of installing a home system, he says. "If you double that, you're in trouble."

Bad time to slow solar development

Loss of the state tax credit comes as the climate crisis is getting more urgent, says Andria Jacob, Clean Energy Program manager for the Portland Bureau of Planning and Sustainability.

"When you take away an incentive in the market, there's always a chilling effect," Jacob says.

President Donald Trump still denies there is a crisis over global warming, and has directed federal agencies to halt work on the issue and pulled the United States from the international Paris climate accord. As the federal government walks away from addressing one of the planet's most pressing problems, that puts more pressure on progressive states and cities to seize the initiative.

The city of Portland had high hopes to use a proposed state community solar initiative to expand solar access, and spread the opportunities to lower-income renters and others. Under community solar, people can subscribe to solar projects built elsewhere, such as in sunnier climates, rooftops with good solar exposure or sites where there is room to build fields of solar panels.

But rules drafted by the Oregon Public Utility Commission appear to limit that potential. And the PUC seems in no hurry to launch the community solar initiative, Jacob says. "It's going to be 2019 before a single project is in the queue is my guess," she says. That's about when federal tax credits start to shrink.

How it pencils out

At Neil Kelly, which isn't considered one of the lower-priced companies in Portland, a typical residential solar installation might cost about $20,000 now, Ruhoff says. But after deducting Energy Trust of Oregon incentives, the federal tax credit, and four years of state tax credits allowed by the Oregon Residential Energy Tax Credit, the net costs drop to about $6,500, he says.

At that price, a homeowner could earn roughly 10 percent a year on their investment, or get enough free electricity to pay off their outlay in about 10 years.

If that homeowner were to lose the $6,000 in state tax credits, that nearly doubles their net costs, Ruhoff says, making it take 20 years to pay off the system.

Prices vary by the size and complexity of installation, company and region in Oregon.

A typical 4.7-kilowatt solar system built by Abundant Solar in Corvallis might cost about $14,500, Reismiller says.

After deducting for federal tax credits, Energy Trust rebates and state tax credits, that drives net costs down to about $3,327, he says.

For a larger 7-kilowatt system, the net cost is closer to $6,960.

Loss of the $6,000 state tax credit would nearly triple the net costs for the smaller system, and nearly double costs for the larger one.

Solar advocates hope Energy Trust will increase its incentives to make up some of the loss of the state tax credit. However, Energy Trust is seeing increased demand for incentives now, likely related to the impending loss of the state tax credit. So it's lowering its rebates so they can be extended to more people.

"We anticipate incentive reductions will be more frequent than in the past to keep up with the demand," says Julianne Thacher, Energy Trust spokeswoman.

The agency will know more about next year's incentives after it passes its 2018 budget, she says.

In many parts of the United States, the costs of residential solar are approaching price "parity" with new natural gas, oil and coal energy systems. However, that doesn't come as easily in Oregon, where extensive hydropower delivers some of the nation's cheapest electricity. That makes it harder for solar to compete here without subsidies.

Jacob, of the city of Portland, says the Residential Energy Tax Credit tended to disproportionately benefit upper-middle-income homeowners, who needed to spend several thousand dollars in up-front costs. She'd like to see a revamped state subsidy that spreads the benefits more broadly.

"I just think it needs leadership" at the state level, she says.

Steve Law can be reached at 971-204-7866 or This email address is being protected from spambots. You need JavaScript enabled to view it., or Twitter at https://twitter.com/SteveLawTrib

Find out more:

How to take the Residential Energy Tax Credit before it expires:

www.oregon.gov/energy/At-Home/Pages/RETC.aspx

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