Illinois Solar Incentives and Rebates Guide
Key Takeaways
- The state of Illinois recognizes that not everyone may be able to afford solar installation costs and offers incentives for low-income households so that solar can be both accessed and affordable.
- Federal incentives include the Federal Solar Tax Credit that offers residents of Illinois a 30% tax credit through the year 2032.
- Local programs include city-specific solar incentives for small businesses in Chicago that can save up to 90% of building improvement costs.
- Net metering continues to be an option for Illinois residents: the state requires that all investor-owned utilities and alternative retail electric suppliers offer net metering.
We’ll explore the different options that can show how switching to solar is not only cost-efficient in the long run but more affordable than you may think. Various incentives can meet a variety of financial situations within the public and private sectors for both residential and commercial users. In fact, Illinois ensures that solar energy is available to all residents, even those in low-income communities and households. Let’s take a closer look at the Illinois-specific programs available.
Illinois Solar Incentives
Solar Sales Tax Exemption
Illinois has a number of state-wide solar incentives available—for residences and businesses alike. For example, the Illinois Department of Commerce and Economic Opportunity offers Sales Tax Exemption for Wind and Solar Energy – High Impact Business and provides a 100% exemption of Retailers’ Occupation Tax for building materials incorporated into the facility.
According to the Database of State Incentives for Renewable and Efficiency (DSIRE), there are some equipment requirements to take advantage of this tax exemption. For example, building materials must be physically incorporated into the building to qualify for exemption.
Property Tax Exemption
The Illinois Department of Revenue also offers a financial incentive that can provide property tax assessment for commercial, residential, industrial, or federal government properties. This program is especially helpful for those who may want to install solar panels but may be hesitant about their overall property tax increase that usually occurs whenever any improvements are made to a property. Through the property tax exemption, although your property value will still increase after installing solar panels, your taxes won’t. This equates to major overall savings in the long run.
Illinois Department of Commerce and Economic Opportunity
The Illinois Department of Commerce and Economic Opportunity offers a Special Assessment for Solar Energy Systems program that is a property tax incentive. The incentive amount varies and is open to residential and commercial sectors. According to DSIRE, eligible solar sources to be taken into consideration include solar water heat, solar space heat, and solar photovoltaics. Applicants must fill out a property tax form, and restrictions do apply. For example, the exemption would not be applicable for solar systems that are installed for structural, aesthetic, or insulating reasons.
Adjustable Block Program (Illinois Shines)
The Illinois Shines program offers an array of financial incentives for sectors from multifamily residential to schools. This program includes solar projects like Community Solar, where customers can benefit from off-site solar panels. An off-site solar panel system helps individuals who don’t want or are unable to install panels directly on their property. The program works by providing incentives to approved vendors, which then get passed through to the consumer. You can locate an approved vendor on the program website.
Income-Eligible Savings
The Illinois Solar for All Program, offered by the state, gives income-eligible households the opportunity to install solar panels and still save. Approved solar vendors can only charge eligible households half of the value of electricity they use. This means that if a participating household uses $200 worth of electricity over the course of a month, the approved vendor could charge them no more than $100 for that month. Additional benefits include no upfront costs for solar panel installation.
The Community Solar Energy Sovereignty Grant Program is another program set on eliminating financial hardships as barriers to obtaining solar energy. This program provides up to $1 million for commercial, school, and nonprofit sectors. The main objective of the program is to provide grants to historically disadvantaged or low-income communities.
Local Incentives
There are lots of local-level incentives, especially for the city of Chicago. For example, the Green Building Permit Programs offer a potential reduction of permit fees with an expedited process, as long as the building meets certain requirements (some including the use of solar panels). The city of Chicago also offers grants to commercial businesses that take advantage of building improvements. Through the Small Business Improvement Fund, up to 90% of these improvement costs can be funded.
Federal Incentives
Federal Solar Tax Credit
The federal government has passed an act to help offer tax credits for solar installations. The potential amount you could receive depends on when the solar system was installed. The Inflation Reduction Act of 2022, sometimes known as the Federal Solar Tax Credits (ITC), offers a 30% tax credit on systems installed from 2022 through the end of 2032. If your system is installed after 2032, you could see up to 26% tax credit. For installations in 2034, solar system owners could see up to 22% for installations. Unlike smaller incentives that often have caps due to limited funds, this program does not have a cap. Large installation projects can take advantage of this and see valuable savings.
Federal Solar Investment Tax Credit
| Through 2032 | 30% |
|---|---|
| 2033 | 26% |
| 2034 | 22% |
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Net Metering in Illinois
Net metering involves using excess solar energy to your credit—literally. During brighter, sunshine-filled hours, your solar system may generate more energy than you actually consume. Within this time, there is no supply charge since you are providing your own source of energy. At night, when you need to tap into your electricity source and can no longer generate power from the sun, you would be charged at your regular rate of electric usage. The difference is, however, that you would receive a credit in exchange for the excess energy produced during the day.
According to DSIRE, the state of Illinois requires investor-owned utilities and alternative retail electric suppliers to offer net metering, which means greater opportunities to take advantage of this program. However, municipal utilities and electric cooperatives are not required to offer net metering.
Net metering is not just limited to homeowners; multiple sectors can take advantage throughout the state of Illinois, including commercial, industrial, nonprofit, residential, schools, agricultural, and institutional.
Solar Renewable Energy Certificates (SRECs)
Solar Renewable Energy Certificates (SRECs), sometimes called solar renewable energy credits, are another incentive for people to invest in solar panels for their homes. But how exactly do these work and what is the benefit for certificate owners?
The certificates act as a representation of an amount of solar-generated energy measured per megawatt-hour. Solar system owners can sell their certificates to utility companies or SREC brokers for cash. The money-back helps with Illinois homeowners’ overall electricity bills and encourages them to continue to use their solar systems.
Impact of Payback Period on Solar
People looking to make the switch may wonder how soon they will see energy savings once they complete their initial investment into solar installation. With all the promise of savings, new solar system owners may be anxious to regain the amounts they initially invested. A payback period for any investment can be defined as the length of time it takes for the savings generated by an investment to match its cost. An average solar payback period of 10 years may seem lengthy, but the incentives discussed above can help bring that payback period down.
Payback periods ultimately depend on the size of the installation and local electricity rates. The exact impact of these incentives depends on your eligibility, the overall cost of your solar power system, and your average electricity rates.
| Typical 6kW solar system installation cost | $17,700 |
|---|---|
| 30% Federal Tax Credit | $5,310 |
| Total Cost After Incentives Total Cost After Incentives Not including local incentives, which vary | $12,390 |
| Assumed Electricity Produced by a 6kW Solar System in Illinois | 8,561 kWh |
| Annual Electricity Cost Reduced or Offset Assuming 100% utilization by the home | $1,345 |
| Sample Payback Period | 9 years |
Sources: https://www.nrel.gov/docs/fy22osti/83586.pdf, https://globalsolaratlas.info/map (Chicago); https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a
Conclusion
Residents of Illinois may not know where to start when it comes to making the switch to solar. High upfront installation costs plus long payback periods may deter individuals from investing. But with the amount of incentives offered at the local, state, and federal levels, interested parties can realize their savings and investing potential.
No matter if you are a small business owner or live in a low-income area within Chicago or elsewhere in the state, there are plenty of resources that can help reduce your overall investment costs. These incentives provide even more reason to embrace solar power.