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Is the ComEd Solar Rebate a Good Deal?

by | May 18, 2023 | Economics, Incentives

ComEd recently began offering a rebate to residential solar customers called the ComEd Renewable Energy Distributed Generation Rebate (we’ll just refer to it as the ComEd solar rebate or the ComEd solar program). With the rebate, solar customers can receive $300 per kW DC of solar capacity, which for a typical residential customer would be $2,000-4,000. Sounds good right? Well, it’s very important that you read the fine print. In fact, although ComEd’s web site and documentation — and many solar companies — would lead you to believe the rebate is a good deal, most customers would be much better off if they didn’t take it.

What’s the Catch?

ComEd’s website and the Distribution Generation Rebate Terms and Conditions list the following conditions taking the rebate:

  1. The electric generator must be a qualified type (like solar), must have a capacity under 5,000kW (residential systems are typically 5-15kW), and must use a “Smart Inverter” (the ones Certasun uses qualify).
  2. The system must have been interconnected after August 11, 2022.
  3. The system must be primarily intended to offset the customer’s own current or future power and energy requirements.
  4. A few other minor conditions that would be no problem for a typical residential customer.

There is no question that most readers would conclude that taking the rebate is a great idea. But there is more to the story: the really fine print of the rebate is contained in Rider DG REBATE, a legal filing with the Illinois Commerce Commission. This 21-page document is complex and can be difficult even for industry insiders to parse. A crucial piece of information is tucked away on page 12:

“A retail customer who is serviced under Rider POGNM — Parallel Operation of Retail Customer Generating Facilities with Net Metering (Rider POGNM), by a Distributed Electric Renewable Generating Facility, for which a Resource 1 Rebate has been issued, shall only be eligible for net metering service under the provision of subsection (n) of Section 16-107.5, as of the date of the issuance of such rebate.”

What is “subsection (n) of Section 16-107.5”? It’s the really, really fine print: The Illinois Public Utilities Act (which runs over 600 pages). Section 16-170.5 is dedicated to electricity net metering. It describes what an Illinois utility like ComEd must offer to customers when their systems export more electricity than they use to the grid. The subsections describe different types of net metering, with subsection (n) net metering being the least advantageous to a retail customer.

Net Metering, Explained

Understanding net metering is really important to understanding the economics of solar. Most ComEd residential solar customers get net metering under subsection (d) of Section 16-107.5. This is colloquially known as “full” or “1:1” net metering. Customers receive a credit for each kWh they export to the grid. They can use those credits anytime during a year to offset the full, delivered price of electricity when they draw from the grid (e.g. at night). Thus, they benefit fully from every kWh produced by their system. When customers accept the ComEd solar rebate they must take net metering as described in subsection (n), which you might call “generation-only” net metering.  Instead of receiving credits meant to offset the full price of each kWh delivered (currently about $0.16 / kWh), they receive credits only for the cost of generating that electricity (currently about $.08 / kWh). In short, the value of their exported energy decreases by 50%.

Understanding Solar Energy Exports

So, if you take the ComEd solar rebate you get some money up front, but you give up about half the value of energy you export. Is that a good deal? Well, you have to understand how much energy your system will export to do the math. Virtually every residential solar system exports energy to some degree. Imagine a solar system that produces as many kWh of electricity as a customer consumes in a year. We call this a high “offset” percentage (in this case, 100%). On any given (sunny) day, the system will export much of its solar production to the grid, generating net metering credit. The customer will use credits when the system is not producing as much as the house is consuming. A similar home with a smaller system — and a lower annual offset — would export less to the grid.

The graphs above provide a broad sense of the concept of energy exports, but they are simplified for clarity. In the real world, a home’s consumption varies throughout the day (think of an A/C cycling on and off), and production varies as well (imagine clouds moving through the sky). Solar production and exports can actually look more like the graphs below (though these are still simplified for clarity):

As you can imagine, given the variations in energy consumption and solar production over time, it is impossible for solar companies like Certasun to precisely determine the amount of energy a particular system will export. However, we can look at empirical data from our past customers to see what a typical level of exports is. In the graph below, we show the offset (the percentage of the previous year’s energy consumption produced by the solar system) and exports (the percentage of solar production exported to the grid) for a number of our customers’ systems:

Generally, as a system’s offset grows, so does that system’s export percentage — meaning, a higher portion of that system’s production is sent to the grid and net metered.

We see a general trend that the percentage exported is roughly equal to 70% of the system’s offset percentage, e.g., if a system offsets 100% of a customer’s annual usage, we can expect it to export roughly 70% of its production, and so forth.

ComEd’s Solar Rebate vs. Net Metering

We now have the information we need to determine whether the this ComEd solar program is a good deal.

Consider customer Matthew M, who purchased a 9kW system that we expect will produce 10,000 kWh in its first year. This is a 99% offset of the 10,100 kwh he consumed in the previous year (and we assume he will continue to consume in future years).

Based on the relationship we described above, we estimate his system will export 70% of the energy it generates to the grid, or 7000kWh. He will use this energy later in the year and get credit for it under one of the two forms of net metering we described above.

Let’s examine whether it makes financial sense for him to take the solar rebate, using two scenarios:

Scenario 1: Matthew takes the rebate. Here is a breakdown of the value he will get from the rebate itself and partial net metering (we assume 4% ComEd rate growth, 0.25% annual production degradation, and 5.5% discount rate for the present value, and a tax rate of 26.95%). 

ComEd solar rebate$2,700
Income tax on rebate-$728
Exported energy7,000 kWh
Credit for each kWh exported$0.08
1-year value of NM credit$583
Present value of NM for 25 years$11,003
Net Benefit$12,975

Scenario 2: Matthew doesn’t take the rebate, and instead receives full net metering. His overall net metering benefit looks like this:

Exported energy7,000 kWh
Credit for each kWh exported$0.16
1-year value of NM credit$1,120
Present value of NM for 25 years$21,133
Net Benefit$21,133

As you can see, Matthew is over $8,000 better off if he doesn’t take the rebate.

Should You Take the ComEd Solar Rebate?

We’ve done similar math for different combinations of system size, solar production, offset percentage, and export percentage.

The ComEd solar rebate is unlikely to make financial sense for a system that produces more than 25% of the energy you consume over a year.

An exceedingly small share of the systems we propose would meet this threshold.

There are a handful of exceptions. For example, if you believe it is highly likely you will move within five years, you might want to take the rebate since you won’t “lose out” on the benefits of full net metering for as long as we’ve assumed here. However, someone buying your house might give you a smaller “solar premium” for your house than a similar one with full net metering.

There are, however, other solar incentives available that make solar a lot more attractive and affordable. Read about them here.

Work With a Trustworthy Source

ComEd’s materials certainly would lead you to believe the rebate is a good idea, even though we’ve shown that it is almost certainly not.

Unfortunately, we’ve also seen some solar companies list the ComEd solar program on their proposals while not properly accounting for the foregone net metering value. We aren’t sure if they are doing this this out of ignorance or whether it is a willful omission of the facts designed to make their proposals look better.

Choose a solar company that is knowledgeable and honest. Certasun will provide an informed and transparent assessment of whether the ComEd solar rebate makes sense for you.

One more thing: starting on January 1, 2025, full net metering will no longer be available to any new solar customers. The good news is that if you have applied for net metering before that date, you will receive full net metering for the lifetime of your system. Get ahead of the net metering deadline: sign up to receive a free solar consultation and quote today from our experienced consultants.

This post was written by Marni Berliner.
Marni is Certasun's Director of Sales.

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