Deciding to install solar panels on your property is likely to be a major financial decision. Along with the substantial long-term financial benefit of getting your power from the sun for free, there is the upfront cost of the solar photovoltaic (PV) system to consider. Customers are keen to know what solar incentives are available to them as they decide how large a PV system to install on their roof.
Federal Investment Tax Credit
The most important and impactful financial incentive for solar is the federal Investment Tax Credit (ITC). The ITC is a dollar-for-dollar tax credit that homeowners apply to their federal income taxes. This year the ITC is set at 26%. This means that the federal government will reimburse you 26% of the total cost of your PV system, including the hardware, the installation costs, permitting costs, and any electrical upgrades you might need to undergo in order to install solar on your property. Learn more about the federal ITC here.
The federal ITC has been one of the biggest growth mechanisms for solar in the United States since it was enacted in 2006. However, the tax credit has already begun its decline: it has dropped to 26% this year, down from 30% in 2019. Next year—2021—the tax credit is set to reduce to 22%. By 2022, the ITC is scheduled to expire completely for residential solar installations (and remain at 10% for commercial & utility solar). Therefore, since one of the biggest financial incentives to going solar is sunsetting over the next two years, there is no better time than now to explore the options for a PV system on your property.
Property Tax Exemptions
Many counties in Northern Virginia, including Arlington, Fairfax, Loudoun, Fauquier and Prince William counties, offer property tax exemptions for solar installations on residential and commercial properties. Each county’s program has different rules and regulations governing the exemptions, so it is best to check with your county’s property tax code. But the bottom line is that you will see savings on your property tax bill over five or more years due to your solar PV system.
Solar Renewable Energy Credits
There is one more financial incentive for Virginians to keep in the back of their minds. Our state legislature just passed the Virginia Clean Economy Act earlier this year, which accelerates the push for renewable energy around the state. The law establishes a Renewable Portfolio Standard for VA, which requires electricity to come from 100% carbon-free sources by the year 2050. Solar power is, of course, expected to play a major part in achieving that goal. The law does not specifically lay out a plan for a solar Renewable Energy Credit (SREC) marketplace, but industry experts expect that SRECs will emerge very soon in Virginia in order to comply with the new Renewable Portfolio Standards.
What is an SREC, and why should you care? An SREC is a unit of solar energy with a monetary value. If you own a solar PV system on your property, your system will automatically generate SRECs. SRECs are bought and sold in an SREC marketplace. Large-scale power generators need a certain amount of RECs to remain in compliance with the state’s Renewable Portfolio Standard; if they do not have enough renewable power in their own energy portfolio, they need to purchase wind and solar RECs from producers like you. Your solar PV system will generate one SREC for every 1000 kilowatt hours of solar power produced. On an average 10kW residential system, this equates to about one SREC a month.
If other states’ programs are any indication, SRECs are expected to be worth hundreds of dollars each (SRECs in Washington DC are worth over $400 right now). With the passage of the landmark Virginia Clean Economy Act, we are all eagerly waiting for updates about the SREC marketplace and the value of each SREC generated. And we expect that VA homeowners will soon be able to generate additional $100’s of dollars a month from their solar panels.
With all the financial incentives available for solar–some expiring soon, others coming online shortly–now is truly a great time to consider installing a solar PV system on your property.