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A Guide to DC Solar Incentives for 2020
Washington DC solar incentives are some of the best in the country, which is great news for you as a DC homeowner or business owner looking into rooftop solar.
America’s capital is committed to sustainability, and there are even solar panels on the White House. In this article, we’ll take a look at the best solar incentives for residents of Washington DC that make going solar much more affordable.
Solar Renewable Energy Certificates (SRECs)
Washington DC residents who install solar energy systems at their homes or businesses can sell Solar Renewable Energy Certificates (SRECs) for as much as $500 per MWh. In 2005, the District of Columbia Council enacted a Renewable Portfolio Standard (RPS) that essentially states that utility companies must meet certain benchmarks in terms of solar carve-out targets.
One SREC is equivalent to one megawatt-hour (1,000 kilowatts) of electricity that has been produced by an eligible solar power source, and electricity suppliers (utility companies) must purchase a set number of SRECs per year to meet their legal compliance obligations.
While an one SREC can be worth a maximum of $500 on the SREC market, the exact value does fluctuate based on market conditions, with the average being about $480. Home solar energy system owners can also opt to sell their SRECs to an aggregator like SRECTrade, who then bundles SRECs and resells them to utility companies.
Selling an SREC Example
If you have an average size 5 kW solar energy system that produces 5 MWh of electricity per year, you can sell those five SRECs for up to $500 each, earning you up to $2,500 a year just for having a solar energy system at your home or business!
And, of course, the bigger your system, the more SRECs you have to sell. This type of yearly passive income can significantly trim down the payback period on your solar energy system.
Property Tax Exemptions
In 2012, The District of Columbia Council enacted the Solar Energy System and Cogeneration System Personal Property Tax Credit, which exempts you from paying higher property taxes as a result of the increased value of your home from the addition of a solar energy system. Basically, even though the value of your home goes up when you add a solar energy system, your property tax amount will remain the same as it was previous to the solar energy system installation.
Net Metering in DC
Net metering is a solar program that allows you to sell excess energy that your solar panels produce to the grid in exchange for credits on your utility account. This policy essentially allows you to “store” energy from your solar panels for later use, without adding an expensive battery system.
Obviously, solar panels produce the most energy during the middle of the day when the sun is highest in the sky and hitting the panels most directly. However, many people are at work or school during this time, and power consumption needs are low. Conversely, when people come home in the evening and use much more power for lights, appliances, heating or cooling, and so forth, their solar panels are no longer producing much (if any) electricity.
Net metering solves this problem by allowing homeowners to sell the energy that their solar panels produce during the day to the grid for close to or even equal to the retail rate of electricity. Then use those credits against the cost of energy they buy back from the grid during times when their solar panels are not producing much energy.
Net Metering with PEPCO
Potomac Electric Power Company (Pepco) serves the vast majority of the DC area and parts of Maryland, and they offer net metering everywhere that has an open circuit – some areas do not have an open circuit which makes grid interconnection impossible and eliminates the possibility of net metering.
If you are in an area that’s eligible, Pepco will install a special two-way electricity meter at your home that will keep track of energy flowing in both directions. If, at the end of the month, the number on the meter is negative (you have sold more solar energy to the grid than the amount of grid energy you’ve used), you will have a credit on your account for the difference.
If the opposite is true, you will only pay for the difference between how much energy you bought from the grid and how much solar energy you sold.
Pepco will credit you at the full retail rate if your solar energy system is less than 100 kW and at the generation rate if your system is larger than 100 kW. Either way, the credits never expire so you can use them against your bill in the winter, or at the end of the year you can sell those unused energy credits as SRECs.
Solar Advantage Plus Program
Washington DC’s Solar Advantage Plus Program is designed to make solar energy a feasible option for low-income residents. This unique program offers first-come, first-served rebates of up to $10,000 for qualified applicants in order to fully cover the cost of a 3-4 kW solar energy system.
Successful applicants benefit not only from a completely free solar energy system, but they also then own the energy it produces as well which will reduce their electric bills long-term and allow them to earn extra income by selling SRECs.
Federal Investment Tax Credit for Solar
The federal solar investment tax credit was established by the Energy Policy Act of 2005, and although it was originally set to expire in 2007, it has been extended several times due to its extraordinary success and popularity. The tax credit works by allowing homeowners and business owners who install solar energy systems to deduct a percentage of the total cost of the system from their federal tax liability amounts.
Until 2019, the deduction amount was 30% of the cost of the solar energy system, and now in 2020 it allows for 26% of the amount to be deducted.
- In 2021, the amount will be further reduced to 22% of the total cost, and
- In 2022 and beyond, business owners will be able to deduct 10% of the cost of their clean energy system while there will be no deduction for homeowners.
If the credit amount exceeds your federal tax liability amount for the year, you can rollover excess credit to the following years, as long as the tax credit is still in effect.
In order to qualify for this incentive, you simply have to own your own new solar energy system. If you sign a lease or a PPA with a solar installer, you do not own the system and are therefore not eligible for this tax credit.
This tax credit often saves new solar energy system owners thousands of dollars. For example, let’s consider that the average cost of a new solar energy system in Washington DC is $16,350. The federal tax deduction would allow you to save $4,251, meaning the net cost of the system is reduced to $12,099 – a very significant saving!
Is Solar Worth It in Washington DC?
Solar is certainly worth it in Washington DC. DC has one of the most ambitious Renewable Portfolio Standards in the country, with the goal of 100% renewable energy by 2032. This in turn means that the District offers some of the most robust solar incentives to help reach that goal, which translates into very reasonably priced and even lucrative offers for you as a DC resident.
Washington DC gets over 200 days of sun per year, which makes solar energy quite feasible. Additionally, solar panels are getting more sophisticated all the time, and they are increasingly able to harvest even diffused light on cloudy days. The efficiency of solar panels is rapidly increasing as well, meaning that a higher percentage of the sun’s energy can be converted into electricity.
With an average payback period of about 5 years and an average 20-years savings of over $54,000, DC is one of the best places in the country to go solar in terms of financial benefits. The nation’s capital is committed to renewable energy, so in turn legislators have made it easy and beneficial for DC residents to make the switch to green, renewable, sustainable solar energy.
The Numbers Don't Lie
The numbers don’t lie – solar energy systems offer a rate of return that’s well above the long-term average return from other common investments like share market and property investment.
At Avila Solar, we aren’t solar installers ourselves, but we work hand-in-hand on a daily basis with local DC solar installation companies and we would be more than happy to provide you with a recommendation of the best possible solar company for your project.
We are here as a solar resource for you – if you have any questions about how solar works, whether your property is suitable for solar, or how any of the above-mentioned solar incentives work, please give us a call today and our experts will be happy to help.