Virginia explained: How can you save on residential solar power?

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fraudulent internet ads and questionable “qualification” surveys of Virginia’s solar installation abound online, but it’s hard to find clear and specific information about what the state and federal government is doing to encourage cleaner energy use. .

With a price similar to that of a used car, Virginia homeowners looking to invest financially in solar panels face a tangle of tax exemptions, credits, fees, and utility programs.

The costs (and benefits) of going solar

EnergySage Solar Marketplace estimates the average residential solar price in Virginia is between $12,325 and $16,675 for a 5 kilowatt system, which is on the smaller end of a system size. The most common systems are between 8 and 10 kilowatts, but it depends on the size of the roof. For a 9 kilowatt system, the average cost is about $26,100 before federal tax breaks.

EnergySage estimates that the average solar system in Virginia pays for itself in about 12 years by reducing or eliminating a household’s electric bill and saves customers about $21,000 over 20 years compared to simply buying solar. energy from a traditional electric utility. A solar panel usually lasts about 25 years.

The non-profit Solar United Neighbors, which helps organize solar cooperatives, evaluates quotes from installers and advocates for increased solar affordability, estimates the payback period is shorter: between eight and 11 years, according to the report. program associate Virginia Ben Hoyne.

These estimates assume an upfront payment for the solar panel, as well as a 2-3% annual increase in the price of non-solar electricity.

How solar pays you back

Those with residential solar power can save money even though most systems don’t offset 100% of a home’s usage with clean energy.

After the installation of the solar system is complete, homeowners can trade energy with their energy company through net metering. Net metering is the system which counts grid electricity inputs and outputs generated by rooftop panels, allowing solar panel owners to accumulate credits for excess electricity produced by the panels during the day.

As the meter installed on your home tracks the amount of electricity consumed, it also calculates the amount offset by generation and fed back into the grid, which can reduce or even eliminate your energy bill depending on generation capacity. of the system.

The state requires for-profit regulated utilities like Dominion Energy and Appalachian Power to adhere to fair price net metering rules. This means that the energy injected into the network receives the same evaluation as the energy extracted from the network.

The Dominion has also obtained in the residential solar installation sector with a subsidiary called BrightSuite.

Some Virginia utilities charge monthly “waiting feewhich aim to compensate them for losing customers whose systems generate too much excess electricity. However, the law prohibits standby charges for residential solar power in Appalachian Power and Old Dominion Power territory.

Federal tax incentives

For those interested in installing solar panels, the most significant initial financial assistance is provided by the Federal Residential Solar Investment Tax Credit, which provides a 26% credit for systems installed between 2020 and 2022, meaning you can deduct 26% of the cost of installing the system of your income taxes when you file your return. For this 9 kilowatt system, the credit would reduce the cost to $19,314.

For systems that complete installation in 2023, the credit is 22%, after which it will expire without further action by Congress.

This credit requires solar customers to have a certain tax responsibility to be deducted, as well as requiring customers to pay for the entire system, either in cash or by financing. For example, a married couple under 65 who jointly deposit less than $25,100 would not qualify for the tax credit.

Residential Solar Financing Options

If paying for the system requires a loan from a bank or other financial institution, potential customers should also consider the fees and interest payments associated with borrowing money.

Solar customers who are homeowners may be able to take out a home equity loan. interest rates for a long-term loan for a solar panel from Clean Energy Credit Union, a financial institution that only offers loans and financing services for clean energy investments, is currently around 5.5%.

“Many installers have their own in-house financing or a partnership with a lender,” Hoyne said. But he cautioned that while rates are important, contract and upfront fees are also key. “Someone might have a really good rate, but also [if] you pay $5,000 in fees, [it] it doesn’t matter that this rate is really good.

Some places have solar cooperatives, where potential customers can join a large group of others in the area to use their bargaining power to negotiate better prices from installation companies. Low-income households may also be able to enter into a power purchase agreementwhich operates like a lease where private investors pay for the system and landlords pay the investors rather than the electric utility.

Solar on the roof of the Iron Works Cycling & Outdoor Adventure building in Big Stone Gap, one of the few commercial rooftop solar panels in the area. (Iron Works Cycling)

State protections and local taxes

At the community level, Virginia law prohibited homeowners’ associations to prohibit the installation or use of solar panels, although they may set “reasonable restrictions” on size and location. In 2020, the legislation was updated to set clear reasonableness guidelines, prohibiting associations from making rules that increase installation costs by 5% or reduce expected energy production by 10% or more.

Under Virginia law, solar energy equipment has a separate tax classification from real estate or personal property. For the rest of This yearlocalities have the option of exempting their residents from paying taxes on such equipment.

Currently the cities of Alexandria, Hampton, Roanoke, Suffolk, Lynchburg, Harrisonburg, Charlottesville, Petersburg, Fredericksburg, Winchester and Lexington in addition to the counties of Fairfax, Prince William, Loudoun, Chesterfield, Albemarle, Hanover, Fauquier, Pulaski, Giles and Scott offer these tax exemptions, for database from the Weldon Cooper Center for Public Service at the University of Virginia.

As of January 1, 2023, all residential solar installations under 25 kilowatts will be be considered as a separate class of property and be exempt from local tax.

Shared solar — an inclusive alternative

One potential solution to reducing the cost of solar energy and increasing its accessibility is to participate in a community solar program, sometimes called shared solar. These programs allow multiple households to buy some of the electricity produced by a solar panel, allowing people like apartment dwellers who cannot install a system on their roof to buy clean energy and receive credits for it.

“Most people who can get solar power are homeowners, which rules out a ton of people,” Hoyne said. This includes residents of apartments or multi-family units, those who move too often to realize the long-term benefits of solar electricity, homeowners whose roofs or home orientations are not suitable for panels, or people who cannot afford facilities.

In 2020, the General Assembly obligatory Dominion and Old Dominion Power to develop shared solar programs. The State Corporation Commission recently set the minimum bill for Dominion customers – the amount customers will still have to pay to cover power generation costs – at $55, resulting in a legislators and defenders complain that it is too expensive to be widely available.

Solar United Neighbors were pushing for a much lower $10 minimum bill, and Hoyne said $55, which he believed to be the “highest in the country”, was “not a positive development” and “goes to the bottom”. ‘against the intent of the legislation’.

An expanding market

Although reductions in the cost of solar technologies have far exceeded modest forecasts – falling by around 15% per year between 2010 and 2020, according to an Oxford university meta-analysis – a report of the Weldon Cooper Center for Public Service claims that “soft costs” such as permits, inspections, labor, taxes, and grid interconnection make up 63% of the total cost of residential solar PV installations.

Average hardware costs were around $0.99 per watt in 2018, while EnergySage found the total Cost in the Commonwealth at $2.90 per watt in July 2022.

Part of the difficulty in finding reliable information on residential solar costs is due to the variety of factors that come into play, creating a large variants prices for different systems and different installers.

Hoyne points to the relative newness of the solar industry as a reason for the “disjointed” nature of information online, as well as the “multiple players” involved. He says there is potential space for the Virginia Department of Energy or electric utilities to fill the void.

“Now you’re starting to see some critical mass where more people can go solar,” Hoyne said. “As to why there’s a limited amount of information, it’s just a new market, recent in terms of broader appeal.”

US Department of Energy Proposes Solar Power Generation calculator which estimates how much power can be generated in a geographic area, although housing orientation and tree cover also impact the amount of direct sunlight reaching a PV system.

Other useful resources, both commercial and non-profit, include Local Energy Alliance Program, SolarizeNOVAGoogle Sunroof Project, Solar United Neighborsthe State Incentives Database for Renewable Energy and Efficiency and one guide by the Solar Energy Industries Association.

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