Cost of Solar, Financing, Lease Options
How much does solar energy cost?
An average residential solar system costs between $15,000-$25,000 after solar rebates and solar incentives. Considering that you will probably spend over $72,000 in electrical bills over the next 25 years, this can be a small price to pay. Some companies even offer solar lease options in which you pay no out-of-pocket expenses for the installation.
The exact cost of solar for your home will depend on the applicable Maryland solar rebates and utility incentives available in your area and the type of solar system you chose. Using a qualified installer who is familiar with the local incentives and permitting process will ensure that you get the most from your investment.
Are there any government tax incentives or rebates?
One of the great elements of solar power in the U.S. is that there are large number of tax incentives and rebate programs that exist to make it easier to afford solar power for your home. The solar installer that you select will be up to date on all of the applicable incentives based on where you live but below are some of the basics:
- Federal Tax Credit: Investment Tax Credit (ITC) allows individuals to deduct 30% of the cost of a solar system from individual federal income taxes;
- Individual State Rebates: Many states offer cash rebates that are either flat amount or are based on the size of your solar power system – check out the U.S. governments Database of State Incentives for Renewables & Efficiency for more information on the rebates in your particular area;
- Property Tax Exemptions: Many states also specifically exclude the value a solar system from your your annual property taxes… for example, if a new solar power system adds $30,000 to the value of your home, that $30,000 will be exempted from the total assessed value and your property taxes will not increase as a result of the new system.
- Municipal and Utility Rebates: In addition to the federal and state incentives, many local municipalities and utilities will offer rebates on top of everything else…please check out Database of State Incentives for Renewables & Efficiency for any incentives in your specific area.
What are the current Maryland solar incentives and how do they work?
The primary state sponsored Maryland solar incentive program is the Residential Clean Energy Grant Program: With the help of the Maryland Energy Administration, this program provides financial incentives to those installing solar water-heating or Photovoltaic systems in their primary residence. For those installing solar water heating there is a $500 flat incentive for systems with a panel area of 10-100 square feet, and for installation of solar PV there is a $1,000 flat incentive for systems with a capacity of up to 20 kW. These grants are either provided after the installation, or are subtracted from the individual’s adjusted gross income, thus enabling the receiver to avoid paying state taxes on the amount of the grant received.
Maryland also offers owners of solar PV systems solar renewable energy credits (SRECs). The genesis of the SREC came with Maryland’s Renewable Energy Portfolio Standard, enacted in May 2004 and revised in 2007 and 2008, that required electricity suppliers (all utilities and competitive retail suppliers) to use renewable energy sources to generate a minimum portion of their retail sales. The renewables requirement increases gradually, ultimately reaching a level of 20% from Tier 1 resources in 2022 and beyond. Initially, the law did not include solar PV systems but was amended in April 2007 to include a solar PV requirement of 2% by 2022, which is included within the 20% by 2022 Tier I renewables requirement. In May 2010, Maryland revised the standard to accelerate the schedule for compliance for solar schedule and revised further to allow solar water heating systems to qualify under the standard. In May 2012 the solar compliance requirements were accelerated again for the period from 2013 – 2020 and the ultimate target of 2% was solar moved up from 2022 to 2020. Accordingly, electricity supplies are required to have an annually increasing amount of their electrcity come from solar:, specifically 0.005% in 2008, to 0.025% in 2010, until the final 2% by 2020 requirement.
Under Maryland law, an SREC represents the generation attributes of 1 megawatt-hour (MWh) of electricity generation (or equivalent) from a qualifying solar facility. Under Maryland law, ectricity suppliers must purchase and retire SRECs in order to meet their compliance obligations under the law, or pay a Solar Alternative Compliance Payment (SACP) for any SREC purchasing deficiencies. The SACP essentially operates as a ceiling on the price that a supplier would pay for SRECs to fulfill obligations under the Maryland RPS. In Maryland, the SACP is set at $400 per MWh for 2009 through 2014, but will decline over time to $50 per MWh in 2023 and thereafter. As a result, the SREC system represents a significant source of revenue for owners of qualifying solar facilities with a value determined by demand in the trading market. A Maryland SREC has a three-year lifetime during which it is valid for compliance (i.e., the calendar year during which it was generated plus the next two calendar years). Once a facility qualifies as an eligible solar generator, it is eligible to produce SRECs for as long as it remains in service as an eligible generator. Residential solar water heating systems are not permitted to generate more than 5 SRECs annually.
Does Maryland have any other tax incentives for solar?
Many states also specifically exclude the value a solar system from your annual property taxes. For example, if a new solar power system adds $30,000 to the value of your home, that $30,000 will be exempted from the total assessed value and your property taxes will not increase as a result of the new system. As of July 2009, residents are now able to receive 100% real property tax exemption for solar and wind energy properties, including solar PV and solar hot water systems. In addition to this, there was also an amendment added that grants solar and geothermal heating/cooling systems an assessment that could potentially make their assessed value equivalent to those of conventional energy systems.
In addition to the federal and state incentives, many local municipalities and utilities will offer rebates on top of everything else. Unfortunately, there are little to no utility rebate programs available for solar energy systems and installation. However, there are a large amount available for energy efficiency products such as washer/dryer systems, refrigerators, water heaters and lighting, among other appliances. The types and amounts of rebates offered vary by county, but two major companies that provide them are PEPCO and SMECO. For more information on the different utility rebates offered, check out the Utility Rebate section on DSIRE’s website.
Is Maryland a Net Metering state?
Maryland allows all owners of solar systems to net meter which means that you can connect your solar panel system to the utility grid. Furthermore, homeowners with solar installed are able to “bank” the excess electricity their solar system generates and receive credit up to 100% of their electric use bill at the full retail electricity price that they can use later. The only negative to Maryland net metering is that if at the end of a 12-month billing cycle, you have still generated electricity more than you use, you grant any credit to your power company.
If I can not afford an up front payment for a solar power system, are there financing options to help me?
Yes, our partners offer a variety of great financing options to help offset some of initial installation costs. In some cases, your monthly payment will be less than the amount of savings on your electric bill. Low interest rates are available and the solar system increases the value of your home. Again, the your solar installer will have all of the details on the available solar financing options but make sure you ask about the following:
- Home Equity Loans: borrowing against the equity of your home;
- Solar Lease: leasing the solar panels for a fee over a set length of time (this is an increasingly popular option for more and more Marylandn’s looking for solar); and
- Power Purchase Agreement: an arrangement similar to a lease arrangement where the solar provider/installer secures funding on their own for the solar project, installs the solar system in your home/office building and then sells the electricity from the solar system to the home/building owner at a fixed contractual price for a set length of time.