The Ultimate Guide to Solar in Maryland: 2019 Maryland Solar Energy Incentives, Costs, and Policies

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Written by Sarah Hancock | September 19th, 2019
Sarah Hancock is passionate about green living and sustainability. She frequently writes about renewable energy and manages the Solar blog at BestCompany.com.

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Maryland Solar Overview

Maryland lawmakers have done a nice job of enacting favorable solar policies, making solar energy attractive and affordable in the Old Line State. Just this year, Governor Larry Hogan passed the Clean Energy Jobs Act, committing Maryland to produce 50 percent of its energy from renewable sources by 2030 and increasing funding for clean energy workforce development.

As a result, several solar incentives are up for grabs in Maryland, and Marylanders can take advantage of substantial savings by switching to solar.

Here’s an at-a-glance description of the current benefits and drawbacks of switching to solar in Maryland:

Benefits of going solar in Maryland:

  • Higher-than-average electricity prices = more savings with solar
  • Multiple financing options available
  • 30% federal tax credit
  • $1,000 solar rebate for systems up to 20 kilowatts
  • 100% property tax exemption
  • 100% sales tax exemption
  • Approximately $50 per SREC in performance payments
  • RPS of 50% by 2030 with 14.5% solar carve out
  • Statewide net metering with credit rollover and end-of-year payout
  • Easy to connect to the grid
  • Good for the environment

Drawbacks of going solar in Maryland:

  • Fewer yearly days of sunshine than some other states
  • State tax credits for large systems only

We break down and explain each of these items in the article below.

national harbor maryland

Cost of Solar in Maryland

Prices of solar in Maryland have fallen 47 percent over the last five years, and as of 2019, the average price per watt for a solar energy system purchased outright in the Old Line State is approximately $2.92. For an average-sized 10 kilowatt system, this comes out to be $29,200 before tax credits and other local incentives are applied. After incentives are applied, the cost drops to about $19,000.

In terms of price per kilowatt-hour of energy used, those with solar panels in Maryland will pay only about $0.07 per kilowatt-hour. This is low compared to the average price of electricity from the utility, which is currently about $0.14 per kilowatt-hour. Utility prices are expected to go up over the next several years, which means that Marylanders who switch to solar now will see their savings increase over time.

Considering this, as well as inflation and financial benefits from available incentives, the average home or business owner in Maryland who purchases a solar energy system could expect to recoup their solar investment in about nine years. After that, they will essentially be able to use the energy production from their solar panels to power their house or office building for free or for a very low rate.

In fact, over the life of the solar energy system, the average Maryland resident could reasonably expect to save upwards of $40,000.

antietam maryland

Maryland Solar Financing Options

In terms of paying for a solar energy system, Marylanders have several financing options available to them, including outright purchases, loans, leases, and power purchase agreements.

Outright Purchases

In Maryland, purchasing a solar panel system outright will provide you with the biggest dollar-for-dollar savings in the long run, but it does require that you pay for your system in full upfront. However, since you’ll be the owner of the system, you’ll get to take advantage of the 30 percent federal tax credit and the state’s solar rebate, which will help you to recoup a good portion of those costs in the first year. You’ll also be eligible for other local incentives, such as SREC payments, that will put money back in your pocket over the life of your solar energy system. In addition, you’ll own the solar equipment and the energy it produces. In about nine years after it pays itself off, all the electricity produced by the system will be pure profit.

Although this option is not feasible for everyone, you may want to consider it if you can swing it. Some solar companies will even offer a discount if the system is paid for in full upfront.

Loans

Getting a loan to finance a solar system in Maryland is a great way to go solar if you are interested in solar ownership but are unable to purchase the system outright. With a solar loan, you’ll be paying for the system over time but taking advantage of the incentives, perks, and savings from the beginning. 

Many solar companies partner with banks or companies that specialize in providing loans for solar projects. These loan companies typically offer loans contracts ranging from 5 to 20 years and interest rates between 1.99 and 4.99 percent, depending on your credit score and the length of the loan. Common benefits that come along with getting a solar loan include the ability to take advantage of federal tax credits and available local incentives, as well as the option to pay off the loan early with no prepayment penalties.

When you choose to go solar with a loan in Maryland, you’ll actually start making money in the first year thanks to relatively high electricity prices and performance payments. Essentially, the money you save on your utility bill as a result of having solar combined with the cash you receive from the electric distribution companies for performance payments will be higher than your loan payment. Your savings will then increase each year as electricity prices go up. Once the loan is paid off, you’ll be able to power your home or business for free or for a very low cost for the remainder of the system’s life.

Leases

Leasing a solar panel system for your home essentially means that you will be renting the system from a solar company or a third-party financier for the duration of a contract, which is generally 20 years, at a locked-in monthly rate. Leases typically do not require the homeowner to put any money down upfront, but because the solar company owns the system, the customer does not get to take advantage of tax credits, rebates, net metering, performance payments, or long-term financial benefits.

Since electricity prices in Maryland are slightly higher than the national average, your solar lease payment will likely be about the same as your current electricity bill without solar at the beginning. However, electricity prices are expected to increase over time, which means you should still end up saving several thousand dollars over the life of the contract, and let’s not forget the positive impact you’ll be making on the environment.

Power Purchase Agreements

PPAs are similar to leases in that the homeowner typically does not have to put any money down and a third party owns the system. However, instead of renting the system at a locked-in rate, the homeowner buys the electricity produced by the system at a set rate.

Due to Maryland’s relatively high electricity prices, Marylanders can definitely save money with a PPA. Even though savings won’t be incredibly hefty at the beginning, they should increase each year as the cost of electricity goes up.

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Maryland Solar Incentives

Residents of Maryland who choose to purchase their solar system outright or with a loan get to take advantage of some fantastic solar incentives, including a federal tax credit, a solar rebate, sales and property tax exemptions, and performance payments.

Tax Credits

There are two tax credits you need to be aware of when switching to solar. The first is the 30 percent federal tax credit that anyone in the United States who owns their solar panel system can qualify for. Because these credits are given on a 1-to-1 basis according to your tax liability, you will want to have an idea about what your federal tax liability is to know how many years it will take for you to take full advantage of this tax credit. 

The second is the state tax credit. While Maryland does offer a state solar tax credit, only systems that produce at least 23,530 kWh of energy can qualify for it. To reach these levels of production, you’d need a system about three times larger than the average residential solar system in Maryland. However, if you are planning on installing a solar system large enough to qualify for the state tax credit, you’ll receive $0.0085 for every kWh your system generates and will be able to take the tax credit annually for five years. If your system is not large enough to qualify for the state tax credit, you’ll still be able to take advantage of the federal tax credit.

Tax Exemptions

Residents of Maryland who install solar panels on their home have two dollar-saving tax exemptions available to them. The first is a 100 percent property tax exemption, so while the value of your home will likely go up due to the addition of solar panels, your property taxes won’t. The second is a 100 percent sales tax exemption, which will save you hundreds of dollars right off the bat because you won’t have to pay sales tax on your solar energy system.

Solar Rebates

Many utility companies offer rebates to homeowners that own a solar panel system. These rebates are similar to those that you’d receive on an electronic or appliance purchase and result in money back in your pocket after the solar installation.

Through Maryland’s Clean Energy Grant Program, those who install a system sized under 20 kilowatts (the average residential system in the Old Line State is about 10 kilowatts) are eligible for a flat $1,000 rebate.

Performance Payments

Performance payments reward solar owners for the electricity their panels produce on an ongoing basis. Utility companies will typically either offer a per-kWh bonus or pay you a fixed amount for credits earned.

Maryland utilizes the Solar Renewable Energy Certificate, or SREC, market to provide solar owners with performance payments. Under this system, solar owners receive one SREC every time their solar energy system produces one megawatt-hour of energy. An average-sized 10 kilowatt system will produce about 12 SRECs each year, and recent SREC prices in Maryland are approximately $50, which means the average solar owner will garner about $600 in performance payments each year.

baltimore maryland

Maryland Solar Policy Information

Legislators in Maryland have done a nice job of enacting solar-friendly net metering, Renewable Portfolio Standard, and interconnection policies, making it simple and attractive to go solar in the Old Line State. 

Net Metering

Net metering refers to utility companies crediting solar owners for the excess power that they feed back into the grid from their solar energy system. During the day while solar panels are generating power, the meter typically runs backwards and sends surplus energy to the grid, as many homes aren’t consuming as much energy as their system is producing. At night, when the system is no longer producing energy, most homes pull energy back from the grid to cover their electricity needs. Through net metering, solar owners are able to generate credits to help offset any bills they receive from their utility company for tapping into the grid.

People who live in Maryland get to take advantage of one of the most favorable net metering policies in the country. In order to make sure you get credit for the surplus energy that your solar system generates, the utility companies are required to monitor your system’s output and credit your bill for any energy that you do not use. These credits can be rolled over from month to month. If there are leftover credits remaining at the end of a 12-month billing cycle, the utility company will pay you for them at current market rates. Plus, you’ll still retain your SRECs for total system production over that time period.

Renewable Portfolio Standard

Utility companies are required by their state legislature to make sure that a certain percentage of their energy production comes from renewable energy sources, such as solar, by a specific 

date. If the utility companies in the state do not comply with RPS law, they will be heavily fined. Therefore, states that have a large RPS requirement usually have great incentives up for grabs from the utility companies in that state.

Maryland’s RPS, which is currently set at 50 percent by 2030, is one of the most aggressive goals in the country. In addition to this, the state’s RPS includes a lofty solar carve out that requires 14.5 percent of the state’s total energy production to come from solar power.

Interconnection Standards

Interconnection standards have to do with the requirements involved when it comes to connecting a solar system to the grid. It’s important to know if your state has any additional requirements that must be met in order to get your home solar system plugged into the grid.

The state of Maryland has created a standard, statewide guideline for connecting to the grid that all utility companies must comply with, making it simple and straightforward for solar customers to plug in.

maryland waterfall

Maryland Solar Statistics

To date, Maryland has installed over 1,000 megawatts of solar, enough to power more than 120,000 homes in the state with solar energy. Over 1,000 additional megawatts of solar are expected to be installed in the Old Line State over the next five years. Currently, there are over 240 solar companies and more than 4,500 solar jobs in Maryland.

Interested in a solar quote? Check out the top-rated solar companies in Maryland and read reviews from verified solar customers.

The Top Solar Companies

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#1 Sungevity chevron_right
9.8 Overall Score
4.1
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(1,717)
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#2 Sunrun chevron_right
9.0 Overall Score
3.6
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(1,388)
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#3 Zenernet chevron_right
8.7 Overall Score
4.6
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(253)

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