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Thanks to a 2019 bill that reintroduced net metering and sales tax exempt status for solar panel installations in the state, Washington is well on its way to becoming one of the more residential-friendly solar states in the country. Though the Evergreen State has some of the cheapest utility rates in the nation, these and other solar incentives and pro-solar policies will go a long way toward improving solar adoption in Washington.
Read on to learn more about the ins and outs of going solar in Washington.
Here's an at-a-glance description of the current benefits and drawbacks of switching to solar in Washington:
With the price of solar energy falling significantly over the last 10 years, now is the best time to add a solar PV system to your home. In Washington, a typical 5 kilowatt system averages about $19,000 in upfront costs. That number can be influenced by panel energy efficiency, system capacity, cost of add-ons like solar backup battery storage, and installation fees. Thanks to the federal tax credit worth 30 percent of the final price, that $19,000 figure can be reduced significantly, closer to $13,300.
If that still seems like a lot upfront, look at it this way: the levelized cost (i.e., the average cost over 25 years) per kilowatt-hour for traditional electricity in Washington is about 21 cents. For solar energy however, the levelized cost (the total upfront costs divided by system output over 25 years) is only 7 cents per kWh — a third of the price in the long run!
In Washington, residents can finance a solar system in one of two ways: cash purchase, where they pay for the system out of pocket, or third-party financing, where they take out a solar loan or apply for a home-equity line of credit (HELOC):
Cash purchase obviously requires the greatest upfront investment, but it also poses the best overall return on that investment. Assuming the homeowner purchases a 5 kW system for $19,000, he or she will automatically receive 30 percent of that figure in credits from the federal government after the first year!
The annual savings from switching to solar will offset the costs of the system after about 16 years or so, leaving another nine to ten years for the system to become profitable. After 25 years of operation, Washington residents will have accrued close to $9,000 in total profit, with home value increasing by a comparable amount over that same time period.
The other option is to finance the system through a lender. In most cases, solar borrowers can get a loan covering the total $19,000 cost of the system for zero money down, 4 percent APR, and 15-year terms. Borrowers are also entitled to the federal tax credit, good for 30 percent of the upfront costs, which puts more money back in their pocket after the first year.
Paying nothing up front and receiving the federal tax credit puts solar customers head by almost $5,000 after the first year. These savings will decrease as time goes on and loan payments outpace the monthly utility bill. By year 15, the final year of the loan, borrowers will find themselves in the hole by about $7,000.
The good news is once the loan is paid off, homeowners can go right back to saving. By year 25, they will have earned a little less than $1,000 in total savings.
Washington State does offer a few incentives to help make solar more affordable in the state. For example, the lack of a state income tax means more buying power and consequently a potentially larger tax credit from the federal government. Besides this, Washington has two other solar-specific incentive programs:
Solar power rebates are available for Snohomish County residents only and are worth $300 per kW, with a maximum rebate value of $2,000. Unfortunately, other counties and utility providers have not yet caught on to this program, so residents outside Snohomish County will have to wait or get in touch with their county leaders.
Although solar panel systems do not qualify for property tax exempt status in Washington, they do receive a sale tax exemption, meaning all system components from solar panels to rooftop mounting and racking equipment can be purchased tax free. Given that systems in the state can go for tens of thousands of dollars, this exemption means hundreds of dollars of savings on the front end.
In terms of policy, Washington lawmakers have enacted a number of regulations aimed at making solar power more accessible:
A state’s renewable portfolio standard (RPS) represents its goal to make room for alternative forms of energy other than coal (e.g. natural gas, wind energy, solar power, etc.), and is often composed of a percentage of total energy output and a deadline. In Washington, the RPS currently sits at 15 percent renewable energy by the end of 2020. While the state is close to achieving this goal, it does need to be updated with a more ambitious figure for a later date in order to be truly competitive.
A net metering policy requires utility providers to credit solar users for the surplus energy their systems pump into the grid each month. Solar users are cautioned, however, to stay proactive on monitoring their energy production. If homeowners run a surplus every month, but fail to call in their credits after a year, these credits will be returned to the utility provider.
Interconnection rules identify the standards solar panel users must follow in order to get their systems connected to the power grid. Washington solar panel owners must receive approval from no fewer than four different regulatory boards before they can plug in, and weeks or months can pass before approval is secured from all four. Additionally, a costly external disconnect switch is also required to be installed prior to interconnection.
The majority of Washington’s 230+ megawatts of solar energy come from residential solar installation projects. And with more than 22,000 total installations powering 23,000 homes as of 2020, solar energy in the state is projected to grow by another 661 mW over the next five years. More than 100 solar installers and manufacturers currently operation within Washington’s borders and employ upwards of 3,700 people.
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