Your 2019 guide to getting solar panels for your home in Maryland
This page is a complete guide to the complicated and sometimes confusing process of installing solar panels on your Maryland home. Since there's a lot to consider, we've separated the page into sections to help you find what you are looking for. If you find this page useful, please share it with someone who might also find it interesting!
** What's new for 2019 **
Maryland, home of the Star-Spangled Banner, the Orioles, the Appalachian Mountains, Chesapeake Bay, and the warm friendly beaches of the Eastern Shore. Whether you want to go hiking, head for the ballpark, take in some of our nation’s great historical sites, or relax on the beach, you’ll want to do that in a clean safe environment. To keep the Maryland environment looking good, renewable energy like solar power is the word. Here’s what the Maryland legislature has been working on to make that an affordable reality.
Maryland got an early start using renewables. A 2001 law mandated six percent of government building electricity come from renewable sources. That was one of the first government mandated renewable targets across the country. In 2010, all state buildings reduced their energy usage by 15% from a decade prior. Much of this momentum can be attributed to Maryland legislature establishing a strong renewable portfolio standard (RPS). What does that mean for homeowners considering solar power here? Read on.
Questions? Our network of solar experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page. You can get discounted on-grid pricing as low as $4,000/kW! This is paired with the strong Maryland solar incentives you see below.
The Solar Strategy section is focused on the 3 ways of paying for solar in Maryland, so you can decide which is best for you. We've created a tool that asks you a few questions and recommends whether you should pursue a solar lease, loan, or outright purchase. Then, we provide detailed analysis of how each works.
The Policy Information section contains all our latest research on the rules set by lawmakers and the Public Utilities Commission, which determine how easy it is to go solar in Maryland. These policies and rules govern everything from renewable energy mandates to interconnection, and have a huge effect on the viability of solar.
Finally, the Solar Incentives section includes information about money-back rebates and grants, tax credits, and tax exemptions for going solar in Maryland.
Click any of the boxes below to go to that section of the page, or scroll down to read the page in order.
|Your Maryland Solar Strategy|
|Comparing Solar Investment Options|
|Paying Cash for Solar in Maryland|
|Solar Loans in Maryland|
|Solar PPAs in Maryland|
|Solar Purchase Payback Time in Maryland|
|Maryland Solar Policy Information|
|Renewable Portfolio Standard (RPS)|
|RPS Solar Carve-Out|
Your Solar Strategy in Maryland
Figuring out the best way to go solar in Maryland can be a little daunting. From loans and leases to power-purchase agreements, there are a lot of options out there. To help you pick the one that might be best, we've created the handy decision tool below.
We'll ask you a few simple questions about you and your home. Once you're done, we'll recommend a good option. Further down this page, we provide cost estimates and example return-on-investment calculations for all the various options:
How to pay for solar panels in Maryland
The chart above shows the 25-year returns for an investment in solar whether you choose to purchase a system with cash or pay over time with a loan or lease. As you can see, the purchase option leads to the highest dollar-amount returns over time, and the savings are HUGE in MD.
But paying up-front requires a big cash investment. That's why the solar loan option is better. If you take a loan or HELOC, you pay the system cost down monthly, but you still get a huge tax credit, meaning you'll come out way ahead in the first year. Your payments over 15 years will be only a little more than your savings, and you'll still come out tens of thousands ahead in the end.
The option with the smallest savings is for a solar Power-Purchase Agreement (PPA), which means you put $0 down on a rooftop solar system and pay monthly for the electricity, while you accumulate electricity bill savings over time. PPAs are an excellent option if you don't have any equity or cash to put down, and they still save you thousands in MD.
Read more below about each of three very good options for solar in The Old Line State!
Option 1: Paying cash for solar
An outright purchase used to be the only way to get solar, and it's still the option that provides the "biggest" financial returns. The reason we put "biggest" in quotes here is because it's technically true. You'll see a net return of almost $25,000 over 25 years if you pay up front. But it requires a significant up-front investment.
If you have equity in your home or can qualify for a solar loan with an interest rate of 4% or less, that's the option to go with. It's like being able to start a business that is sure to succeed, just by having a roof. Read about loans below.
If you've got cash and you prefer to pay up front, you'll put down $15,650 up front. By the end of year 1, incentives and energy savings will erase a bunch of it. Over 25 years, your system will have produced about $25,000 in income. The reason this works is that electricity in Maryland is EXPENSIVE. Solar offsets enough of it to save you about $874 in year 1, and it just goes up from there. As the electric company raises rates, you save more and more, and more...Finally, there's the state's SREC market, which can make solar homeowners hundreds of bonus dollars over their systems' lifetimes. An SREC is a certificate of renewable energy generation, and you get one each time your solar panels have generated a megawatt-hour (MWh). A 5-kW system in Maryland will produce about 6 MWh of electricity per year, and the utility companies will pay you about $22 per SREC. That translates into about $125 this year and big bucks over time. Read more about Maryland's SREC market below.
Here’s how the numbers pencil out when you pay up front for a 5-kW rooftop solar system in Maryland:
- Installing a typical 5kW solar system should start at about $15,650 after the state's generous rebate. That's cheaper than solar has ever been, but it still might seem like a big investment. Don’t worry, because after tax breaks and energy savings, your first-year costs will be considerably less than that.
- The Feds calculate their incentive based on actual out of pocket costs, so take 30% of $16,650, for a tax credit of $4,695. Your total investment is now down to just $10,955.
- After the tax credit we subtract your first year’s energy savings, which we estimate to be $874. That reduces your cost after the first year to only $10,081.
- That isn't the end of the savings train! Maryland's SREC Market will save you $125 this year, bringing the final year 1 cost to just $9,956. That's 40% off the starting price!
- Your system will pay for itself in just 10 years, and over its 25-year life, you'll see a total net profit of $20,451. The internal rate of return for this investment is a stupendous 10.3%!
- And don't forget... your home's value just increased by close to $23,000, too (your expected annual electricity savings over 20 years)!
- In addition to all that cash (and home value), you’ve created some green for the earth as well by not using electricity from fossil fuels. It's like planting 104 trees a year, every year your solar power system is humming.
Keep in mind, the numbers above are based on an average home in Maryland. If you're ready for a custom quote for a solar panel system, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Option 2: Using a loan to pay for solar
Don't have $16,000 sitting around to pay for solar? No sweat! As long as you have equity in your home, you can still own solar panels and reap all the benefits. Heck, even if you do have the cash, getting a loan to pay for solar is by far the best option when it comes to percentage return on investment.
That’s because, in Maryland, using a loan to pay for solar is like investing in a business that's sure to succeed, and also earns you a tax break. Your tax savings will be huge in the first year—more than enough to offset the small difference between the loan payments and electric bill savings. All this means you'll never have to spend a cent on solar, and you'll still come out way ahead over 25 years.
A solar purchase like this will make sense for you if the following is true about you and your current situation:
- You can qualify for a solar loan or home-equity line of credit (HELOC) for $15,650, with a fixed rate of 4% or lower and a 15-year repayment period.
- You love making money without much risk
Here’s how the numbers pencil out for a Maryland solar purchase with a loan:
- Installing a typical 5-kW solar system should start at about $16,650. That's how big your loan will need to be to cover it.
- Maryland offers a rebate of $1,000 off the cost of your system, making it $15,650.
- The electricity you'll save in the first year of operation would have cost $874, but your annual loan payments will be $1,478, meaning you would spend $604 on solar this year, but...
- You'll also see a huge tax break. The Feds give you 30% of the cost of your system (after rebate) back as a tax credit, which in this case is $4,695.
- The final bit of savings comes from Maryland's SREC program (discussed below). SRECs will mean an additional $125 in income from solar this year. Altogether, you'll come out $5,216 ahead after year 1. The cost of your loan will only barely ever wipe away that windfall, and then only many years into the future.
- The benefits of taking the loan are so great that after the loan is paid off, your profits stack up just like if you bought the system outright. You'll end up with $14,932 in profits over our 25-year example—all without putting a single penny into it. That's HUGE.
- On top of the green that will stay in your pocket, your system will mean green for the environment, too. 104 trees-worth, every year!
Keep in mind, the numbers above are based on an average home in Maryland. If you're ready for a custom quote for a solar loan, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Option 3: Buying the electricity, not the panels with a Power Purchase Agreement (PPA)
Maryland residents have long enjoyed the ability to get solar from a third-party company and pay monthly, and a PPA is still a great way to go, especially if you haven't got piles of cash or equity in your home. The state legislature and public utilities commissions are really into solar, so there isn't much reason to worry that utility companies will start trying to impose monthly fees on solar homeowners like they have in other states.
For now, leasing a 5-kW solar system can save you about $11 per month, which might not sound like a lot, but add that up over 20 years and consider how much electric companies raise rates on that electrciity you won't be paying for, and you have a end up with a small mountain of cash with very little risk or work. You can put $0 down and start saving right away, while the installaion company takes care of all the maintenance and repairs.
Here's more about how a solar PPA works:
Keep in mind, the numbers above are based on an average home in Maryland. If you're ready for a custom quote for a solar PPA, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Maryland Solar Policy Information
Ever wonder why solar seems to be everywhere in some states, but not in others? We did too.
State legislatures and public utilities commissions can enact rules to make solar power accessible for everyone. Favorable rules explain why some of the cloudiest states—New York, New Jersey, and Connecticut, are doing so well with solar, and yet some of those with the most natural solar resources—like Alabama, Mississippi, and Georgia—are doing so poorly.
Below is important information about the public policy, rules, and economic reasons that affect your ability to go solar here in Maryland:
25% by 2020
A Renewables Portfolio Standard (RPS) requires utilities in the state to eventually source at least a certain percentage of their electricity from clean, renewable sources like solar panels. Maryland has a pretty ambitious RPS, mandating that 25% of all energy must come from renewable sources by 2020. Maryland’s target of 25% is a relatively strong RPS overall, especially when compared to states that have yet to jump on the RPS bandwagon.
Perhaps more impressive is the fact that the state legislature overrode a veto in 2017, increasing the RPS to 25% and moving the deadline for compliance two years earlier, from 2022 to 2020. You go, Maryland lawmakers!
Maryland’s RPS is critical to strong renewable energy policy. Utility companies aren't really all that gung-ho about you producing your own power. After all, it costs them money when you use less of their electricity. They also don’t naturally want to give you big payments for energy you're feeding back into the grid. The main reason the utilities are aiding your transition to lower electric bills and offering you incentives to put solar on your roof is because the state forces them to. If the utilities don't hit their RPS numbers, they have to pay large fees back to the state.
What's an RPS? Your state legislature paves the way for strong solar energy incentives to flourish by setting standards for renewable energy generation within their territories. Those standards are called the state’s renewable portfolio standard (RPS). If utility companies do not meet these standards, they must pay alternative compliance fees directly to the state. Many utilities then determine the best ways to source their energy from renewable sources that are less expensive than this fee.
An RPS is a mandate that says "Hey utilities! Y'all now have to make a certain percentage of your electricity from renewable sources. If not, you'll have to pay us huge fines." The consequences are good, because utilities usually try to meet these RPS standards by creating solar power incentives for you, the homeowner. Read more about Renewable Portfolio Standards.
RPS solar carve out
2.5% by 2020
What’s more, the 2017 amendment to the RPS requires utilities to draw at least 2.5% of the state's electricity from good, clean solar power by 2020. Maryland is forecasting robust growth in the local solar market as a result of this legislation. They are projecting 1,650 MW of solar power by 2020. That’s a lot of solar power!
What's a solar set aside? A solar set aside guarantees a specific portion of the overall renewable energy mix generated comes from the sun. For those states with progressive standards, high alternative compliance payments, and clear solar carve outs, the faster those areas become ripe for solar.
Some states have higher alternative compliance fees than others, and some states have more progressive alternative energy standards and deadlines than others do.
For instance, New Jersey has an overall RPS of 22.5% by the year 2021. That requires local utilities to source 22.5% of their energy mix from renewable sources by the year 2021. Pretty good. However, New Jersey also has a specific solar set aside of 4.1% by 2028. That’s the type of firm commitment which really gets the industry rolling forward. No wonder why New Jersey is one of the hottest solar markets right now!
Maryland Electricity Prices
The average cost of electricity in Maryland is 14 cents/kWh. That’s slightly above the national average of 13.6 cents/kWh. At Solar Power Rocks, we think the national average is too cheap, so we think energy in Maryland is currently too cheap as well. We know you hate high electric bills, but hear us out.
Most of our electricity still comes from burning millions of tons of fossil fuels. The cost of those fossil fuels in dollars and cents may be low for now, but the environmental costs are astronomical. Switching to solar power now saves you money down the road and helps save the planet. You can thank us later.
Why are electricity prices so important? Because that is what solar power is directly competing against. The cost to produce power with solar is relatively constant (of course how much sun hits your area has an effect), so if you are paying $0.40 per watt for power, then you make FOUR TIMES AS MUCH as the guy or girl paying $0.10 per watt electricity.
The caveat here is that if the $0.10 per watt person has a HUGE rebate, they may be better off than the $0.40 per watt person. Because of that, states without any renewable standards tend to be heavily reliant on cheap coal for electricity, and also have very low electricity prices. When electricity prices are artificially low, that hinders the ability of solar energy to achieve meaningful payback in the state.
Maryland Net Metering
Net-metering requires your utility to monitor how much energy your solar power system produces and how much energy you actually consume to make sure you get credit for the surplus.
Maryland’s net-metering rules let you connect your solar panel system to the grid, and if you generate more kWh than you use, your electric company is required to credit you the going rate toward future bills.
If at the end of a 12-month billing cycle you have generated more electricity than used, you'll get a check at market rates for the difference. However, you still retain the associated SRECs your system produces over that time period.
What is net metering? Net metering is the billing arrangement where you can sell excess electricity back to your utility for equal the amount you are charged to consume it. The more customer friendly net metering policies, the higher the grade.
The grade here specifically reflects individual solar system capacity, caps on program capacity limits, restrictions on “rollover” of kWh from one month to the next (yep just like cell phone minutes), metering issues (like charges for new meters), Renewable Energy Credit (REC) ownership, eligible customers and technology (the more renewables the better), being able to aggregate meters across the property for net metering, and safe harbor provisions to protect customers from solar tariff changes.
Maryland Interconnection Rules
Interconnection rules are a little technical, but they basically allow you to “plug in” to the electric grid with solar panels on your roof. The more complex, out of date, or nonsensical the state rules are for plugging into the grid, the lower the grade.
Specifically, the grade reflects what technologies are eligible, individual system capacity, removing interconnection process complexity for smaller systems, interconnection timelines and charges, engineering charges, prohibiting the requirement of unnecessary external disconnects, certification, spot interconnection vs. wide area interconnection, technical screens, friendliness of legalese, insurance requirements, dispute resolution, and rule coverage.
Solar Incentives in Maryland
Next to high electricity prices and net metering, solar incentives have traditionally been the most important factor for whether home solar power makes financial sense in a state. In the past, some states with otherwise lousy policy had tremendous incentives that drove down the up-front cost of going solar so much that homeowners could save oodles of money even without net metering or a good RPS.
These days, the big incentive most people can get is the Federal Solar Tax Credit that earns you 30% of your costs back after just 1 year. State incentives play less of a role than in the past, but some really good ones are still out there, ready to help homeowners go solar and save money before you know it.
Let's see how Maryland measures up:
Maryland Solar Power Rebates
$1,000 for systems up to 20kW
Maryland has altered their state solar power rebate from previous years. Now, every homeowner installing solar panels on their roof gets a flat $1,000 rebate through the Clean Energy Grant Program. That solar panel rebate is valid only for systems sized 20kW and below. If you’re planning a larger system, you do not qualify for this grant, but you are then eligible for the state production tax credit below.
How do solar rebates work? Similar to getting a rebate card from your local big box store for a dishwasher purchase, state legislatures also provide rebates for solar panel purchases to spur on investment and create new jobs. If you purchase the solar panel system yourself, you qualify for this free cash, which many times is a lump payment back to you. Some solar installers like to take this amount directly off the total installed price, and they'll handle the paperwork for you to make things a lot less complex.
The availability of state and utility rebates were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The better the rebates, the higher the grade.
Maryland Solar Power Tax Credits
$0.0085/kWh for very large systems
For homeowners with deeper pockets and lots of land, you can qualify for the state’s Clean Energy Production Tax Credit. To qualify, your solar system needs to be pretty big -- we're talking 28-kW of panels, which is more than 5 times bigger than the average system. So if you have the roof space on your mansion, you can get at least a $1,000 state tax credit.
How do you get there? Maryland will credit you $0.0085 (that’s a fraction of a cent) for each kWh you feed back into the grid toward your annual state tax. So your system would need to kick out at least 23,530 kWh to hit that magical $1,000 level. Only systems sized 20kW and up can do that. If you are in the position to install a system that large, you can take your production tax credit annually for 5 years. Not too shabby, Daddy Warbucks.
For those of us with less-than Titanic-sized incomes, everyone can benefit from the 30% Federal Solar Tax Credit. There's no cap on the federal tax credit and fortunately for Maryland, having a smaller state rebate to deduct means a larger tax credit coming your way.
About state solar tax credits: State tax credits are not technically free money. However, they are 'credits' and not 'deductions' which means that if you have the tax appetite to take advantage of them, then they can be a 1-to-1 dollar amount off your taxes instead of a fraction of the cost of the system. So that means they can be an important factor to consider. In certain circumstances, state tax credits can provide a very powerful incentive for people to go solar.
(Keep in mind, we are not tax professionals and give no tax advice so please consult a professional before acting on anything we say related to taxes)
The availability of personal tax credits for solar energy were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the tax credit amount, the higher the grade.
Solar Power Performance Payments
Varies based on market conditions
Another great financial incentive in Maryland is the SREC market. As we discussed above, an SREC is basically just proof of clean energy generation, and solar owners get an SREC every time their system generates 1 megawatt-hour (MWh, or 1,000 kWh) of electricity. Our standard 5-kW system will generate about 6 SRECs per year.
Utility companies buy SRECs from generators (aka homeowners with solar) because they need to show the state that a certain percentage of their energy supply comes from renewable sources. If the utility doesn’t meet that percentage, they have to pay Solar Alternative Compliance Payments (SACP), which are high fees that start at $400 per MWh. That is what gives SRECs their value.
Because of those high fees, prices for SRECs had remained pretty stable over the past few years, averaging $167.50, which meant those 6 SRECs from our example system represented about $1,000 a year for 5-kW system owners. Unfortunately, the high SREC prices have led to an oversupply on the Maryland market, and price have dropped precipitously. Recent prices are at $22 per SREC, and it's hard to know if that'll ever go up again. It could go way up, if the state adopts a new RPS law, as Governor Hogan has called for. Stay tuned.
For reference, Maryland has built in a step-down reduction in the cost of SACPs, which will ultimately end at just $50 by 2023. Here’s a look at the scheduled reductions:
In Maryland, SRECs are bundled and sold through brokers, so there’s a bit of paperwork to fill out, and a bit of a fee to sell your SRECs through the broker. The good news that your installer knows the ins and outs of the system, and they’ll help you get the SREC transfers set up so you can just kick back and enjoy the savings. What are you waiting for? Find a great installer in Maryland today!
Explanation of performance payments: Performance payments represent a big chunk of the financial rationale for going solar, and in many instances they make your decision a wise one. For certain states, if you’ve got solar panels on your roof, not only will you be cutting your electric bill down to size, but you'll be getting paid additional cash from your utility company. Pretty awesome, huh? Not only are you generating electricity for yourself, freezing your own popsicles with sun, and feeling like you’re doing something smart for your children or any of the other 4 reasons people go solar, but you are getting PAID!
Utility companies are paying people with solar panels on their roofs because their states say they have to, otherwise they will pay a fee. Therefore, the payment amount to homeowners is typically a little bit less than the amount they would be billed for by the state. For states with these alternative compliance fees, Solar Renewable Energy Credit (SREC) exchanges have popped up. In the above chart, we outlined an estimate of yearly payments a homeowner might expect from the utility company for the SREC credits from their solar energy system.
Expected SREC payments were calculated by using the latest trade values in the SRECtrade database. The availability of feed-in tariffs were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the expected monthly payments, the higher the grade.
We've got a great article if you like to read more about what SRECs are and how to earn them.
Property Tax Exemption
Maryland lawmakers enacted a property tax exemption for your solar panels. That means that making your house more valuable by installing a solar system won’t cost you a penny when tax time rolls around. You can expect an increase in your home value by a factor of 20 times your annual electricity savings. For a 5kW solar system installed in Maryland, that’s about $17,000.
About solar property tax exemptions: Property tax exemption status is a pretty big factor when putting together your investment considerations. Some argue that solar power adds approximately 20 times your annual electricity bill savings (if you are owning the system and not leasing). Other studies seem to indicate a home price premium about equal to the cost of installing the system, minus any incentives like the federal solar tax credit.
For many average-sized solar power systems on a house, that can mean adding $20,000 to your home value. And if you don't believe us, believe the bean counters: Many banks and solar financing companies now offer traditional style equity-based home loans for installing solar. An additional $20,000 in property tax basis in many states amounts to a big chunk of change owed back to the state. However, many states have complete exemptions from added taxes when you install solar on your home!
The availability of a property tax exemption for solar energy was sourced from the Database of State Incentives for Renewables and Energy Efficiency. Grades in this category are basically all-or-nothing. Either you got it or you don't. Thankfully, many states have "got it.".
Sales Tax Exemption
What’s more, the purchase of your solar panel system is also sales tax exempt thanks to a sales tax exemption enacted in 2011. Thanks, Maryland!
What's the deal with solar power sales tax exemptions? When states give you a sales tax break on solar, we notice. You should too. State sales tax exemption status for the purchase of solar energy systems were sourced from the Database of State Incentives for Renewables and Energy Efficiency. Sales tax exemptions, if present, were all 100%. A handful of states are completely exempt from sales tax regardless, and therefore received ‘A’ grades by default (OR, DE, MT, AK, and NH).
The consensus on Maryland solar power rebates and incentives
Maryland has been making some good progress on building up the solar energy market in the state. The legislature has set the bar high with a strong RPS (including a solar carve out) and some important solar power rebates and incentives are now flowing into homeowner’s pockets as a result. Solar is now a no-brainer idea in Maryland: good for your kids, environment, local economy, and most importantly – your finances. Don’t miss the boat!
Again, if you are confused about how these numbers work and would like some personalized assistance or a quote of your own, simply connect with our network of solar experts. They’ll help sort out all the pricing, get you access to special deals, and they’re super friendly to boot!