At Solar Power Rocks, our dream is to turn your thoughts of solar power for your home into reality
Note: The numbers above are just estimates for a 5kW solar system, and your home is unique. The best way to know exactly how much money solar power can save you is to connect with one of our partners nearby. A friendly solar expert we trust will give you a buzz and help you craft a personal plan to get the absolute most out of a solar power system for your home. It's 100% free (yes, that’s right, 100% free) and you aren't obligated to buy anything.
A few years ago the $100 million boost to the Pennsylvania Sunshine program had solar power here buzzing. Unfortunately, with funding exhausted for the statewide solar power rebate program, other gaps in policy have drawn Pennsylvania back to the middle of the solar-friendly pack.
There’s still a solid foundation to build around, and with a couple of easy tweaks lawmakers could again make Pennsylvania an example for solar policy. Needless to say, with so much to protect here –from the beautiful Presque Isle to the vast Alleghenys– Pennsylvania has countless reasons to support strong solar-promoting policy.
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 Pennsylvania solar incentives you see below.
Your guide to going solar in Pennsylvania
We've designed this page to be a complete guide to the complicated and sometimes confusing process of installing solar panels on a home in Pennsylvania. Since there's a lot of important information 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!
The Solar Strategy section is all about the various financial options you have in Pennsylvania. We've created a tool that asks you a few questions about what you hope to get out of a solar purchase and recommends whether you should pursue a solar lease, loan, or outright purchase. Then, we give you a detailed picture of how each could work for you.
The Policy Information section contains all of our latest research on the rules set by the state legislature and public utilities commission that determines how easy it is to go solar in Pennsylvania. These policies and rules govern everything from renewable energy mandates to whether you get paid retail or wholesale rates for the extra energy your system produces, and can have a huge effect on the viability of solar.
Finally, the Solar Incentives section lists all of the available financial benefits available to homeowners who go solar. This section includes information about money-back rebates and grants, tax credits, and tax exemptions. If you're looking for what Pennsylvania is doing to make solar more affordable for its citizens, you'll find it here.
We hope you find our work useful. If so, please help us keep our research and advocacy as strong as possible by sharing it with someone who might also find it interesting, contributing any amount you can, and by getting yourself personalized savings estimates from our trusted partner network.
Click any of the boxes below to go to that section of the page, or scroll down to read the page in order.
|Your Pennsylvania Solar Strategy|
|Pennsylvania Solar Policy Information|
|Pennsylvania Solar Incentives|
|Your Pennsylvania Solar Strategy|
|Comparing Solar Investment Options|
|Solar PPAs in Pennsylvania|
|Solar Loans in Pennsylvania|
|Buying Solar in Pennsylvania|
|Solar Purchase Payback Time in Pennsylvania|
|Pennsylvania Solar Policy Information|
|Renewable Portfolio Standard (RPS)|
|RPS Solar Carve-Out|
Your Solar Strategy in Pennsylvania
Figuring out the best way to go solar in Pennsylvania 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:
Compare the Return of Different Solar Investments in Pennsylvania
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, but look a little closer. Taking a solar loan or Home Equity Loan or Line of Credit (HELOC—the orange bars) and paying for the system over time means you'll actually spend less of your own money over time, while reaping a big financial benefit in year 1.
That's because you take a loan for the system, but you still get a 30% federal tax credit based on the entire cost. You'll start out ahead, so your payments over 15 years will have less impact on you than plunking down a big pile of money up front. All you need is equity or great credit.
Lastly, take a look at the blue bars. They represent a solar Power-Purchase Agreement (PPA), which is also called third-party ownership. With a PPA, you put $0 down on a rooftop solar system and buy the electricity it produces for a little bit less than what you've been paying the electric company. You accumulate savings over time, but since you're not spending any money for the installation, you're cashflow positive from day one!
Read more below about each of three very good options for solar in Pennsylvania.
Net Present Value of Solar in Pennsylvania
“Net Present What?!” Don’t panic, this isn’t an economics test. NPV is just a tool used to compare investments. Basically, it asks, “if you had X dollars to invest, which investment would get you the best return?” It relies on the idea that getting a return on your investment sooner is better than later, because you can reinvest your early profits and keep the gain train going.
We compare an investment in solar to a “what-if” investment in a Standard & Poor’s (S&P) 500 stock index fund, which has seen growth of about 7% per year over the past 25 years. We use the cost of solar in Pennsylvania and ask “how much better or worse (in 2018 dollars) is an investment in solar than stocks?” Here's what we found for the three different ways of going solar in Pennsylvania:
Now there's a telling chart! Solar can be a very good investment in Pennsylvania, or it can be kinda bleh. It all depends on how you pay for it. A solar investment in Pennsylvania should provide a better return than the stock market if you choose a PPA or a loan, but not so much if you pay up front. Here's some more about how we got these numbers:
Solar PPA NPV: $1,927
Saving money without having to put anything down is always going to have a positive NPV. In Pennsylvania, A PPA will save you a little bit each month, adding up to $4,050 over 20 years. That's like having an extra $1,927 to invest today. The thing is, it even comes close to a solar loan, so you can choose a PPA in PA and let the solar company do all the work, while you just soak up the savings. Read more about PPAs in Pennsylvania below.
Solar Loan NPV: $2,309
As we’re fond of saying, taking a loan for solar is a no-brainer, because it’s like agreeing to pay over time for something that is also making you money. In Pennsylvania, the money you make comes from electricity savings, and a little bit from selling SRECs. Add to that the money you'll get back from excellent state and federal tax credits, and solar in Pennsylvania is a no-brainer.
All that helps push the NPV of a solar loan to $2,309 better than a similar investment in the stock market. That's a great value for any investment, and it's insane for something that requires no money down. Read more about solar loans below
Solar Purchase NPV: -$1,272
If you're paying for solar up front, you're gonna need a few thousand dollars to do it. And when all is said and done, the NPV of an outright solar purchase in Pennsylvania doesn't match up. Instead, look at what happens to NPV if you choose a solar loan instead. Unless you need to put cash into an asset, a loan is a much smarter way to pay for solar panels. Read more about solar purchases below.
Solar Power-Purchase Agreements in Pennsylvania
A PPA is a great way to go solar if you haven't got stacks of cash or oodles of equity in your home. It's possible to get solar panels for $0-down and see some modest savings over 20 years!
As for leases in Pennsylvania: the electricity costs here are pretty high—above the national average. That means a PPA saves you money starting on day 1! For now, the electricity from a 5-kW solar system will cost you $685 per year under a PPA, but you would have paid $805 to the utilty for the same amount of power. That's $121 that will be staying in your pocket this year.
Now that might not sound like a huge amount of money right now, but as the utility company raises rates, you will start to see greater annual savings. Over 20 years, our estimate shows a total savings of $4,050. The panels will be installed and maintained by professionals, and all you have to do is brag to the Smiths down the street about your green habits!
Here's more about how a solar PPA works:
Example savings in Pennsylvania
Annual Electric Bill Before Solar
Annual Electric Bill After Solar
Est. Annual Solar Payments
Average Annual Savings
Annual Electric Bill Before Solar
Annual Electric Bill After Solar
Est. Annual Solar Payments
Average Annual Savings
Power-Purchase Agreements (PPAs) are the most popular form of what's called "third-party solar." A PPA just means your solar company owns the panels on your roof, and you pay for the electricity they produce. The numbers above show the savings with a solar PPA for an average home in Pennsylvania. The typical electric bill before solar power is super expensive, but with a PPA, your monthly expenses will be lower. You'll be saving money and saving the planet all at the same time!
Here's an estimate of the monthly savings for a solar PPA in Pennsylvania:
With a PPA, your solar company essentially becomes a second utility provider, only the solar electricity is sold to you at a lower rate than the fossil fuel electricity you've been buying from the electric company! Note: your PPA won't eliminate your power bill from your regular electric provider, because you'll still need energy from the grid when the sun isn't shining. But it will save you money!
The less-popular cousin of the third-party solar family is the solar lease. It's basically like renting your panels for a set monthly payment, and getting all the energy they produce—however much it is. Don't get spooked by that language, though. A typical solar lease comes with energy production guarantees that will make sure you're getting what you paid for. In fact, if you're not offered a production guarantee with a solar lease, walk away.
Here's the best part of third-party solar: whether you end up with a lease or a PPA, the installation company owns the panels and will do all the maintenance for you. Usually that means just a good cleaning every year, but if any part of that system fails, you're off the hook! That can be a great benefit to homeowners who are risk averse.
Keep in mind, the numbers above are based on an average home in Pennsylvania. If you're ready for a custom quote for a solar lease or PPA, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Home Solar Power: PPA vs. Purchasing
To PPA, or not to PPA? Willsolar Shakespanels would be proud we're discussing this. Here's the basic deal. If you choose to lease your panels, you benefit from no out of pocket costs and an immediately reduced total electricity payment. Because of this, many regard this option as a no-brainer, since there isn't any downside to think of. The only hiccup you'll start to experience is when you consider the long term financial benefit of owning the solar panel system yourself.
In many situations, if you can afford the outlay or can easily secure financing, the cost of the install becomes an investment with a return outpacing even the strongest performing mutual funds. In addition, there's significantly less principal risk, since the energy credits you will be producing are tied to the sun coming up in the morning instead of our financial markets!
Additionally, if you go the PPA route, you must forfeit all the credits and performance payments you would receive by owning the system yourself to the solar PPA company (after all, that's how they can afford to give you such a no-brainer proposition in the first place).
Solar Loans in Pennsylvania
You don't need $17,000 sitting around to pay for solar. 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 Pennsylvania, 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. That's right: a HUGE tax break!. You'll come out thousands ahead this year, and you'll still see a handsome profit over the 25-year life of your system.
A solar purchase like this will make sense for you if the following is true about you and your current situation:
- You can get a home-equity line of credit (HELOC) for $16,875, with a fixed rate of 5% or lower and a 15-year repayment period. Don't be put off if you're offered a higher rate. It just means a tiny bit less of the thousands of dollars you'll make with solar.
- You love making money without much risk.
Here’s how the numbers pencil out for an Pennsylvania homeowner who makes a solar purchase with a HELOC:
- Installing a typical 5-kW solar system should start at about $16,875 after Pennsylvania's High Performance Buildings Program grant. That's how big your loan will need to be to cover it.
- The electricity you'll save in the first year of operation would have cost $819, but your annual loan payments will be $1,601, meaning you would spend $782 on solar this year, but...
- You'll also see a huge tax break! The Feds give you 30% of the cost of your system back as an income tax credit, which in this case means $5,063. You'll be paying over time but getting the benefits up front!
- But wait, there's more! On top of the electric bill savings, you'll earn special Solar Renewable Energy Credits (SRECs) for the first 5 years your system is running. You'll get one each time your system produces a megawatt-hour (MWh) of electricity, and our example 5-kW will earn you about 5.5 SRECs each year. You can sell your SRECs to the utility company for $39 a piece, putting an estimated $215 in your pocket.
- All those incentives mean you'll come out $4,494 ahead after year 1. Your loan payments will be about $65/month more than your energy bill savings, but that difference will get smaller as the utility company raises rates every year.
- By the time you've paid off your loan in 2030, you'll see yearly savings of about $1,400. After 25 years, your total profit will be $14,223!
- On top of the green that will stay in your pocket, your system will mean green for the environment, too—106 trees-worth, every year!
Keep in mind, the numbers above are based on an average home in Pennsylvania. 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.
Buying Solar in Pennsylvania
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, but based on percent return for the money, a loan is a better option.
If you'd rather make monthly payments instead of putting $17,000 down on a solar system, and if you have equity in your home or can get a large loan with an interest rate of 5% or less, a loan is 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 have to plunk down $16,875, but tax breaks and energy savings will erase a bunch of that after just 1 year. Over 25 years, your system will have produced more than $21,000 in income, after your system cost is paid back. The reason this works is that solar offsets your electricity costs—enough to save you about $819 in year 1, and it just goes up from there. As the electric company raises rates, you save more and more, and more...
Here’s how the numbers work for a 5-kW rooftop solar system in Pennsylvania:
- Installing a typical 5-kW solar system should start at about $16,875 after Pennsylvania's High Performance Buildings Program grant. 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 Federal government offers a great tax credit worth 30% of system costs. So take 30% of $16,875, and you've got a tax credit of $5,063. That brings your first-year investment down to $11,812.
- After the tax credit we subtract your first year’s energy savings, which we estimate to be $819. That reduces your cost after the first year to only $10,995.
- But wait, there's more! On top of the electric bill savings, you'll earn special Solar Renewable Energy Credits (SRECs) until at least 2021. You'll get one each time your system produces a megawatt-hour (MWh) of electricity, and our example 5-kW will earn you about 5.5 SRECs each year. You can sell your SRECs to the utility company for an average of $39 a piece, putting an estimated $215 in your pocket.
- Between those SRECs and your electricity savings, your system will pay for itself in just 11 years, and you'll see a total net profit of $21,369 before the end of your panels' 25-year warranty. The internal rate of return for this investment is a solid 10.1%. That beats an investment in a market-based index fund, and it's more reliable, too!
- And here's a nice bonus to consider: your home's value just increased by more than $16,000, too (your expected 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 106 trees a year, every year your solar power system is humming.
Keep in mind, the numbers above are based on an average home in Pennsylvania. 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.
Pennsylvania 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 Florida—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 Pennsylvania:
18.02% by 2021
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.
Pennsylvania’s RPS is split into two separate requirements. 8% of the state’s energy has to come from “Tier 1 Technologies” -- primarily solar, wind, and low-impact hydro, along with a few less common forms of environmentally friendly energy production. To be classified as Tier 1 the electricity generally must also have been produced within Pennsylvania. Finally, Tier 1 of Pennsylvania’s RPS includes a specific carve-out of 0.5% for solar power.
All that is a very strong foundation for an RPS. Unfortunately, the other 10% mandate of Pennsylvania’s 18% total RPS falls into “Tier 2.″ Tier 2 energy can be filled by much less environmentally friendly resources – almost entirely large scale hydropower (the sort that simply decimates rivers and entire surrounding ecosystems) and derivative uses of coal.
In order to really support truly clean renewable energy, we’d like to see more of Pennsylvania’s RPS mandate truly green power sources like residential solar power systems. Given the friendly conditions in the rest of the state, a strengthened RPS would solidify Pennsylvania as a leader in solar policy.
Pennsylvania’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
.5% by 2021
Specific carve-outs for clean and efficient technologies like solar panels, or mandates for the environmentally necessary increases in distributed generation, typically promote stronger incentives for residential solar power. Pennsylvania’s RPS includes a pretty commendable solar carve out which requires 0.5% of total electricity generation to come from solar panels. That’s what we like to see!
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!
Pennsylvania Electricity Prices
Pennsylvania homeowners pay an average of 14 cents/kWh of electricity. That’s pretty close to the national average of 13 cents/kWh, but we still think that’s pretty cheap. We know what you’re thinking … higher than average, that’s bad! Who likes paying more than average? We get that sentiment. We really do. But here at SPR we think that electricity rates are still too cheap, even at nearly 14 cents/kWh.
We know you like paying less now, but the long term costs of cheap electricity are through the roof. All that cheap electricity is produced by burning fossil fuels -- tons and tons of earth-killing fossil fuels. When the astronomical environmental costs start to mount, monthly electricity bills are inevitably going to rise as well. When that happens you’re going to feel pretty darn smart for making the early switch to producing your own clean, efficient solar power. In the meantime, solar power will still save you a chunk of change here. We’ll go over just how much in a minute.
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.
Pennsylvania Net Metering
Net Metering requires your utility to monitor how much energy your solar power system produces and how much energy you actually consume, and make sure you get credit for the surplus.
Since 2008, Pennsylvania law has required all investor-owned utilities to offer net metering to all residential customers with solar power systems up to 50kW in capacity. If you produce more energy than you consume the surplus is carried over to your next bill at the full retail rate. If you run a surplus for a full year (measured June 1 – May 31), your utility will cut you a check for all of it at the “price-to-compare” rate, which includes the generation and transmission components, but excludes the distribution component charges of your electric bill. While a check at the full retail rate would be even better, the majority of states do not require the utility to cut you that year-end check at all, so kudos to Pennsylvania on this one, regardless of the slightly reduced rate.
More recently, Pennsylvania has been exploring an expansion to net metering that would allow systems sized to produce up to 200% of the owner's usage. At a time when other states are restricting or eliminating net metering this is great news!
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.
Pennsylvania 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 Pennsylvania
Pennsylvania Solar Power Rebates
10% of costs
Back in 2010 we wrote pretty extensively about the benefits of the Pennsylvania Sunshine Program. At the time, that program was huge, with a budget of $100 million pushing solar throughout the state. The good news is that the Pennsylvania Sunshine program was a smashing success, helping to exponentially raise Pennsylvania’s solar energy production capacity. The bad news is that the program was such a success that the solar portion of the Pennsylvania Sunshine program is in 2013, the program ran out of funds.
Thankfully Pennsylvania realized how great it is to continue supporting solar with great incentives. The state now offers its High-Performance Buildings Program, which offers either grants or low-interest loans to homeowners and small businesses who want to go solar.
The grants are equal to 10% of project costs, up to $500,000. Loans are available at very low interest rates, but since you can't take both a loan and a grant for the same building project, we recommend the grant, because it will save you more money than the loan.
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.
Pennsylvania Solar Power Tax Credits
Unfortunately Pennsylvania lacks any state tax incentives for renewable energy as well. Hopefully with the SREC payments, you don’t need any extra help on tax day. But now that the rebate program is exhausted, we think a tax credit available to those who install solar power systems from here on out would be a pretty easy way to sweeten the deal again. All those smart and sensible Pennsylvanians that want to switch to solar power save some cash, and the state never has to remove a dime from its coffers. Sounds like a win-win to us!
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
In order to meet those RPS requirements, the utility companies have to produce or purchase a whole lot of electricity produced from renewable sources. More often than not it’s easier (i.e. cheaper) for them to simply buy the energy from others, like folks with solar panels on their roof, than it is for the utility to produce it themselves. That’s led to a market for Solar Renewable Energy Credits (SRECs). For every megawatt-hour (MWh) of solar energy you produce, you get one SREC (Pennsylvania actually calls them Solar Alternative Energy Credits, or SAECs, but we’ll use the multi-state lingo). Utilities buy those SRECs in order to get credit for the solar energy toward the utility’s RPS requirements.
Prices can vary, but current market prices set the average value of SRECs at about $18-$55 each, though prices can vary significantly for individual transactions. That’s not too shabby. It’s also easy to see how a stronger RPS ties directly into incentives like solar power rebates getting stronger as well. If utilities need to buy more SRECs to comply with the RPS, there is going to be more competition to buy the available SRECs, and thus SREC prices will go up.
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.
If you don’t know what an SREC is, or how they work, check out this great SREC video
Property Tax Exemption
While we can give state lawmakers a pass on not having implemented a state tax credit in the past (even if it’s time for one now), we’re a bit less forgiving when it comes to not having any state tax exemptions. Tax exemptions are perhaps the simplest things that state legislatures can do to create good solar policy. They’re simple to draft, simple to explain, and simple to implement. Despite that simplicity, the benefits are robust. A property tax exemption would save you year after year by preventing any increase in taxes normally associated with your home’s value (we’ll get to that in a minute).
The state legislature has done a lot of tremendous work to promote solar power, and tax exemptions represent an easy but effective way to do exactly that.
About solar property tax exemptions: Property tax exemption status is a pretty big factor when putting together your investment considerations. Many argue that solar power adds approximately 20 times your annual electricity bill savings (if you are owning the system and not leasing. Leasing still has a positive impact on the ability to sell your home though, in our opinion).
For many average-sized solar power systems on a house, that can mean $20,000 to your home value. (Edit April, 2014: Some companies, like Solar Mosaic, are starting to offer traditional style equity-based home loans for such a thing). 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 also sourced from the Database of State Incentives for Renewables and Energy Efficiency. The stronger the tax exemption, the higher the grade.
Sales Tax Exemption
Like we mentioned above, tax exemptions are perhaps the simplest things that state legislatures can do to create good solar policy. Despite that, Pennsylvania has yet to implement either property tax or sales tax exemptions for renewable energy producers. A sales tax exemption would quickly and easily save you between 6% and 8% here.
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 Pennsylvania solar power rebates and incentives
Just a few years ago Pennsylvania was near the top of the solar heap, boasting one of the strongest solar power rebate program in the country to go along with solid performance incentives and strong net metering laws. Unfortunately, with the rebate program now exhausted, the picture is not nearly as sunny for solar. The absence of tax exemptions are more glaring omissions without that big rebate check overshadowing them and the SREC payments, while solid, aren’t dragging payback time frames into “A” range by themselves. All around Pennsylvania is still pretty OK – but it’s also just OK.