Welcome to the Ultimate Guide to Solar Panels in Pennsylvania
This page is a complete guide to the complicated and sometimes confusing process of installing solar panels on your Pennsylvania 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 2020 **
If you're lucky enough to live in Philadelphia, you can access new $.20-per-watt home solar rebates. Philly plays host to 10% of the state’s population, so the rebates have a chance to make a real impact in the lives of people who want to go solar in 2020.
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. Read on to learn all you need to know about home solar incentives, policy, and savings in Pennsylvania.
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.
What you'll find on this page:
The Solar Strategy section is focused on the 3 ways of paying for solar in Pennsylvania, 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 Pennsylvania. 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 Pennsylvania.
Click any of the boxes below to go to that section of the page, or scroll down to read the page in order.
Generate an accurate online solar estimate for your home
|Your Pennsylvania Solar Strategy|
|Pennsylvania Solar Policy Information|
|Pennsylvania Solar Incentives|
|Your Pennsylvania Solar Strategy|
|Comparing Solar Investment Options|
|Paying Cash for Solar in Pennsylvania|
|Solar Loans in Pennsylvania|
|Solar PPAs 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:
How to pay for solar panels 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.
How much can solar panels on roof save you?
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, 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.
Option 2: Using a loan to pay for solar
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.
Option 3: Buying the electricity, not the panels with a Power Purchase Agreement (PPA)
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:
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 PPA, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Calculate solar panel cost and savings for your specific home
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 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 Pennsylvania:
Pennsylvania's Renewable Portfolio Standard
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.
Pennsylvania's Solar carve-out and SRECs
.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!
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.
Pennsylvania Net Metering
Statewide with caveats
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!
Pennsylvania Interconnection Rules
Statewide, with caveats
"Interconnection" refers to the rules and regulations that govern how solar system owners can get their systems connected to the grid and accounted for. Pennsylvania utilities are required by state law to offer standardized interconnection rules, but how the Public Utilities Commission chose to do that was, in our opinion, a bit too complicated.
Unlike interconnection standards in the best solar states, there's a $100 fee for even the smallest systems (and a minimum $261 fee for somewhat larger home systems), and a redundant external disconnect switch is required for even small home systems. The good news is the standards here require no additional homeowner's insurance for solar panel owners. Your regular home policy will do the trick. On balance, we'd say the state earns its "B" grade with relatively well-thought-out, if complex, set of standards that help solar installers work with the utility company to make the process of hooking into the grid relatively painless.
Pennsylvania Solar Incentives
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 26% of your total system 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 Pennsylvania measures up:
The availability of state solar incentives for residential solar systems was sourced from the Database of State Incentives for Renewables and Efficiency, utility company websites, and the state public utility commission.
Pennsylvania Solar Power Rebates
$200 per kW (Philly only)
If you’re lucky enough to live in Philadelphia, you can get a $200 per kW rebate for your home solar system now until the end of 2024. However, there are only $500,000 in funds available every year. That means, these funds are only going to provide relief to about 500 residences each year. Aside from this incentive, there hasn't been much movement from the Pennsylvania legislature on getting more rebates for needy homeowners. The good news is that solar has fallen an additional 60% (and counting) in price since then, so even without cash back from utilities, you can be sure you're getting a sweet deal on that shiny new solar panel system.
Pennsylvania Solar 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!
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.
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.
Low-income Solar Programs
Grade: FLearn more about low-income solar programs available in the U.S.
The final word on Pennsylvania solar incentives and policy
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.