Your 2019 guide to getting solar panels for your home in Virginia
This page is a complete guide to the complicated and sometimes confusing process of installing solar panels on your Virginia 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 **
From the charm of Chesapeake Bay to the unmistakable hue of the Blue Ridge Mountains, Virginia sure does have a lot of natural places to protect. Unfortunately, legislators down in Richmond have not followed in the footsteps of their great forebears when it comes to promoting sensible self-driven solutions like solar power (Jefferson’s yeomen farmers would so be using photovoltaics).
Despite strong solar resources and a strong potential foundation for statewide policy, lawmakers have failed to pass or promote meaningful incentives thus far. We’ll be checking in periodically to see if all this potential turns into some real incentives for you, the customer. In the meantime, solar power is still a pretty sweet investment, even without big state incentives chipping in.
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 Virginia solar incentives you see below.
The Solar Strategy section is focused on the 3 ways of paying for solar in Virginia, 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 Virginia. 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 Virginia.
Click any of the boxes below to go to that section of the page, or scroll down to read the page in order.
|Your Virginia Solar Strategy|
|Comparing Solar Investment Options|
|Paying Cash for Solar in Virginia|
|Solar Loans in Virginia|
|Solar PPAs in Virginia|
|Solar Purchase Payback Time in Virginia|
|Virginia Solar Policy Information|
|Renewable Portfolio Standard (RPS)|
|RPS Solar Carve-Out|
Your Solar Strategy in Virginia
Figuring out the best way to go solar in Virginia 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 Virginia
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. That might look a little complicated to you, so let's break it down:
The green bars show the return if you pay up front. As you can see, there's a big payment (negative) in year 1, which gets slowly reduced over time. The green bars cross the "$0" line at year 14, which is when the system will have paid back your initial investment with electricity savings. Then, our example goes to year 25 (which is when most solar panel warranties end), where you'll end up with just over $16,000 in total profits. Not bad! That's because even though Virginia has pretty cheap electricity, the state gets enough sun to make the electricity savings substantial.
The orange bars, on the other hand, show what happens if you take a Home-Equity Line of Credit (HELOC) to pay for the system. You don't put any money down, but you do get the 30% Federal solar tax credit, meaning you actually come out ahead in year 1. The bars dip below the $0 line after 6 years, because your loan payments (over a 15-year term) will exceed your energy savings by a little each year. Still, once you pay off the loan, the savings start stacking up quickly. In the end, you'll come out thousands of dollars ahead over the 25-year estimate.
Finally, the blue bars represent a similar HELOC option, but for a smaller, 2-kW solar system. This size system is great if you only have a little equity, and it still saves you thousands in the long term, while reducing the amount of CO2 pollution you're responsible for. The loan size is smaller, and so are the first-year windfall and final profits, but if you love the idea of solar, this is a great way to go.
Keep in mind that these numbers are estimated for Virginia residents who don't qualify for rebates from either the Tennessee Valley Authority (TVA) or Dominion Power. Bot TVA and Dominion offer interesting performance payment programs, and TVA even has a $1,000 rebate to go along with it. So if you're served by either of those two companies, your financial outcomes will look a little different from our examples. Your best bet is to connect with one of our partners in Virginia to get help with paperwork and make sure you get all the solar incentive money that you can.
Read on to find out more about each option!
Option 1: Paying cash for solar
Paying up front used to be the only way to get panels on your roof, and it's still the option that allows you the most control. But it isn't the best option from a percentage return on investment standpoint—that award goes to the solar loan.
Still, an outright purchase returns the most money over time, because you own the system from day one and reap all the benefits—the Federal solar tax credit of 30% of system costs and some decent energy bill savings.
In our example, you put down $18,750, but by the end of year 1, that tax credit and the energy savings will erase a bunch of it. Over 25 years, your system will have produced over $16,000 in income.
Here’s an example of how the numbers work for a purchase of a 5-kW rooftop solar system in Virginia:
- Installing a typical 5-kW solar system should start at about $18,750.
- The Feds offer a tax credit of 30% of out-of-pocket costs, so you'll get $5,625 back next April. Note: you can take the credit over two years if you don't owe $5,625 in Federal taxes this year.
- Then there's your first-year energy savings. That's another $749, and it brings the cost after 1 year to just $12,376.
- With all the energy bill savings rolling in, your system will pay itself back after 14 years. Once that happens, you’ll be seeing over $1,200 per year in savings until the end of your system’s life.
- When all is said and done, our 25-year estimate shows a total net profit of $16,041 with an internal rate of return of 6.8%. That's better than most financial investments you can make!
- On top of those returns, your home's value just increased by $14,976, too (your expected electricity savings over 20 years)!
- And speaking of doing good for the environment... your system will create some green for the earth by not using electricity from fossil-fuels. In fact, the energy you’re not using has the carbon equivalent of planting 113 trees a year, every year your solar power system is humming.
Keep in mind, the numbers above are based on an average home in Virginia. 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
This is where we tell you that taking a loan for solar panels is a no-brainer, because it means investing in an income-generating asset. It's true! That's because the state gets a nice amount of sunshine, so even without huge incentives, it's enough to make solar worthwhile, generating a good deal of income for you after you pay your loan off.
Here's the important stuff:
As you can see from the chart above, you'll start out with a big windfall, because with a loan, you're not putting any money down, and you get the rebate and federal tax credit just like if you paid $18,750 up front for your system. You'll come out ahead nearly $4,600 after the first year! In the 14 years that follow, your loan payments will actually cost a little more than the money you'll be saving in electricity, but just think of it like a monthly deposit into a savings account.
The rest of our estimate might look like a see-saw, because you start out with a windfall, drop down into "sizeable investment" territory, and then rocket up again after the loan is paid off. That's when the solar "savings account" will pay dividends. You'll be saving tons of money every year because you'll own the system outright. At the end of our 25-year example, you'll be $8,101 to the good, which is great for an investment where you put nothing down!
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 $18,750 with a fixed rate of 5% or lower and a 15-year repayment period.
- You have an appetite for making a little money with a long-term investment, while also producing benefits for the environment.
Here’s how the numbers pencil out for a Virginia solar purchase with a HELOC:
- Installing a typical 5-kW solar system should start at about $18,750, even without any state rebate. That's how big your loan will need to be to cover it.
- The electricity bill savings in the first year of operation will total $749, but your loan payments will be $1,779, for a difference of $1,050, or about $88 per month.
- But here comes the tax credit! Because you've technically "paid" for the system with your loan, you'll get the Federal tax credit of 30% of system costs, or $5,625! Even after you make those loan payments, you'll end up with an extra $4,595 at the end of the first year.
- When your loan’s paid off in year 15, you’ll see over $1,250 per year in savings until the end of your system’s life.
- For our 25-year estimate, you'll see pretty nice returns, to the tune of $8,101 after all the payments. That's a huge amount of money for a zero-down investment!
- Finally, the environmental benefits cannot be overstated. Operating your system will take as much carbon out of the air as planting 113 trees every year!
Keep in mind, the numbers above are based on an average home in Virginia. 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)
Virginia does not offer solar Power Purchase Agreements or leases. Perhaps it would be a good idea to contact a solar advocacy organization and ask them to fight for solar in your state!
Virginia 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 Virginia:
15% of base year (2007) sales by 2025
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.
Virginia first passed its voluntary RPS in 2007. In our state updates here at Solar Power Rocks, we have often used “goals” or “targets” to refer to RPS-determined minimum levels of renewable energy production that are actually firm mandates. Those mandates are backed by penalties for noncompliant utilities. In this case “goals” really means just that: aspirational targets not backed by any penalties for failing to meet the set standards.
The voluntary goal is currently 15% (of 2007’s generation) renewable energy by 2025. That includes intermediary goals of 7% renewables by 2016, and 12% renewables by 2022. Information on how much progress Virginia utilities have made toward those goals is not readily available.
As you might have guessed, the voluntary program here has not been as effective as the more typical mandatory RPS in promoting incentives for solar power. Virginia legislators should convert the framework of an RPS already in place into true mandates for renewable energy. We’ve seen utilities start strong programs to encourage solar energy production in virtually every state with a strong RPS, and we’re confident that would work here as well.
Virginia’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
In addition to being voluntary, Virginia’s RPS also lacks a solar carve out. They’ve taken steps toward encouraging residential solar creation, however, by offering double credits to utilities for onshore wind and solar energy production. If the RPS contained specific carve-outs for clean and efficient technologies like solar panels, or mandates for the environmentally necessary increases in distributed generation, you’d see even stronger incentives for residential 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!
Virginia Electricity Prices
Electricity costs an average 12 cents per kilowatt-hour here -- comfortably below the national average of 13 cents/kWh. We know you hate that monthly electric bill, but here at SPR, we actually think that energy is too cheap right now. Yes, we said too cheap.
Electricity remains inexpensive only because most of it is still produced by burning fossil fuels. All that earth-killing oil and coal may still be cheap, but the long-term costs will far outweigh those monthly bill savings. When all those long-term costs or scarcity problems (or both) really start to kick in, those monthly electricity bills are going to rise quickly. When that happens, you’ll be patting yourself on the back for having already switched over to clean efficient solar energy.
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.
Virginia 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.
Virginia’s net-metering law applies to residential generating systems up to 20 kilowatts (kW) in capacity. All surplus generation is applied as a credit to your next bill at the utility’s avoided cost (or other previously agreed upon) rate. All cumulative surplus built during each 12-month billing cycle may be carried over indefinitely, or you can choose to sell the electricity back to the utility at the end of the 12-month period. In order to sell the electricity to the utility you must negotiate a power purchase agreement prior to starting net metering.
That’s a pretty solid law overall, but there are definitely some easy tweaks the legislature could implement to make net metering even stronger. The maximum limit on overall enrollment should also be raised from the current 1% to at least 5% of a utility’s peak production capacity. The current system size limitations should also be removed to ensure that all customers can meet on-site generation needs with solar power.
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.
Virginia 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 Virginia
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 Virginia measures up:
Virginia Solar Power Rebates
Virginia currently lacks any sort of statewide solar rebate program. That's a darn shame.
If the RPS set mandatory levels of renewable energy production, we can guarantee more utility companies would offer incentives to help you make the switch to solar. How do we know? It’s worked everywhere that a real RPS has been implemented. Get on it, Virginia!
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.
Virginia Solar Power Tax Credits
20% of the sales tax paid by an individual Maximum Incentive: Not to exceed $500
Without a strong, mandatory RPS in place, it isn't much of a surprise Richmond politicians have not passed any state tax credits for solar power.
Luckily, all solar installations are eligible for a 30% tax credit from the Feds. There's no cap on the federal tax credit and fortunately for Virginia, having no state rebate to deduct means a larger tax credit coming your way. Sample calculations follow below -- keep scrolling!
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
As you've surely guessed from the lack of a true RPS, Virginia also lacks any legislation-based (i.e. truly statewide) performance payment program. If you’re lucky enough to be a Dominion Power or TVA customer, however, you’ll cash in on a utility-based incentive.
Dominion offers what it calls a Solar Purchase Program, which is basically a purchase agreement that pays solar panel owners 15 cents for every kilowatt-hour (kWh) their system generates. The homeowner would continue to pay Dominion the regular rate for all the electricity their home needs.
This kind of agreement differs from net metering, in that the power generated by the panels is sold directly to Dominion, and not used to power the customer's home. It's a good deal for homeowners—at least while retail rates are cheaper than $.15/kWh. The program runs through 2018, and is subject to annual renewal thereafter, meaning you could be selling your power for $.15/kWh far into the future.
With possible rate increases above that amount, it starts to look less like a good deal after about 2021, which is when we estimate the cost of electricity will exceed the payments. Hopefully VA will have something better worked out by then, but it's equally likely Dominion will shift to net metering agreements after 2018, which would mean solar homeowners get a good deal now and a fair deal in the future.
For TVA customers, your new solar power system is eligible for TVA’s Green Power Providers Program. Through this program, TVA offers a twenty-year contract to purchase 100% of the energy produced by your solar power system at the retail electric rate, with an additional premium payment of $0.02/kWh for the first ten years of your contract. You get your payment as a credit issued by TVA through your local electric distributor on your monthly bill. If you generate more credit than your electric bill, payment for the excess credits will be issued either monthly or annually, at the discretion of your local electric distributor. Qualified systems must be between 500 W and 50 kW -- no problem!
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
The tax code is not entirely devoid of love for solar power. Virginia passed legislation way back in 1977, authorizing municipalities to exempt residential solar power systems from taxation (i.e. exempting the value that the solar power system adds to your home from being counted in property tax calculations).
Note that we said the state legislation authorizes municipalities to exempt your solar power system from property taxes. The law does not require that municipalities do so. Be sure to ask the expert installer we partner you with about whether or not your town offers such an exemption.
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 own the system and are not leasing). Other studies seem to indicate a home price premium about equal to solar panel cost, 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
In addition to ongoing property tax exemptions, the sales taxes exemptions that we’ve seen in lots of other states would save you 6% on the cost of a solar power system in Virginia. Unfortunately, the equivalent sales taxes exemption that many states have passed is a big fat 0% of the way there. As in, there is no sales tax exemption for the purchase and installation of solar power systems here. That’s a real shame. Sales tax exemptions help the local solar industry in addition to the customer, so they’re a double win.
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 Virginia solar power rebates and incentives
Virginia has all the right pieces in place for strong statewide solar policy – good net metering, standardized interconnection, and even the framework of an RPS. Unfortunately the RPS’s current voluntary nature is preventing that potentially strong foundation from spurring any meaningful incentives for residential solar power. With above average first-year costs and below average payback time frames, Virginia comes in at a dismal “F” in our ratings.