Your 2019 guide to getting solar panels for your home in Washington DC
This page is a complete guide to the complicated and sometimes confusing process of installing solar panels on your Washington DC 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 **
When most people think of D.C., they think of big government buildings and big marble monuments. But from the Potomac River, to the nearly 3 square mile Rock Creek Park within the city borders and the beautiful forests found just outside of D.C. in virtually any direction, our nation’s capital has a lot of natural beauty to protect. And protecting it they are. Thanks to a strong Renewable Portfolio Standard (RPS) backing up solid performance payments and an extensive district-wide rebate program, both initial costs and payback time frames here rank among the best in the county. Let’s take a look at the details …
In recent years, Washington D.C. has seen a veritable explosion in new solar installation, but there’s still plenty of roof space left, and plenty of incentives to help you make your sunshine dreams come true. In fact, the District offers some of the best solar incentives anywhere in the country.
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 Washington D.C. solar incentives you see below.
The Solar Strategy section is focused on the 3 ways of paying for solar in Washington DC, 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 Washington DC. 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 Washington DC.
Click any of the boxes below to go to that section of the page, or scroll down to read the page in order.
|Your Washington DC Solar Strategy|
|Washington DC Solar Policy Information|
|Washington DC Solar Incentives|
|Your Washington DC Solar Strategy|
|Comparing Solar Investment Options|
|Paying Cash for Solar in Washington DC|
|Solar Loans in Washington DC|
|Solar PPAs in Washington DC|
|Solar Purchase Payback Time in Washington DC|
|Washington DC Solar Policy Information|
|Renewable Portfolio Standard (RPS)|
|RPS Solar Carve-Out|
Your Solar Strategy in Washington DC
Figuring out the best way to go solar in Washington DC 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 Washington DC
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 Power-Purchase Agreement (PPA). One thing it's important to note is: solar makes you a lot of money in Washington D.C.. Yes, we said "makes!" You see, the District's lawmakers value solar so greatly, they set up an amazing Solar Renewable Energy Credit (SREC) market, which means the utility company will pay you thousands of dollar just for producing solar power. Combine that with energy savings, record-low installed prices for solar, the Federal government's 30% tax credit, and local tax exemptions, and it's clear: there are few places in the country better than D.C. for solar.
Now let's discuss that chart above. We've examined three scenarios for going solar here, including a solar PPA, buying solar with a loan or home equity line of credit (HELOC), or buying solar with cash. As you can see, the cash purchase option leads to the highest dollar-amount returns over time, but look a little closer. Taking a HELOC and paying for the system over time (the orange bars) means you'll spend absolutely zero dollars of your own money, while big financial benefits in year 1 and beyond.
That's because you take a loan for the system, but you still get all the benefits of paying up front. In Washington D.C., that means SREC sales, a 30% federal tax credit, and big annual energy savings. With those incentives, you'll actually come out way ahead after the first year. And even though you'll be making loan payments for 15 years, the benefits outweigh the costs from day 1. Read more about solar loans in Washington D.C. below.
Finally, 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, the solar installation company puts panels on your roof at no cost to you, and you just buy the electricity they make, which eliminates most of your power bill from the utility company. PPAs in Washington D.C. are good for homeowners with no equity or cash, because they require neither of those things, and the District's electricity prices are high enough that you start saving money right away. Your savings may start small, but they'll finish big, because the cost of electricity from the PPA should rise by less than the electric company's annual rate hikes.
Read more below about each of the three options for solar in Washington D.C..
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—with lower equipment costs and that big Federal tax credit, solar costs less than ever before, and a solar installation pays itself off in just 6 years. But if you're interested in solar as an investment, taking a loan to pay for the system is a better option.
With a loan, you can make monthly payments instead of putting $20,000 down on a solar system, which means you save money on electricity (and make money selling SRECs) as you pay down the cost of your panels. If you have equity in your home or can get a large loan with a good interest rate, 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 $20,000, but SREC sales, tax breaks, and energy savings will erase a bunch of that after just 1 year. Over 25 years, your system will have produced over $27,000 in income, after your system cost is paid back. Solar offsets your electricity costs enough to save you $811 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 Washington D.C.:
- Installing a typical 5-kW solar system should start at about $17,500. 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 income tax credit of 30% of system costs. That's $5,250 you won't be paying to Uncle Sam this year, and it brings your first-year investment down to $12,250.
- After that tax credit, we subtract your first year’s energy savings, which we estimate to be $811. That reduces your cost after the first year to only $11,439—a savings of about 35% off the cost of your system. That's a huge cost reduction!
- But then comes the meat of this deal. Your SREC sales in 2016 will net you $2,355, bringing your final first-year cost of solar down to $9,084.
- Those electricity savings will quickly pile up, and your system will pay for itself in year 6. But your panels carry 25-year warranties, and they'll likely keep on kicking out kilowatts for a few decades or more. You'll see a total net profit of $22,672 by the end of that warranty. The internal rate of return for this investment is an astonishing 19.1%. That's more than DOUBLE the return of an investment in stock market index funds, and it's more reliable, too!
- And here's a nice bonus to consider: your home's value just increased by $9,871, too—the NPV of your expected electricity savings over 20 years—and thanks to Washington D.C.'s property tax exemption for solar, none of that is subject to taxation!.
- 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 Washington DC. 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 $20,000 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 Washington D.C., 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!. You'll come out thousands ahead this year, and you'll see a spectacular profit over the 25-year life of your system. The reason this works so well is that you're paying over time, but reaping all the benefits now. Your yearly energy savings will offset about half of the cost of the loan payments, and you'll get cash from selling your SRECs too, which might sound like it's too good to be true... so let's take a look at the numbers.
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 $20,000, 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 a Washington D.C. homeowner who makes a solar purchase with a HELOC:
- Installing a typical 5-kW solar system should start at about $17,500. 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 $811, but your annual loan payments will be $1,553, meaning you would spend $742 on solar this year, but...
- You'll also be able to sell your SRECs. Each SREC represents one megawatt-hour of electricity, and each is worth about $380, after the SREC broker takes their cut. Your 5-kW system will earn you a little more than 6 SRECs in a year, which means you'll see an estimated $2,355 in income in 2017 from SREC sales. WOW.
- And we know this is sounding too good to be true, but you'll also get a huge federal tax break! Uncle Sam will give you 30% of the cost of your system back as an income tax credit, which in this case means $5,250 you won't be paying the Feds this year.
- The energy savings, SREC sales, and tax credits mean you'll you'll come out $6,863 ahead after year 1, and it's pretty smooth sailing from then on out. With SREC sales and electricity savings, you'll actually only start paying for solar in 2023, when your net cost will be about $27/month.
- By the time you've paid off your loan in 2031, you'll see yearly savings of about $1,100. After 25 years, your total profit will be $16,872! That's beyond any other "investment" that requires $0 of your own money..
- 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 Washington DC. 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)
Leasing is a great way to go solar if you haven't got stacks of cash or oodles of equity in your home. With a lease, it's possible to get solar panels for $0 down and see big savings over 20 years!
As for leases in Washington D.C.: the electricity costs here aren't very high—we're actually almost exactly the nationl average of $0.13/kWh. But... the sun shines bright enough here to make solar power really profitable! That means a lease saves you money starting on day 1. For now, the payments on a leased 5-kW solar system should be around $690 per year, but the energy the panels generate will save you $811 per year. That's $121 you get to keep in your pocket this year, just for saying yes to solar!
And those savings will only get larger over time. As the utility company raises rates, your lease costs will go up by a smaller amount, meaning you'll see greater annual savings. Over 20 years, our estimate shows a total savings of $4,079. And the best part is the panels will be owned and maintained by the installation company, so all you have to do is brag to the Joneses down the street about your green habits!
Here's a little more about how a Washington D.C. solar PPA works:
Keep in mind, the numbers above are based on an average home in Washington DC. 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.
Washington DC 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 Washington DC:
100% by 2032
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.
In December, 2018, Washington D.C. passed its second RPS law in two years, and now has the best RPS of any state in the nation. Calling for 100% renewable energy by 2032 (the previous standard had a 50% goal by the same date), the District's new standard will result in a huge boom in home and utility-scale solar. But the real big story here is that 10% of all energy in the district must be generated from solar power by 2041. This is also called a “solar carve-out” and it’s discussed in more detail below.
Washington D.C.’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
10% by 2041
D.C. has a District-wide performance payment plan that is built into the RPS’s solar carve-out.
In order to meet the RPS’ solar power targets, utilities must purchase Solar Renewable Energy Credits (“SRECs”) from folks like you (generators are issued one SREC for every megawatt-hour of solar power produced). For every megawatt (MW) of energy a utility falls short, they must pay an Solar Alternative Compliance Penalty (SACP)of $500.
That effectively means that SREC payments could get as high as $500, but it varies in practice, depending on how much the utility needs that SREC to avoid paying the $500 default. Read down below for an in-depth explanation of what these SRECs mean for home solar in D.C.
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!
Washington DC Electricity Prices
D.C. pays an average of about 13 cents/kWh of electricity. That’s just a smidge more that the national average, but we still think that’s pretty cheap. Cheap electricity rates mean you’re probably not feeling too much of a strain in your pocketbook …. yet. Just don’t forget why electricity is so cheap.
That’s right, fossil fuels. Lots and lots on non-renewable, greenhouse gas-producing fossil fuels. When all those fossil fuels really start to bite us in the butt, or start to run low … or both … electricity rates are going to rise, and fast. When that happens you’re going to be really, really happy you switched early to all that efficient, clean solar power that will be in high demand. In the meantime, solar power will still save you a chunk of change. Win-win!
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.
Washington DC 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.
Pepco (D.C.’s only electric utility) offers a standard net metering contract to all residential customers. For all systems under 100 kW, all surplus electricity is credited to your next bill at the full retail rate. Surplus may be carried over indefinitely. All that is superb, and net metering is very strong for residential customers here.
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.
Washington DC Interconnection Rules
The District’s interconnection policies are also very strong for residential customers. If your system is less than 10kW (most residential systems will be), you qualify for simplified interconnection procedures, and will not be required to install a redundant external disconnect switch nor carry separate liability insurance. Again, we gave interconnection a “B” here only because of some limitation for larger customers that don’t concern your residential system.
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 Washington DC
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 Washington DC measures up:
Washington DC Solar Power Rebates
Affordable Solar Program
D.C. used to offer a strong district-wide rebate program, but as of 2016, that's ended for the general public.
What replaced it is much more exciting. Called the "Affordable Solar Program," it was designed to help bring solar to homes owned by families who make less than the median income for the area. As of September, 2016, the program ended, but we're feeling pretty confident they'll bring it back in some for for 2017.
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.
Washington DC Solar Power Tax Credits
While there are no tax credits available here, we can’t fault the city government too much. Those SRECs and rebates are still holding down the fort. Keep in mind, you can also take the 30% federal tax credit for your solar installation, putting thousands back in your pocket next April.
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
~$380 per SREC
As we discussed above in the solar carve-out section, D.C. homeowners with solar on their roofs earn an Solar Renewable Energy Credit (SREC) for every MWh of electricity generated by their system. A typical 5-kW system will generate a little over 6 MWh in a year, meaning 6 SRECs, each of which can be sold to the utility through a broker like SRECTrade.
SRECs are sold through brokers because utility companies don’t engage the hundreds of individual sellers, instead preferring to purchase SRECs in large quantities to meet their compliance requirements.
The good news is that SREC prices are still pretty darn high—2015 prices have been consistent at around $480—but there's some less-good news, too. Those Solar Alternative Compliance Penalties (SACPs) we mentioned will be reduced in 2017, from $500 to $350. Then they'll be stepped down about every year until 2023, when they'll be just $50. After 2023, the District will have completed its journey to 20% renewables, and, without new legislation to increase that goal, SRECs from D.C. solar will be just about worthless (but solar will still save you tons of money).
What this all means for savvy homeowners like you is that your 6.24 SRECs in 2016 will make you about $2,700. In 2017, the reduction in SACP means your SRECs will net you about $1,900, and it goes down from there until 2023. That's not so bad, though! By 2023, sales of SRECs will have put over $10,000 in your pocket, making solar in the District of Columbia a completely brilliant investment.
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
We can stand up and applaud, however, that the District gives you a 100% property tax exemption on all that extra home value you get from your solar power.
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
Sadly, D.C. offers no sales tax exemption, meaning you’ll pay the full tax of 5.75% on the purchase. But even with the tax, solar in D.C. makes more sense than almost anywhere in the country.
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 Washington D.C. solar power rebates and incentives
Our nation’s capital is certainly one of our nation’s leaders when it comes to strong solar energy policy. The picture here is sunny indeed for the switch to solar power; with a 1st year price break of over 50% and a lightning-fast 5 year payback timeframe, Washington D.C. earns a high “A” grade.
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!