Your 2019 guide to getting solar panels for your home in Washington
This page is a complete guide to the complicated and sometimes confusing process of installing solar panels on your Washington 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 **
Dreary cloudy Washington? It’s really not that dreary at all. Check out a solar resource map for the entire Pacific Northwest region. There, you can see—during the summer months especially—the region enjoys a considerable amount of sunlight. So at least our legislators there have some sun to work with!
So how well have those legislators been doing to promote a switch to clean, reliable solar power? Pretty well, actually! In Washington, solar panel owners get paid extra for the electricity their systems generate. And that's on top of the savings they'll see by simply not needing electricity from the power company in the first place.
Read on to get detailed information on solar policy and incentives in Washington, along with a few clear financial examples of how solar saves you money while saving the environment.
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 solar incentives you see below.
The Solar Strategy section is focused on the 3 ways of paying for solar in Washington, 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. 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.
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 Solar Strategy|
|Comparing Solar Investment Options|
|Paying Cash for Solar in Washington|
|Solar Loans in Washington|
|Solar PPAs in Washington|
|Solar Purchase Payback Time in Washington|
|Washington Solar Policy Information|
|Renewable Portfolio Standard (RPS)|
|RPS Solar Carve-Out|
Your Solar Strategy in Washington
Figuring out the best way to go solar in Washington 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
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. Here's the thing about Washington: the state makes up for its low electricity prices and relative lack of sun with a pretty nice per-kilowatt-hour solar payment as an incentive to people who own panels. Furthermore, prices for solar have fallen dramatically over the past decade or so, and even Washington's low electricity prices can't keep it down.
Now as for that complicated chart above... let's break it down a little:
The green bars show solar's financial return over 25 years if you pay up front. Now, solar panels almost always last longer than 25 years, but that number is the end of typical solar warranties, so we base our estimates on the most conservative definition of solar panel life.
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 16, which is when the system will have paid back your initial investment with electricity savings. Our example goes to year 25, which is when most solar panel warranties end, and in Washington, you'll end up with just about $9,000 in total profits by that date. That's pretty good!
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. Money in your pocket now! The bars dip below the $0 line after 7 years, because your loan payments (over a 15-year term) will exceed your energy savings each year. By kind of a lot. Once you pay off the loan in 2030, the savings start stacking up. But over our 25-year estimate, it will basically mean you break even on your solar investment.
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 lets you break even over 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 and haven't got piles of cash or equity, this is a great way to go.
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. 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 about $9,000 in income.
Here’s an example of how the numbers work for a purchase of a 5-kW rooftop solar system in Washington:
- 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 $474 and it brings the cost after 1 year to $12,651.
- But wait, Washington also wants to pay you for making clean energy! The state offers what are called "performance payments" for every kilowatt-hour (kWh) your system produces. The minimum payment is $0.15/kWh, which equals another $790 off your costs, bringing the year-1 total to just $11,861. The best part is those payments continue through June of 2020!
- With the energy bill savings and Washington's payments, your system will pay itself back after 16 years. Once that happens, you’ll be seeing over $800 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 $8,885 with an internal rate of return of 5.2%. That's not quite the return of a stock market index fund over 25 years, but it's a solid investment if you're looking to save money and the planet at the same time.
- On top of those returns, your home's value just increased by $9,477, 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 95 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. 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 usually where we tell you that taking a loan for solar panels is a no-brainer, because it means investing in an income-generating asset. But even though Washington offers some decent solar incentives, the electricity costs here are so low that a 25-year investment in solar will basically break even. That's good news if you're an environmental-minded person with some equity and a willingness to be in your home for at least 15 years, but it might not be right for everyone. Read on to dee if you fit the bill!
Here's how a solar loan works in Washington:
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 30% federal solar tax credit just like if you paid $18,750 up front for your system. You'll come out ahead over $5,109 after the first year! In the 14 years that follow, your loan payments will cost quite a bit 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 slowly gain after the loan is paid off. After 15 years of payments, you will have invested about $8,400 of your own money. Once the loan's paid off, you get all the energy savings with no more payments, and the solar "savings account" will pay dividends. If our prediction of 3.5% annual increases in energy costs hold, you'll end up $946 to the good at the end of 25 years, which is not too bad if you consider you start the loan out by saving over 5 grand in a year.
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 (lower rates and shorter repayment increases your profit).
- You have an appetite for basically breaking even on a long-term investment, while also producing a ton of benefits for the environment.
Here’s how the numbers pencil out for a Washington solar purchase with a HELOC:
- Installing a typical 5-kW solar system should start at about $18,750. 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 $474, but your loan payments will be $1,779, for a difference of $1,305, or about $109 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!
- On top of that, Washington will pay you extra for the energy produced by your panels. The state's $0.15/kWh will earn you an estimated $790 in the first year!
- With all those savings, you'll end up with an extra $4,851 at the end of the first year—even after you make those loan payments.
- After your loan’s paid off in year 15, you’ll see over $800 per year in savings until the end of your system’s life.
- For our 25-year estimate, you'll see some a minor return, to the tune of $946 after all the payments.
- Finally, the environmental benefits cannot be overstated. Operating your system will take as much carbon out of the air as planting 95 trees every year!
Keep in mind, the numbers above are based on an average home in Washington. 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)
Washington 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!
Washington 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:
15% by 2020
A Renewables Portfolio Standard (“RPS”) requires utilities in the state to eventually source at least a certain percentage of their electricity from clean, renewable sources like solar panels.
In 2006, Washington became the second state in the nation to pass a Renewable Portfolio Standard (RPS), mandating that 15% of utilities’ electricity production must come from renewable resources by 2020. The 15% standard will be phased-in over 3 targets: 3% of production from renewable resources by 1/1/2012, 9% by 1/1/2016, and finally 15% by 1/1/2020.
Washington deserves some credit for being the second state behind Colorado to pass an RPS of any kind -- but not that much credit. That 15% mark falls on the lower end of the spectrum and needs to be pushed to 30%, even 40% in the years after 2020 to be at parity with more aggressive standards set across the country.
Washington’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
Washington’s RPS also lacks any mention of a solar carve out. If the RPS contained specific carve-outs for clean and efficient technologies like solar panels, 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!
Washington Electricity Prices
Welcome to the lowest electricity prices in the country! With all those rushing rivers, Washington gets the bulk of its electric power from hydroelectric dams and generators, and Washingtonians pay an average of just 9 cents per kilowatt-hour (kWh) of electricity. That's great news for people who like low electric bills, but not-so-good news for people who want to go solar.
That's because the main financial benefit from solar is reduced energy costs. It's a huge deal in a place like New York, where people pay over $0.20/kWh, but doesn't have the same effect in Washington. The less-tangible value of solar is the benefits it has for the environment. That's why it's a good thing Washington offers solar performance payments to turn a little of that environmental benefit into cash.
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 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 to make sure you get credit for the surplus.
Unfortunately Washington fails the test that separates a great net metering law from one that’s just OK. The best net metering laws make sure that you get the value of every kilowatt-hour (kWh) of surplus you produce – either in credit to future bills or, if you consistently run a surplus, in cash payments at the end of a regular accounting period.
In Washington, any net surplus you have accumulated and not used as a bill credit are forfeited to the utility on April 30th of each year, without compensation. Don’t fret! This just requires a little more planning to make sure you don’t install more solar power capacity than you will use each year.
The expert local installers we partner with can help guide you through this planning and a whole lot more. Besides, even if you produce a tad too much energy one year, you are still eligible for the state REC payments, even with net metering.
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 Interconnection Rules
Statewide with caveats
Net metering is solid in Washington, if not spectacular. Sadly, interconnection is not solid at all; unless by solid you mean hard, and by hard you mean difficult, as in difficult to connect to the grid simply and cheaply.
Now, we don’t want to get carried away. Utilities may not require net-metered customers to comply with safety and performance standards not required by the Washington Utilities and Transportation Commission (WUTC) or, or to purchase additional liability insurance. So it’s not the worst interconnection we’ve seen … but it’s close.
Redundant external disconnect switches are generally required, customers are responsible for providing too much of the connection equipment, and the performance standards that the WUTC itself mandates — the National Electric Code, National Electric Safety Code, and standards from the Institute of Electrical and Electronic Engineers and the privately owned Underwriters Laboratories – could be made less onerous.
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
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 measures up:
Washington Solar Power Rebates
$300/kW - Snohomish County only
There are no statewide rebates available to Washington residents, because the state has chosen instead to incetivize solar adoption through its performance payments program. Still, the vast majority of Washington residents aren’t getting any help with installation costs at all. We thought you were pro-environment, Washington. C’mon.
But there is one place where the local utility has gone above and beyond to offer some decent cash back—on top of the state payments! Homeowners served by Snohomish County PUD (in Washington’s third largest county) are eligible to receive a rebate on the price of solar installation at a rate of $300 per kilowatt installed, up to a maximum rebate of $2,000. That isn't a huge amount of money, but knocking a cool thousand off the day-1 price of a 5-kW system is nothing to sneeze at.
So if you're in Snohomish county, good for you! If not... sorry for you.
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 Solar Power Tax Credits
No State Income Tax
Since Washington State doesn’t have any income tax, there aren’t any solar tax credits to redeem! Luckily, you will still benefit from the 30% Federal Solar Tax Credit. There's no cap on the federal tax credit and fortunately for Washington, 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
$0.16 - $.21/kWh (ended)
Up until the end of 2018, Washington had a special kind of solar program that would pay you for every kilowatt-hour (kWh) of solar energy you produced, for up to 8 fiscal years after installation. It was called the Renewable Energy System Incentive Program, and was intended to reward solar system owners for the benefits their clean energy give to the state of Washington.
Unfortunately, as all that past-tense verbiage in the above paragraph should tell you, that program has ended. That's not exactly a bad thing, because the program was initially supposed to run through the end of 2021, but it was so popular that all the allotted money was used up 3 years early.
Considering the success of the program (and a similar one before it), look for something new coming down the pipe. Perhaps if Governor Inslee and the legislature can work together to pass a new RPS law, solar carve-out and incentive package, we'll see something as good as the former performance payments program.
As for now, unfortunately, the lack of a program like this has pretty much shut down the Washington home solar market.
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
Tax exemptions are a simple, straightforward, and effective way to promote solar power. A property tax exemption would exempt you from paying taxes on the more than $8,000 in property value that installing a solar power system will add to your home -- all without ever actually removing a dime from the state’s bank account! That sounds like a win-win to us. Unfortunately, state lawmakers have yet to see the light (no pun intended), leaving Washington with no property tax 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 are owning the system and not leasing). Other studies seem to indicate a home price premium about equal to the cost of installing the system, minus any incentives like the federal solar tax credit.
For many average-sized solar power systems on a house, that can mean adding $20,000 to your home value. And if you don't believe us, believe the bean counters: Many banks and solar financing companies now offer traditional style equity-based home loans for installing solar. An additional $20,000 in property tax basis in many states amounts to a big chunk of change owed back to the state. However, many states have complete exemptions from added taxes when you install solar on your home!
The availability of a property tax exemption for solar energy was sourced from the Database of State Incentives for Renewables and Energy Efficiency. Grades in this category are basically all-or-nothing. Either you got it or you don't. Thankfully, many states have "got it.".
Sales Tax Exemption
Washington exempts all equipment, all labor, and all services related to the installation of that equipment from all sales and use taxes on solar systems up to 10kW. As the sales tax in Washington is currently 9%, that’s nothing to sneeze at when purchasing equipment that costs twenty to thirty thousand dollars. We’d love to see that 10kW maximum bumped up, but otherwise, that’s a model law right there. No twists, no tricks, just savings for smart solar energy.
Update: It looks like Washington has put the kibosh on future solar sales tax exemptions for residential systems. The Department of Revenue quietly issued this letter on September 21st, 2017, indicating that the exemtions would end for systems installed after September 30th, 2017. Boooooo.
That means you'll pay full sales tax on your solar installation, which is a bummer. But hey, the state's production incentives are still bonkers, so go get 'em!
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 solar power rebates and incentives
The world of Washington solar policy is brightening. There aren’t any solar rebates, tax credits, or property tax exemptions, and there are low electricity rates, poor interconnection, mediocre net metering. But even with a requirement to purchase expensive Washington-made equipment to take full advantage, Washington’s REC payments can chop your solar payback timeframe to a very reasonable 6-year time period. This one weird trick to get a good return on your solar investment isn’t enough, however and earns Washington a middling “C” 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!