States Paving the Way for a Bright Future for Residential Solar

By: Jack Sundermann

When deciding whether to install solar energy systems into their homes, most Americans heavily consider overall cost and payback period on their investment. Despite advances in technology over the past decade, residential solar systems represent a significant investment with an average gross cost of $20,650.[1] Prices for similarly sized solar energy systems can vary wildly from state to state.[2] Interestingly, this is often less to do with average sunlight and more to do with the incentives and policies enacted by local governments.

Current Federal Incentives

Anyone installing a solar system is entitled to a 30% federal income tax credit based on the gross cost of the system.[3] This credit provides a dollar-for-dollar reduction in the amount of income tax that you would otherwise owe.[4] For example, claiming a $10,000 tax credit reduces owed federal income tax by $10,000.

Almost any solar system installed between 2017 and 2034 will be eligible for the credit.[5] While there is no limit on income for this program, its function as a tax rebate means that you need taxable income to benefit from this credit.[6] Every state has their own unique set of incentives that customers can access, but states like New York, Maryland, and Illinois have gone the extra mile to incentivize residential solar.

New York

New York has two primary programs available to individuals interested in residential solar, the NY-Sun Initiative Megawatt Block Program and the New York State Solar Equipment Tax Credit.[7] The Megawatt Block Program offers a cash incentive per watt of solar capacity, with prices that vary depending on where you live.[8] New York City residents have an incentive rate of $0.20 per watt, while upstate residents’ incentive rate is $0.30 per watt.[9] To qualify, residents simply need to have their system installed through a program participating contractor and meet certain system requirements.[10] Additionally, New York offers a 25% state-tax credit for all systems installed on a primary residence.[11] The maximum possible value of the credit is $5,000, but it can be combined with the federal tax credit.[12]

The combined value of these incentives can almost halve the gross cost of the system. For example, an upstate New York home’s $20,00010-kilowatt system would see a cash return of $3,000 under the Megawatt Block Program and a combined tax credit of $11,000. While the sticker price of a residential solar system might still be quite high in New York, when subtracting the incentives, the out-of-pocket cost is significantly lower.

Maryland

Maryland has a wide variety of different incentives available to residents interested in solar energy.[13] One of the most interesting is the Low Income Solar Grant Program. Under this program, the Maryland Energy Administration subsidizes the design and installation of residential solar energy systems for a limited number of low-income households.[14] The program funds the total cost of a system up to a total value of $25,000.[15] The purpose of this program is to allow the Maryland Energy Administration to gain insight into best practices for the installation of residential solar.[16]

Maryland also offers a Solar Renewable Energy Certificate (SREC) program. In this program, every megawatt-hour of solar energy produced by the system generates one SREC.[17] The system owner can then sell their SRECs to electricity suppliers or utilities in the SREC market.[18] The price of individual certificates is dependent on the supply and demand during a given year, so values vary from year to year.[19]

Maryland has also adopted a comprehensive community solar pilot program, which provides renewable energy benefits to low and moderate-income residents without requiring property ownership.[20] Community solar programs allow multiple residents to share the benefits of a single solar system by allowing them to purchase electricity from a solar farm.[21] The goal of community solar programs is to allow residents who do not have suitable roof space, rent their homes, or cannot afford the up-front costs of installation.[22]

Illinois

The Land of Lincoln has created some robust programs for renewable energy. The two primary incentive programs for residents looking to install solar systems are Illinois Shines and Illinois Solar for All.[23] The Illinois Shines program is another that involves the buying and selling of RECs.[24] For every megawatt-hour of energy production, one REC is generated. Illinois Shines help provide upfront funding for solar systems by prepaying for fifteen years of RECs.[25]

Illinois Solar for All, by contrast, gives income-eligible households access to residential solar installations with no upfront cost.[26] Generally, qualifying residents are those whose income is below 80% of the median area income.[27] This program is made possible by providing incentives to approved vendors with the expectation that they extend those savings on to customers.[28] The incentive for these vendors is, again, selling RECs.[29] The vendors install the system and keep the RECs for themselves in return for little to no installation cost to the resident.[30]

Moving Forward

The last 10 years have seen a significant drop in price for residential solar systems. Despite that, the price of residential solar can, at first glance, still be prohibitively expensive for most Americans. Thankfully, we are beginning to see more effort from our federal and state officials as they implement creative legislative solutions and utility regulation. By continuing to advocate for better access to renewable energy, we can make these types of state and federal programs commonplace and make residential solar accessible for every American.

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[1] Vikram Aggarwal, How Much Do Solar Panels Cost in 2023?, Energy Sage (Nov. 4, 2023, 12:18pm).

[2] Id.

[3] Off. of Renewable Energy and Energy Efficiency, Homeowners Guide to the Federal Tax Credit for Solar Photovoltaics, (Nov. 4, 2023), https://www.energy.gov/eere/solar/homeowners-guide-federal-tax-credit-solar-photovoltaics.

[4] Id.

[5] Id.

[6] Id.

[7] Leonardo David, New York Solar Incentives, Market Watch (Last visited Nov. 9, 2023).

[8] N.Y. State Research and Dev. Auth., Dashboards and Incentives https://www.nyserda.ny.gov/All-Programs/NY-Sun/Contractors/Dashboards-and-incentives (Nov. 4, 2023).

[9] Id.

[10] Id.

[11] N.Y. State Dept. Tax’n and Fin., Solar Energy System Equipment Credit, https://www.tax.ny.gov/pit/credits/solar_energy_system_equipment_credit.htm.

[12] Id.

[13] CNET.com, These Seven States Have the Best Incentives for Solar Panels, https://www.cnet.com/home/energy-and-utilities/top-states-solar-incentives/.

[14] Maryland.gov, FY23 Low Income Solar Grant Program, https://energy.maryland.gov/residential/Pages/incentives/LowIncomeSolarGrants.aspx (Nov. 4, 2023).

[15] Id.

[16] Id.

[17] Md. Energy Admin., Solar Renewable Energy Certificates (SRECs) Explained, https://news.maryland.gov/mea/2020/06/16/solar-renewable-energy-certificates-srecs-explained/ (Jun. 16, 2020).

[18] Id.

[19] Id.

[20] Md. Pub. Serv. Comm’n, Community Solar Pilot Program, https://www.psc.state.md.us/electricity/community-solar-pilot-program/ (Nov. 4, 2023).

[21] Off. of Renewable Energy and Energy Efficiency, Community Solar Basics (Last visited Nov. 9, 2023).

[22] Id.

[23] CNET.com, Best Solar Panel Installation Companies in Illinois, https://www.cnet.com/home/energy-and-utilities/illinois-solar-panels/

[24]Illinoisshines.com, Solar and Shines Basics, https://illinoisshines.com/solar-and-basics/#solar-incentives (Nov. 4, 2023).

[25] Id.

[26] Illinois Solar for All, Residential Solar, https://www.illinoissfa.com/programs/residential-solar/ (Nov. 4, 2023)

[27] Illinois Solar for All, For Homeowners and Building Owners, https://www.illinoissfa.com/programs/for-homeowners-and-building-owners/

[28] Illinois Solar for All, Residential Solar, https://www.illinoissfa.com/programs/residential-solar/ (Nov. 4, 2023)

[29] Id.

[30] Id.