Washington, DC Solar – Everything You Need to Know
Information about Solar Panels in Washington, DC
In Washington, DC (District of Columbia) solar is an excellent idea. With their fast rising electricity rates, fantastic REC program, and net metering regulations, homeowners in our nation's capital can save over $22k by installing an average-sized solar system.
Interested in going solar, but not sure where to start? We’ve got all the info you need below! Read on for savings estimates, financing options, available incentives, and relevant solar policies.
#1 Are Solar Panels Worth it in Washington, DC?
* Note that these are estimated values for informational purposes only, and do not take into account the full complexity of all financial projections. They also only apply to cash purchases, which means your numbers will be different if you lease your system or pay for it with a loan (factoring in interest). Also note that we are not financial advisors, so this information should not be construed as financial advice.
#2 Options for Buying Solar Panels in Washington, DC
DC homeowners have a variety of financing options available, each with their own benefits and drawbacks.
Paying for your solar installation in cash upfront isn’t the fastest way to see a return on your investment (solar leases allow you to see an immediate return), but they do allow you to save much, much more money than through leases or loans.
Installing a medium-sized 5kW solar system on your DC roof will set you back about $17,100 before incentives. That’s quite a bit, but after accounting for the 30% federal tax credit (which you’re eligible for as the owner of the installation), that total cost drops to just $11,970.
Still a lot of money, yes, but considering DC’s fast rise in electricity rates, as well as the wonderful REC program (more on that below), you’ll see a return on your investment in just 9 years and a total net savings of $20,575. Spend $12k and make a net profit of almost $21k? Talk about a sweet deal. In fact, Washington, DC is one of the most lucrative areas for solar in the entire country!
That’s not all, though. Since you own the system outright, you can add some serious value to your home as well.
Of course, the downside to cash up front is in the name – you’ve got to have all that cash at the outset. Don’t have that much lying around? Thankfully, there are other options to go solar for the rest of us! Read on for more info.
If your pocketbook isn’t fat enough to purchase outright (or you just don’t want to) and you don’t have the equity in your home to secure a loan, solar leases can be a worthwhile option. While you aren’t going to see savings anywhere near a cash or loan, most solar companies claim you can save up to 20% on your utility costs by going solar.
A solar lease works just like a car lease. The solar company installs the system on your home but retains ownership. You pay them monthly to lease the equipment, which produces power that you can use and put into the grid.
20% savings certainly isn’t as exciting as cash purchase’s $23k savings above, but remember that you are going solar for, quite literally, no money down.
There are a few more downsides beyond just the lower savings. Since you’re leasing the solar equipment, the solar company retains ownership of the installation, and therefore you are not eligible for the federal tax credit even though the panels are on your roof. Solar companies say they pass that discount on to you through lower monthly bills, but there’s really no way to verify this.
Additionally, leased solar panels add no financial value to your home and can scare away some potential buyers, so think carefully before going solar with a lease.
More: Solar Leases
Solar loans offer the best of both worlds. You can go solar for little or no money down just like a solar lease, but actually own the system like a cash purchase. As the owner of the installation, you’re eligible for the federal tax credit and can also add value to your home.
Many different organizations today offer loans for solar, from solar installers to banks and credit unions. In a place like Washington, DC where solar is pretty common, it’s not a matter of finding a loan, it’s a matter of finding the best one!
The only downside to loans, of course, is the interest – and that can really cut into your savings. Taking time to find the best possible loan with the lowest interest and shortest time frame (that you can handle financially), is time well spent.
For the 5kW installation above, taking out a fairly common 15-year loan with 5% interest tacks on an additional $7,241 in interest. Subtracting that interest from the savings above, your total savings going solar with a loan comes in at $13,334. Still worthwhile, but not as much as a cash purchase.
More: Solar Loans
#3 Washington, DC Solar Policy Information
DC residents benefit from a long list of policies designed to encourage and promote solar energy.
Renewable Portfolio Standard
You might be unfamiliar with renewable portfolio standards, but they’re the single most important piece of legislation to encourage growth in a state’s renewables industry.
When state governments pass RPS legislation, they are requiring utilities that operate in the state to source a certain amount of energy from renewable sources by a specific date. Typical requirements include Ohio’s 12.5% by 2026 and New Mexico’s 20% by 2020.
Washington, DC has actually one of the most aggressive RPSs out there, at 50% by 2032. In fact, out of the 29 states with RPSs, only Hawaii, Vermont, California and New York beat it!
With RPSs in place, utilities are forced to adopt renewable technology at a faster rate than they’d otherwise be inclined to. Utilities can typically meet these goals in a few different ways, each with their own beneficial outcomes.
- First, they can build their own renewable power plants (like a solar or wind farm).
- Second, they can purchase renewable electricity from a generation company.
- Third, they can buy Renewable Energy Credits (RECs, or certificates that utilities must collect to prove they are complying with the RPS laws) from businesses or homeowners with solar installed.
With all these different paths available, RPS goals typically fire up the area’s solar industry — not just for utility-scale projects, but for commercial and residential solar as well.
Read the REC section below to see how you can benefit from this mandate by selling the RECs your installation produces!
Electricity prices are an important part of going solar, but not in the way we usually think.
Most people enjoy low electricity prices – who wants to pay more than they have to? But with solar, high prices actually mean you can save more by producing your own electricity and avoiding those costs!
DC residents actually pay pretty standard electricity rates. The average electricity cost in the district is about $0.13 per kWh, about on par with the national average, though miles away from New York’s $0.19 per kWh.
Current electricity prices are only part of the equation, though. When we look at EIA data on electricity prices since 2001, we see that Washington, DC’s prices have risen 3.6% each year on average – a full percentage higher than the national average!
So while rates are pretty good right now, they’re actually rising at a much faster rate than the rest of the US. For solar homeowners, this is actually good news, since each penny that prices rise is a penny you successfully avoid paying!
Net metering is a basic component of your solar savings. Without it, you stand to save much less money by installing solar.
In a nutshell, net metering is simply the idea that, each month, your utility watches how much electricity you pull from the grid and how much electricity you put into the grid (if your solar installation produces more than you use). At the end of the month, they’ll calculate the difference. If you put more into the grid then you pulled out, your utility will credit your account for that difference.
Washington, DC requires all privately-owned utilities (ie Pepco) to offer full retail-rate net metering, with credits remaining in customer accounts indefinitely (in some states, any credits left over at the end of 12 months is forfeited to the utility).
With retail-rate credits, if you pay the utility $0.14 per kWh, your utility will also pay you $0.14 per kWh for all your excess electricity – a pretty great setup for homeowners.
Solar installations often produce more electricity during the summer, so net metering allows your solar installation to create a ‘bank’ of bill credits when it is producing more than you can use. During cloudy, stormy, and snowy days, you can then pull from this bank to cover the electricity you are taking from the grid.
In DC, you’ve got just about the perfect net metering system!
More: Net Metering
Most states in the US have passed laws standardizing the interconnection process. Interconnection is the process to connect your solar installation to your utility’s grid. Without standardization, utilities can create any difficult, long-winded, expensive process that they please.
Thankfully, Washington, DC passed interconnection standards in 2006 that are fairly straightforward when compared to its state counterparts.
Systems under 10 kW in size are not required to have an external disconnect switch (an additional safety measure that adds a little installation cost).
In addition, utilities aren’t allowed to require homeowners to have additional liability insurance for their installation – not a given in many states, and a requirement that can cut into your bottom-line savings.
Overall, DC’s interconnection standard is adequate. We’re very happy it’s there, and it covers the basics. That’s good enough for us.
Homeowners Associations and Solar Access
Across the country, unlucky homeowners who either want to go solar or have already gone solar, have run into 1 of 2 issues:
- Their Homeowners Association (HOA), covenant, or other organization denies their request to go solar.
- After installing solar, their neighbors build an addition or plant trees that block the sunlight from hitting their panels, essentially making the installation worthless.
They might sound like fairly simple situations, but these two issues have actually caused huge battles ending in courtrooms. In response, many states have passed laws protecting solar homeowners in either or both situations.
Unfortunately, Washington, DC has yet to pass any sort of laws protecting solar homeowners. If you install solar on your roof, notify your HOA and neighbors of the plan as soon as possible, stay friendly, and convince them that solar isn’t something that they need to worry about – it’s something everyone benefits from!
#4 Washington, DC Solar Incentives, Rebates, and Tax Credits
DC homeowners are eligible for the federal tax credit and REC trading – two great incentive programs that quicken your return and increase your savings.
Federal Tax Credit
DC homeowners who purchase and install their own system (sorry, no leasing) are eligible for the federal Renewable Energy Income tax credit. This credit drops your owed taxes by 30% of the cost of your installation. So, if you paid $18k for your installation, you’d avoid paying $5,400 in federal income taxes the following year.
As a nonrefundable credit, the feds won’t cut you a check if your taxes drop below zero. The good news, though, is that if you don’t owe enough to claim the entire credit in one year, you can break it out and claim portions over several years.
Federal lawmakers extended the full credit to 2019, when it will drop to 26% for a year, then 22% for a year. In 2022, it dies off completely (unless it’s extended. Hey, it happened once, right?)
More: Solar Federal Tax Credit
Local Tax Credits/Rebates
Washington, DC offers no tax credits for solar installations.
Utility Based Incentives
Washington, DC’s sole utility, Pepco, currently offers no incentives for solar installations.
Renewable Energy Credits (Updated for 2017)
We already mentioned that to comply with renewable portfolio standard regulations, utilities can collect the RECs that businesses’ or homeowners’ solar installations produce. This is huge for DC residents, as you can literally make thousands of dollars by selling the RECs your installation produces over its lifetime!
Each megawatt-hour of electricity produced by a renewable system produces 1 REC. That REC can then be bought and sold on the market, at market price (so variable cost).
Currently, the maximum payment for RECs in DC is $0.50 per kWh, and selling costs are surprisingly close to this amount. Over time, the maximum payment decreases, ending in 2032 when the RPS mandates are complete. Here’s the incentive schedule for the remainder of the program:
- 2017 to 2023: $500 per MWh
- 2024 to 2028: $400 per MWh
- 2029 to 2032: $300 per MWh
With this new schedule, your solar installation just got a LOT more valuable. A 5kW installation producing 91,530 kWh by 2032 would equal about $3,807 in payments just for RECs alone (as long as market prices remain close to the maximum values above). Wow!
Property Tax Exemption
Just like many home improvements, solar can add quite a bit of value to your home. Of course, as your home’s value increases, your property taxes increase as well.
To encourage homeowners to go solar, Washington, DC offers 100% property tax exemptions on the added value your solar installation brings to your home. With property taxes at 0.572%, you could save about $100 in your first year alone on an $18k installation. It’s not a huge amount, but over 10 years that really adds up!
Sales Tax Exemption
Unfortunately, Washington, DC does not offer any sales tax exemptions for solar installations.
Many states allow homeowners to avoid paying sales tax on either the cost of the equipment or even the entire installation costs. With DC’s sales tax at 5.75%, that’s about $1,000 you could avoid on an $18k system.
General Increase in Home Value
Installing solar on your home can add around $4 per watt to the value of your home, according to a study from the federally-funded Lawrence Berkeley National Lab.
Researchers studied 22,000 home sales in 8 different states over 14 years and found that homebuyers were willing to spend an average of $2.70 and $4.30 per watt depending on the age of the installation.
While Washington, DC wasn’t a part of the research area, you can be fairly certain that if you purchase and install your own system (even with a loan), you’ll see the value added to your home when it comes time to sell.
Unfortunately, this only applies to homes with solar owned by the homeowner. According to another study from LBNL of southern California homes, solar installations financed through leases bring no additional value to the home, though they don’t detract, either.
If you’d like to dig even more on local incentives and rebates, check out the DSIRE database.
What to Do Next?
With the excellent incentives available, installing solar in Washington, DC is a great financial investment. Cash is always going to be your best bet, but you can still come out on top with solar loans and leases as well.
As with any financing, be sure to read the fine details and shop around for the best deals. Once you’re ready to pull the trigger, be sure to reach out to at least a few installers to compare prices and options. Saving money by helping the planet can be a truly rewarding experience, so get out there and do it!