Delaware Solar – Everything You Need to Know
Information about Solar Panels in Delaware
Overall, Delaware stands as a solid backdrop for residents interested in going solar. A relatively aggressive solar carve out means that utilities fight to add solar-producing homes to their network, and depending on where you live, there are some great opportunities to save.
Although The First State might not have the biggest and best incentives, it's a great place to start your journey with solar!
#1 Are Solar Panels Worth it in Delaware?
* 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 Delaware
Cash will always be king, but if you don’t have deep pockets, there are two other options as well.
Using cash to pay for your solar installation is the simplest process and will ultimately yield the best financial results — provided that you have the dough to pay for your system up front. You’ll be able to take advantage of all the credits and rebates available, and you won’t be saddled with a long-term loan or contract!
Keep in mind, however, that purchasing a solar system outright will require quite a bit of cash. We estimate that your cost to install a standard 5kW system in Delaware will be around $16,983 out the door, including both equipment and installation.
Since you’ll own the system outright, you’ll be able to take advantage of the federal tax credit, which is worth a $5,095 discount on your income tax! This will drop your total cost down to $11,888, which is quite a bit less than we were dealing with originally! Let’s look at a few more ways that you can save money with your system by paying cash.
Since solar is an energy-producing asset, don’t forget that your system will generate about 6,675 kilowatt-hours during your first year. That juice will be worth about $985 if you were to purchase the same amount from the utility company at the retail rate ($0.15 per kWh as of May 2017).
Over the years, your system will degrade in performance very slightly each year (about 0.8% annually) while your utility company will tend to increase energy prices by 3.3% per year on average. If we run that out over the 25-year life cycle of a modern solar system, your system will pay for itself in 11 years and generate $21,672 in profit.
That’s equal to a 9% yearly return on your initial investment – not a bad financial outcome by anyone’s standards, and you’re getting it while helping the environment!
If you are part of one of the power companies that offer a rebate, then you could save even more! For instance, if you live in an area covered by Delmarva Power, you might be eligible for an additional $2,500 in grant rebate money! This would decrease your payback time to 9 years, generate $24,173 in profit, and have a return of 11.8% per year. Wow!
If you don’t have the cash on hand and you aren’t able to secure a loan with good terms to finance a new solar system, then leasing is always a decent choice. This option is excellent because you will put nothing down, have no interest-bearing loan to worry about, and you also won’t have to worry about the maintenance on your system during your contract.
In this scenario, you’ll basically be allowing a solar company to place a system on top of your home and generate power. You’ll pay them a fixed amount in exchange for the energy the system produces with the intended result that you’ll save a little bit on your utility bills each month. It won’t be a huge amount, but it will still be savings, and of course you are helping out the environment at the same time!
Beware, however, that these solar companies are out to make a profit and they will receive all of the tax, grant, and rebate benefits gained from owning the system. Remember, you won’t own the system with this option. It is important to go over any contract with a fine tooth comb because it could be very easy to get trapped into a long-term commitment with ballooning rates or strict rules that create problems for you down the road.
Of particular note is what would happen to the system if you end up trying to sell the home. Sometimes, you can take the system with you. Other times, you’ll have to convince the home buyer to take over the contract from you!
More: Solar Leases
Taking out a loan to purchase your solar system is by no means a bad option. In fact, think of the loan as an investment in the future that will actually make you money in the long run! Even though you are financing the system, you’ll still have access to all of the ownership perks associated with going solar in Delaware, and you’ll come out way ahead in the end!
Starting out with that $16,983 system cost from before, let’s take out a 15-year loan at 5% interest (of course, you might be able to get something better!) and run the calculations out over the 25-year lifespan of the system.
- Make monthly payments of about $134.30 on your loan.
- Save about $82 per month on your electricity bills (this means that you’ll initially be paying about $52 per month to purchase your panels. After the loan is paid off in the 15th year, you’ll begin saving over $1400 per year on your utility bills!)
- Pay about $7,113 in interest over the course of the loan.
- Make $14,560 in profit over 25 years with a 4.4% annual return on your investment.
Although it might not be glamorous to pay extra for your system, remember that you’ll get that big tax credit back after the first year. You can use that to pay off your loan even faster!
If you are able to take advantage of the utility rebate, you could raise your total profits to $17,060, your return to 5.7% annually, and get profitable on paper a year earlier!
More: Solar Loans
#3 Delaware Solar Policy Information
Luckily for you residents, Delaware has a pretty hospitable landscape for solar right now. It’s not perfect, but a solid RPS and solar carve out coupled with higher-than-average energy prices will allow you to make money from your choice to go solar!
Renewable Portfolio Standard
Serving as the foundation of a state’s solar landscape, the renewable portfolio standard (RPS) is often what drives residential solar incentives. Essentially, this document is what allows a state government to lay out their renewable energy vision over the short, medium, or long term.
Often, they will use it to set a goal for a certain percentage of the state’s total energy to be generated by renewable sources by a particular year. This goal can be broken down into milestones, and there are all sorts of other stipulations and requirements that can be added to the package.
Don’t forget that the state has the power to force its local utilities to comply with whatever they want them to do. To meet compliance, utilities will often offer all kinds of rebates or other incentives to get residents to help them cover the requirement. This is always good news for the consumer!
Delaware has a strong RPS that outlines a 25% renewable energy goal by the year 2025-2026. This aggressive goal came only five years after setting a goal of 10% by the year 2019-2020, which shows a continued commitment among legislatures. The 25% goal is broken up into milestones each year, and the current requirement sits at 16%. Each year, it will rise 1.5% until completion.
Some states’ RPS have a special rider, known as a solar carve out, that sets a goal for solar energy specifically in addition to all of the other renewables. Delaware took this extra step and set a 3.5% goal for solar power by the year 2025-2026, one of the highest in the country! The requirement for 2017 is 1.5%. Let’s take a look at where they stand right now:
- Total energy produced in the state in May 2017: 628 thousand MWh
- Total energy produced from solar in May 2017: 7 thousand MWh
Based on these numbers, it looks like they are at about 1.11% for the time being, so still behind the goal. As long as they are behind, it is unlikely that incentives will dry up too fast!
If you are reading an article about saving money with solar in Delaware, then you probably already think you’re paying too much for electricity. With solar, you save more money as your utility’s electricity prices rise, because you are essentially producing your own electricity at a lower cost than you would be paying on your utility bill.
Looking at it from this perspective, the electricity prices in your state are going to be a big factor in how much money you can save over the long haul.
In the case of Delaware, electricity costs $0.1477 per kWh, while the national average is $.1322 per kWh. If you live in Delaware and are paying for this fossil-fueled electricity, then you could be saving a lot of money with solar. What’s more, utilities tend to raise their rates over time to fund higher generation costs, research, development, and infrastructure upgrades.
In Delaware, this increase is about 3.3% every year on average. That’s a lot! Once you have your solar system installed, you can forget all about those increases, as you’ll only have to worry about your system’s minuscule amount of performance decline each year instead (0.8%) – nothing compared to 3.3%!
Although Delaware’s net metering rules have been around since 1999, updates in the last decade have turned it into a substantial benefit for residential solar in the state. Net metering exists to address what happens to the extra solar energy that residents produce while they are connected to the grid.
During daylight hours, for instance, the solar system is going to be producing a lot of electricity, all while the home may only be consuming a fraction of it. Rather than waste it, the utility will let that energy be fed back into the grid to help power other homes in its network.
Since you’ll be providing the utility company with extra power, it only makes sense that they would compensate you, typically via bill credits in your account. The compensation can go towards paying for the energy that you have to draw from the grid during the nighttime.
Termed net-excess generation, the utility will pay you for the net excess power that you are generating for the grid. If your home uses 900 kWh, for instance, but you are producing 920 kWh, then you’ll get credit for the extra 20.
Luckily for residents of Delaware, this credit will be given to you at the full retail rate ($0.1477 per kWh) that the utility charges. Credits like these allow you to see financial benefits from all the electricity your installation produces, even if you aren’t home to use it!
This credit can be rolled over indefinitely, or you can submit a request to get a check mailed to you for the difference at the end of the year, though they’ll base the payment on their ‘energy supply rate’, typically around $0.04 per kWh. Even still, how amazing would it be to get a check FROM the power company?
Note: You also get to keep any SREC’s generated by your solar system. We’ll talk more about those later!
More: Net Metering
Since we’ve established that your solar system will basically be acting like a little part of the local power plant, it would make sense that the utility would want to regulate exactly how you are connecting to the grid to avoid any problems.
In Delaware, the interconnection rules state that local utilities should develop a policy based on the Interstate Renewable Energy Council’s model and the Department of Energy’s best practices for interconnection. Below are the rules for Delmarva Power, but other companies should be similar:
Residential systems under 10 kW will fall into the “Level 1” category of the interconnection rules, and there will be little or no headaches associated with this level. For instance, level 1 does not require any processing fees, and there is no requirement for continuous liability insurance on your system, saving you time and money throughout your ownership!
Additionally, there is no need to have an external disconnect switch installed so that the utility can cut your system off from the grid when it wants to, further ensuring a low cost and easy installation.
Homeowners Associations and Solar Access Rights
Although residential solar installations have been around for a long time, they have only recently started to make their way into the mainstream. And as we all know, new things can sometimes cause a bit of a stir.
If you live in a neighborhood with a homeowner’s association, for instance, they might have rules against putting up an enormous solar array on your roof. Injustice against nature aside, you’ll likely have to abide by whatever rules that were set forth when you moved in.
Be sure to check with your HOA before attempting any type of solar installation!
In another situation, let’s say that it’s completely fine with your HOA to install that new system, but a few months after it goes up on your roof, your neighbor turns around and builds a huge tree house that blocks all of the sun from your panels. Your bright, shiny new system is now worthless!
Luckily, there are laws in place to protect this sort of thing, and they are called solar access rights. While Delaware has passed the Solar Rights Law, it only protects you in the first situation, as it prohibits HOAs from restricting solar power and protects you from other people limiting the use of solar on your property as well.
If you’re worried though about a cantankerous neighbor, it’s up to you to tell them your plans early and forge good relationships to keep your sunlight unobstructed!
#4 Delaware Solar Incentives, Rebates, and Tax Credits
Although there aren’t any tax credits and rebates at the state level, several utility-based options ensure that there is money to be saved with Delaware Solar!
Federal Tax Credit
In Delaware and every other state across the union, you’ll be able to take advantage of an incredible incentive called the federal tax credit (or formally the Solar Investment Tax Credit). With this single credit, you’ll be able to take 30% off the cost of your installation and equipment by recovering those costs on your federal tax return.
Although it is nonrefundable (you can’t get money back on your return if you owe $0 in taxes), you’ll be able to break the credit down over multiple years so that you can enjoy it as it becomes available. Having this credit in your back pocket would mean that a $20,000 system would end up costing only $14,000 for an incredible $6,000 in savings!
Do not forget, however, that this credit is actually due to completely expire at the end of 2021. It will drop from 30% to 26% in 2020, then to 22% in 2021. If you want to get the full amount, then you’ll need to act before the end of 2019!
More: Solar Federal Tax Credit
State Tax Credits/Rebates
We’ll just come right out and say that there are no state tax credits to speak of here in Delaware. Unfortunately, despite a strong RPS and an overall enthusiastic solar climate, there isn’t anything currently on offer, but that could always change in the future as the requirements get steeper!
Utility Based Incentives
What Delaware does have, on the other hand, are some rebates offered through several of the larger utilities and electric co-ops in the state. Before you get too excited, remember that you will likely have to sit on a waiting list to get some money, or you might not be able to fit in at all if the program has been suspended temporarily. Let’s see what’s on offer:
Delmarva Power – If you are lucky enough to be a Delmarva Power customer, then we have some good news! Not only is the program not currently on a wait but also your incentive amount will be $.50 per Watt for a new solar installation. For our 5 kW system that we discussed earlier, this would mean a $2,500 payment to go towards the cost of the system!
Delaware Municipal Electric Corporation – According to their pamphlet, the DEMEC is only able to offer residents of specific municipalities access to their solar energy grant program (currently the cities of Dover, Milford, and Newark). With this grant, depending on where you live, you’ll get back up to 33.3% of your total installation costs as a rebate not to exceed $7,500. There is often a wait list for this rebate, however, so be sure to check with the utility for the most up-to-date information.
Delaware Electric Cooperative – With this utility, you can get $.50 per Watt ($.20 per Watt over 5kW) for residential systems and the grant will not exceed $2,500 for systems 5 kW or less. In this scenario, you’ll be able to get the full $2,500 back for your 5 kW system in the above examples! The window for applying in 2017 has already passed so be sure to check with the utility for the most current information!
Solar Renewable Energy Credits
Remember how we said that you’d get to keep all of the SRECs that your system produced each year and told you that we would explain later? Well, here we are!
If local utilities are forced to generate a certain amount of electricity through solar (ie the solar carve out), and they haven’t met the requirement, then they have to pay a penalty to the state. One way to avoid paying this penalty is to purchase the credits that other producers earn for generating energy through their solar systems.
If you bought the 5 kW system in our above example, then your rig will produce about six of these SREC’s over the course of the year (1 megawatt-hour of solar energy equals 1 SREC). Generating them is the easy part, but figuring out exactly what to do with them next can get a little complicated. Here are a couple of options:
The GreenGrantDelaware Program – This program offers residents a flat $450/kW upfront payment in exchange for the rights to all SREC’s generated by the system over the next 20 years. For our 5 kW system, this would equal a check for $2,250 which is a pretty sweet deal. Unfortunately, the program has nearly run out of funds, and it is likely that you’ll have trouble applying for this credit at this time.
SREC Delaware – Delaware’s residents could once just sell their SREC’s on the open market, but in 2011 this option was replaced by the SREC Delaware program as Delmarva Power became the only real buyer of the credits. With this option, you’ll enter into a contract with the utility company, and they will pay you the “bid price” for the first ten years and a fixed price of $35 for the next decade. The bid process is conducted each year, and there is no guaranteed price to be had.
Property Tax Exemption
Unfortunately, Delaware doesn’t offer anything in the way of a property tax exemption for solar. If you’re wondering why this would apply to you, then consider the fact that not only are you purchasing an expensive set of hardware that has a real value attached to it but also that the equipment is capable of slashing the utility bills of the home on which it is installed.
All of this means that adding solar to your home will likely bring a nice boost to your property value! Many states allow for residents to exclude the addition of value from solar from their property taxes to help provide another incentive for them to purchase it.
This would put money in your pocket while still allowing you to sell your home for more money. Property tax exemptions are always a win-win!
Sales Tax Exemption
We could say that there is no sales tax exemption for solar in Delaware, but that’s not technically accurate. Because there is no sales tax in this state, it doesn’t matter anyway!
Sales tax exemptions are an excellent way to save extra money on your solar installation that you might not necessarily be thinking about when you’re looking at the sticker price. A typical system would result in potentially hundreds or even thousands of dollars in sales tax in other states with high taxes and no incentives. Thank your state government for this one!
General Increase in Home Value
Just like we discussed in the property tax exemption section, installing solar panels can potentially add thousands of dollars to the value of your home.
According to a recent study out of the Lawrence Berkeley National Lab, you could expect to find about $4 per watt of your system on average added to your home’s value, assuming that you own the system outright. This study was conducted over four years and looked at the sale of 22,000 homes, with and without solar, over that period to determine what premium those homes could command.
At this rate, this increase in home value will at least cover the cost of your installation, so as the worst-case scenario you will have enjoyed the perks of solar for free if you decide to sell your home down the road! Be sure to check around your area to find out as much information as possible about what solar can do to your resale value. Depending on where you live, it could be more or less than the $4 premium found in the study.
If you’d like to dig even more on local incentives and rebates, check out the DSIRE database.
#5 Newark Solar
If you live in Newark, Delaware, then you’ll be part of the Delaware Municipal Electric Corporation (DEMEC). Under this utility, you might be eligible for a few financial perks that can save you money!
Their rebate program offers up to 33.3% of your solar costs to be reimbursed, up to $7,500! With our 5 kW system example that costs about $17,000, you’ll be way under the limit and rake in about $5,661 in savings, which will dramatically increase your return on investment. How much?
If you live in Newark and pay in cash to take advantage of all of the benefits you will:
- Pay off your system on paper in only 6 years
- Generate $27,333 in profit over 25 years!
- Enjoy a 17.8% return on your initial investment
If that’s not enough to convince you to install solar, I don’t know what is!
What to Do Next?
If you are living in Delaware and interested in going solar, you should rest easy knowing that you stand to make a lot of money by producing your own clean energy – and you’ll be helping the environment to boot!
Don’t forget, however, that our prices are only estimates and it is essential that you do your own homework to explore the expected costs on a local level. There is truly no substitute for picking up the phone and talking to an installer!