Vermont Solar – Everything You Need To Know

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Information about Solar Panels in Vermont

Vermont may be the second-least-populous state in the Union, but the people that do live there are clearly interested in producing energy from renewable sources and making renewable energy the norm in Vermont.

Whether it be hydroelectric, wind, or solar, it's easy to see the dedication of its citizens and government to help protect the environment and provide affordable electricity to boot!

On an individual level, the federal tax credit coupled with some excellent potential performance payments means that you'll be able to enjoy a quick payoff for your solar system and start enjoying tidy profits in short order.

Read on to discover how you stand to save quite a bit of money by going solar in Vermont, all while protecting the environment at the same time!

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#1 Are Solar Panels Worth it in Vermont?

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Overall Grade
9 years Avg. Payback Time (For Cash Purchase)
11.1 % Estimate IRR (Return on your investment on cash purchase over 25 years)
$26,827 Your Net Profit Over 25 Years (Cash Purchase)

* 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 Vermont

Typically, there are three main ways that you’re able to bring solar power to your home: paying cash, taking out a loan, or signing up for a lease or purchase power agreement. Each of these options provide different benefits and disadvantages, and depending on your particular scenario, you might find that one will work better than another!

 

Although they may all be a little different, you should rest easy with the knowledge that you stand to make some decent profit with Vermont solar no matter which route you decide to take!

Cash Upfront

There is never a real argument against paying for something with cash unless you will be using your last dollar to purchase your solar system. Cash carries the benefit of completely owning the system from day one, and once you have saved enough money on paper through electricity cost reductions, rebates, credits, and exemptions, you’ll find that your system is generating a lot of real savings for your household!

To discover exactly how much we stand to earn with a cash purchase, let’s work the details to see how much we’ll save and how long it will take to pay off the system over its 25-year lifetime. Always remember that these numbers are just estimates and should be treated as a starting point in your research!

When purchasing an average-sized 5 kW system in Vermont, you’ll probably end up paying about $18,133 for the sticker price on equipment and installation. Don’t forget that we’re also exempted from sales tax here, which prevents the price from going even higher. We’re off to a good start!

$18k is still a lot of money, but we’ll be able to drop the price in short order with the federal tax credit (more on that below). After the first year of ownership, you’ll end up recovering about $5,439 on your personal taxes with this federal tax credit, landing the final cost at $12,693.

On the savings end, we’ll use some of our compiled data and a bit of basic math to see that a 5kW system in Vermont will produce about 6,280 kWh per year. With electricity prices hovering around 17 cents per kWh, that leads to about $1,092 in avoided costs on electricity each year!

While it’s true that your system performance will degrade by about .08% per year with normal wear and tear, that number pales in comparison to the average annual utility rate increase in Vermont of 2.1%. Over time, your savings will grow and grow as utility prices increase!

As we will discuss below, there is also an awesome performance payment for those of you that are served by Green Mountain Power (which covers most of Vermont) that will pay you $.053 per kWh produced each year. These payments are impressive because you are literally getting paid to use your system by the very utilities that you are circumventing!

Taking these two awesome programs into consideration means that you’ll be paying for your $12,693 system on paper in about nine years, see about $26,826 in profits, and enjoy an 11.1% annual return on your investment over the 25-year lifespan!

Bottom Line: There is nothing better than making money by doing something that helps protect the environment and spreads adoption of a renewable resource!

Leases and PPAs

Taking out a lease or signing up for a power purchase agreement (PPA) are really two sides to the same coin. Both options mean that you won’t own the solar system itself, but rather that you will have some rights to the electricity it produces.

Obviously, with someone else owning the equipment, you’ll stand to make much less than if you owned it yourself (they have to make some money from the deal after all!) but you can still come out way ahead depending on the deal you get.

Using a PPA or lease means that you’ll pay a little less for your electricity each month and this is purely a savings play from a financial perspective. You won’t be responsible for any of the maintenance, and often you are guaranteed a certain level of production no matter what happens with the weather!

If you plan on going down this route, just remember that you will be signing a long-term contract and it will be a painful situation if the company you are dealing with has their own best interests in mind. Most installers out there operate with integrity but read the fine print for details about payment increases and any loopholes that could leave you holding the bag in certain situations.

Keep in mind that if you end up selling the house you’ve signed the lease for, it could be a messy situation to get out of the contract if your buyer isn’t interested in keeping the solar system!

Bottom Line: If you just want to save a few extra bucks without any headaches, leasing or PPAs just might be your jive.

More: Solar Leases

Loans

Don’t have the cash for an all-out purchase, but aren’t interested in a lease or PPA? Then check out solar loans!

We’ve covered a lot of the financial behind-the-scenes with our cash example above, so for a solar loan, we’ll just look at how the numbers will differ. Don’t worry – despite paying interest, you’ll still be making money!

With a loan for Vermont solar, you’ll still be able to take advantage of all of the tax credits, rebates, and exemptions that you would by paying cash. The biggest difference will be the interest payment. Using the earlier system price of $18,133, you’ll end up having to pay about $7,855 in interest for a typical 5% interest loan over a 15-year period.

That amount of money hurts to see deducted from your earnings, but remember that you will be taking out a loan to MAKE money. It’s still profit in the end! Taking all things into account, you’ll end up paying off your loan after 15 years, but on paper, you’ve paid the system off by year 14 with the accumulated savings! At the end of 25 years, you’ll be $18,971 richer – a 5.6% annual return.

Bottom Line: This outcome is not too shabby when you consider that you didn’t have to put any money down and that you are helping to save the environment at the same time!

More: Solar Loans

#3 Vermont Solar Policy Information

Now that we’ve discussed how we can pay for a new solar system, we’ll take a look behind the scenes to discover how Vermont’s government feels about renewable energy in general and solar power specifically.

 

We can learn a lot about the future climate for solar by looking at the individual policies created to deal with it and to see how aggressive and far-reaching their goals are for renewable power generation within the state. Don’t worry, you’re going to find some good stuff in this section!

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Renewable Portfolio Standard

To paint a broad picture of exactly how the government wants to handle renewable energy, they will often create something called a renewable portfolio standard (RPS). In the case of Vermont, they created something very similar in 2015 called a renewable energy standard (RES).

This document outlines exactly how much power the state wants to generate from renewable sources and by what year they want to have it completed. These standards are crucial, since utility companies will rarely jump on board with non-fossil fuel technologies as they can be more complicated to integrate into their grid than coal or natural gas plants. With the RES in place, utilities are compelled to take action, otherwise they can face penalties and fees!

Vermont has a very high standard for renewable energy, and it looks like this:

  • 55% of energy produced by renewable sources by 2017
  • 75% of energy generated by renewable sources by 2032

Wow. The state has already come a long way, and it wants to take things even further! You might be wondering how they are already sitting near the halfway mark with renewables, and the answer is that the majority of their power comes from hydroelectric – either domestically or purchased from Canada. It’s clear that Vermont highly prioritizes renewable energy! 

Now, an RES mostly concerns utilities that don’t have any solar farms or other renewable production of their own, but there is a further stipulation that 1% of power comes from distributed sources (like the homes of you and me) by 2017 and an incredibly-high 10% by 2032.

This requirement means that a lot of folks are going to need to purchase a solar system to hit that quota! Solar carve-outs are great because they can help channel incentives directly to residential solar buyers.

More: Renewable Portfolio Standard (RPS)

Electricity Prices

As we mentioned before, the amount of money that you are paying for electricity before going solar can make a significant impact on the financial end of things. If you are generating power for free, you are avoiding the alternative cost of paid electricity. The higher the price, the more you’re saving!

In Vermont, the average resident is paying about $.177/kWh for the electricity produced by local utilities. This price is WAY higher than the $.129/kWh national average, and that is a very, very good thing for someone thinking about going solar!

Also, remember that utilities tend to increase their prices over time as things like labor and material costs creep up on the production side. Currently, the average in Vermont is about 2.1% annually. This might not sound like a lot, but over 25 years this can add up. It could be as high as $.29/kWh by then!

Meanwhile, your solar panels will just keep chugging along, producing almost the same amount of power using a free energy source (ie sunlight)!

Net Metering

For much of the history between residents and their utility companies, ordinary folks weren’t doing much producing when it came to electricity. They had their homes happily connected to the local grid and drew power whenever they needed it from their power company down the road.

With the advent of certain renewable resources, primarily solar, suddenly grid-connected homeowners were adding electricity to the grid, not just consuming. There had to be some system in place to figure out what would happen when a home produced more power than it needed during the sunny part of the day while using power from the grid at night. This system is called net metering.

Net metering regulations govern whether or not a utility can accept this power and how much money, if any, they will pay the homeowner for contributing energy to the grid. In the case of Vermont, there is a pretty good policy in place here to help protect and incentivize residential solar.

As a solar system owner, you’ll be responsible for covering the cost of the net meter itself as well as anything else required to get it up and running. There is an individual system limit of 500 kW, which will almost certainly never be hit by an individual homeowner, and you’ll receive the average retail rate (close to the $.1739/kWh number above) for any extra power that you are feeding into the system.

Providing net metering incentives at retail-rate is the gold standard, meaning you won’t have to worry about producing too much power during the daytime! This surplus production will be credited to the next bill, allowing you to use the credits during months when your solar system isn’t producing as much, like during the winter.

One area of improvement would be the ability to let this credit roll over into the next year. Currently, it will revert back to the utility. It’s a good price, but not a perfect system!

Note: You’ll need a “Certificate of Public Good” from the Vermont Public Service Board in order to get your net metering working. Once you meet the interconnection requirements below, you’ll be able to register for the certificate. Unless the utility replies within 10 days that there is an issue, you’ll get it automatically!

More: Net Metering

Interconnection Rules

Since we’re dealing with loads of electrical power and because someone that doesn’t know what they were doing could bungle the whole grid, many states have a specific policy, called interconnection rules, that sort out how homes are required to connect to the grid. In the case of Vermont, we’ll be looking at the rules governing systems that are less than 150 kW. If you have a home with a system larger than that then, well, you’ve got bigger problems!

According to the policy, utilities are required to offer net metering to all customers, and they may not charge any additional fees other than their typical minimum monthly fee. Fewer fees are always positive! One little snag is that customers will be required to install a utility-accessible external disconnect switch. This is a small gripe, however, as it is purely a safety measure and doesn’t add too much to the installation costs.

Homeowners Associations and Solar Access

It might seem like a strange concept, but many states have opted to protect homeowners’ right to go solar. In Vermont, they call it renewable energy rights.

Vermont scores better than many, declaring that nobody is allowed to restrict the use of solar collectors, clotheslines, or any other devices based on renewable sources. We like these sorts of solar-friendly blanket statements!

Organizations can dictate where solar panels are installed (on the backside of a roof, for example, away from the street), but only if the placement doesn’t affect energy production.

#4 Financial Incentives, Rebates, and Tax Credits

Here we look at all the ways to reduce the cost of your solar installation.

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Federal Tax Credit

Whenever someone is talking about tax credits for solar power, the fantastic residential renewable energy tax credit has to be discussed. This credit ensures that you’ll be able to receive a personal tax credit on your federal taxes worth 30% of your total solar equipment and installation costs.

That’s almost a third of the price discounted right off the bat! This is the single biggest financial incentive that you’ll find for going solar in Vermont. While the credit is non-refundable, meaning the the feds won’t cut you a check if you owe less than $0 at tax time, you can break the credit out over multiple years.

It should be mentioned, however, that this tax credit won’t be around forever. Starting in 2020, this credit will be reduced to 26%, then 22% in 2021, and then it will disappear after that unless it gets renewed. Act fast to enjoy this fantastic benefit!

More: Solar Federal Tax Credit

State Tax Credits and Rebates

Unfortunately, there aren’t any juicy credits available through the state of Vermont for solar panel systems specifically. There was an excellent program available, but it ran out of funding a couple of years ago and hasn’t shown any signs of being revived. Hopefully, more money will come this way soon!

Note: Although not for solar exclusively, there is still funding available for solar-powered hot water systems! You can receive $.40 per kWh/yr for installing a new system and the average resident receives about $1,000!

Utility Based Incentives

Although it might not look as tempting as a tax credit or rebate on the surface, utility-based performance payments can be another great way to work a discount into the cost of your solar system and help pay it off much faster!

Not every resident of Vermont will be eligible for this offer, but Green Mountain Power customers will enjoy a $.053/kWh payment for any electricity generated by their system. This is in addition to any credits received for net metering! Racking up those net-metered credits during the sunny season means that you might not have to pay for the power you’re getting from the grid at all during the gloomy winter!

Note: In Burlington, the area in which we calculated average solar power generation with a 5kW system for our payoff estimates, this means that your 6,280 kWh production over the course of the year could end with $332 in performance payments.

Property Tax Exemption

One great way that state governments like to reward solar adopters is in the realm of tax exemptions. When you make any sort of improvement or addition to your home, such as finishing a basement or laying a new driveway, your home’s value will tend to go up by some amount.

This is great if you are looking to sell your home in the near future because you will be able to demand a higher price for it, but if you are planning on sticking around for a while then you’ll be paying higher property taxes due to the additional value.

Thankfully, in Vermont you’ll be able to get an exemption for any value added to your home for state property taxes, provided that your system is under 50 kW and net metered. For a system valued at around $20,000, this could be substantial savings!

Note: It is still possible that your local municipalities could still enforce their own property taxes, but you’ll need to do your homework to see if this is the case.

Sales Tax Exemption

Along with the property tax exemption, Vermont also offers a sales tax exemption that can lead to serious savings on any purchased equipment and installation costs. With Vermont’s fairly high 6% sales tax, the exemption will save you about $1,087! It always feels good to keep a little money away from Uncle Sam while helping to improve the environment and your own home!

General Increase in Home Value

We’ve already talked about how you’ll be receiving a nice exemption for any value added to your home from purchasing a new solar system, but we want to reiterate the point that your home’s value can increase with this addition.

According to a study conducted over many years by the Lawrence Berkeley National Lab involving the sale of approximately 22,000 homes across eight states, homes with solar owned by the homeowner (ie cash or loan purchase) typically sell for a $4/watt premium over similar nearby homes.

With your 5 kW system installed, this could equal about $20,000 in extra home value should you choose to sell your home after installation. If you crunch the numbers, you’ll realize that you’ll be getting credit for the full system value. Meanwhile, you’ve captured all kinds of savings in the process!

More: Buyers Will Pay More for Solar Homes

If you’d like to dig even more on local incentives and rebates, check out the DSIRE database.

#5 – Montpelier, VTmontpelier-vermont

Are solar panels worth it in Montpelier? Going solar in the Montpelier area could be either good or bad depending on the specific area of the city you are living. This is because some areas of the city are serviced by Green Mountain Power while others are serviced by the Washington Electric Co-op.

If you were paying attention earlier, you’ll remember that Green Mountain Power actually offers a special deal for their customers in the form of performance payments. This incentive works out to about $332 per year. Not a massive amount, but it definitely adds up over time – and free money is always better than no money!

Be sure to double check your provider before you consider going solar in Vermont’s capital so that you’ll be able to factor in those differences. Washington Electric Co-op customers likely are able to save money as well, but you’ll need to contact a few installers to receive custom estimates to be sure.

What to Do Next?

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It is quite evident that installing solar in Vermont will make a lot of sense for most folks out there. The landscape for renewable energy in this state is friendly, and it is likely that it will continue to be so long into the future.

Whether you plan on paying cash, taking out a loan, or looking into a solar lease, you’ll stand to make a little or a lot of money with your decision. Be sure to use our information as a starting point on your journey and always to get an estimate from many professionals to ensure that you are getting a good deal!

Image Credits under CC License via Flickr - 2, 3, 4, 5, & Pixabay

 

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