Virginia Solar – Everything You Need to Know

virginia-solar

Information about Solar Panels in Virginia

Despite having some terrible gaps in their overall solar policy, installing solar in Virginia is still quite a lucrative investment thanks to the state’s decent net metering policy and sunny southern skies.

Saving over $15k by going solar in Virginia isn’t difficult, but of course, you need to do your homework first. What incentives are available? What do you need to connect your system to the grid? How much can you save?

We’re here to help with all these questions! Below, you’ll find all the information you need to make an informed decision on Virginia solar: savings estimates, info on solar policy, and a rundown of all incentives available to Virginia homeowners going solar.

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#1 Are Solar Panels Worth it in Virginia?

C
Overall Grade
13 years Avg. Payback Time (For Cash Purchase)
7.3 % Estimate IRR (Return on your investment on cash purchase over 25 years)
$15,540 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 Virginia

If you’re looking to install solar in Virginia, you can finance with cash or through a loan.

Cash Upfront

Cash is the Big Kahuna when it comes to financing solar. You’ll pay quite a bit out of pocket, but the financial rewards are better than any other type of financing. As the owner of the installation, you’re able to take advantage of the federal tax credit(a 30% discount) and potentially add quite a bit of value to your property.

Let’s run through an example of financial savings by installing solar in Virginia:

Say you install a medium-sized 5kW installation at a cost of $16,533 (or $3.30 per watt, the average installation cost in the state as of 2017). You then take advantage of the federal tax credit and lower your cost to $11,573. You’re already making progress!

A 5kW installation pumps out about 7,300 kWh each year in Virginia, so that’s 7,300 kWh you don’t have to buy from the utility.

By producing your own electricity, and with the state’s average utility rate at about $0.12 per kWh, you’ll avoid about $870 in utility payments in the first year alone. After year 13, you’ll have saved enough money to cover the entire cost of the solar system.

After Year 13, your investment is paid for and the rest is money in your pocket! By year 25, the estimated lifespan of solar systems, you’ll have saved about $15,540, with a return of 7.3%.

You can assume that pretty much any solar installer will take cash, so take your time to find the company that you trust and enjoy working with.

Bottom Line: If you’re looking to squeeze out as many savings as you can from your solar installation – and have some money to spare for a long-term investment – paying in cash is the perfect option.

Leases

Solar leases and power purchase agreements (collectively known as third-party ownership) allow homeowners to skip out on paying sticker price for solar. Instead, your installer retains ownership of the installation and you either make monthly payments to use the equipment (lease) or purchase the electricity produced by the system (PPA).

Solar for no money at all? Sounds pretty great, right? Yes, but there is one big downside. Leases and PPAs usually lead to moderate savings, around 20%, on electricity bills – nothing like your savings from a cash purchase. Of course, you’re getting these savings with no investment on your side, so is 20% savings really that bad when all things are considered?

Leases and PPAs can and do get mired in legal issues. But, unlike neighbors North Carolina, South Carolina, West Virginia, and Kentucky, the state of Virginia actually allows homeowners to enter into PPAs. Great!

However, with few incentives and a generally unfavorable attitude towards solar among policy makers, national solar installers are hesitant to actually enter the state. With few incentives to drop the price, it’s harder for both homeowners and installers to make money.

While SolarCity, one of the originators of third-party financing, did enter the state in early 2017, they are only offering financing through cash or loans – no leases or PPAs.

Solar leases are what originally fueled the solar boom in the late 2000s and early 2010s, but they’re beginning to wane in popularity as homeowners move towards solar loans, which typically see higher savings while still avoiding upfront costs.

Bottom Line: You’d be hard pressed to find a company offering third-party financing in the state, but honestly, solar loans are better anyway if you’re pressed for cash.

More: Solar Leases

Loans

With solar leases and PPAs out of the picture, if you want to go solar but don’t have the scratch to pay out of pocket, you’re left with securing a loan to pay for your installation.

Solar loans, though, are far from being the last kid picked on the softball field, as they have a good mix of benefits pulled from both cash financing and leases.

Like cash purchases, solar loans allow you to retain ownership of the installation. You are, then, eligible for the federal tax credit to lower your total investment cost. Also since you own the system, you add value to your home (more on that later).

However, unlike purchasing in cash, loans let you avoid paying that huge initial payment.

Of course, as with any loan, you’ll have to pay interest. Let’s see how that affects your bottom line:

Financing the same 5kW installation above with a 5% loan over 15 years (a fairly standard offering), you’ll end up paying an additional $7,000 in interest. Subtracting that interest from the savings total above, you can expect to save about $8,539 over the life of your installation.

That’s quite a drop from the cash option above, but let’s put this into perspective: Sure, you’re saving less compared to if you paid in cash, but you’re still saving thousands of dollars – all without putting ANY of your own money down. That’s pretty good. And while you’re saving all this money, you’re also leading to a cleaner environment. Great. Also, you’re becoming more self-sufficient, producing your own energy. Wow. Suddenly it still seems worth it, right?

Here are a few tips to help you drop those interest payments (and increase savings) as much as possible:

  • Shop around for the best possible loan. Talk to a few installers, banks, and credits unions to see what sort of interest rate and length you can obtain. Take on the shortest possible loan you can handle, as that will help lower your total interest.
  • Remember that federal income tax credit? Well, take the money you would’ve handed over to our friends at the IRS and instead pay off some of the principle on your loan. It won’t cover the entire amount, but it’ll make a huge dent and lower your total interest you’ll pay.
  • Each month, make a small additional payment that goes solely to your principle. Even $10 a month will add up to $1,200 annually, and your loan could be paid off early after 10 years. Woot woot!

There are lots of tips out there to lower your interest payments, so jump online and do some research yourself! Armed with some knowledge and good homework, you stand to save a lot from installing and financing solar with a loan.

Bottom Line: Obviously, it’s not as much as a cash purchase, but paying $11 to make $8 later on makes sense, right? And you’re helping the environment at the same time. That’s a win in our books.

More: Solar Loans

#3 Virginia Solar Policy Information

Virginia has passed pretty strong solar access protections and decent net metering laws but fails miserably when it comes to renewable portfolio standards and interconnection rules.

virginia-seal

Renewable Portfolio Standard

State legislatures that pass Renewable Portfolio Standards are typically aiming to jump start the renewables industry in their state. They accomplish this by mandating that utilities must source a percentage of all the electricity they sell from renewable sources.

These goals typically start small – around 3% or 4% for the first few years – then slowly increase over the next 10 to 20 years to 20% or 30% for most states, but can all the way up to 100% (as is the case in Hawaii)!

RPS mandates are important since, without them, utilities are pretty… we’ll say slow, to start building renewable projects or purchasing renewable electricity.

Virginia actually passed an RPS goal back in 2007 that 15% of all electricity (based on the year 2007) must come from renewables by 2025, but unfortunately, the goal is entirely optional!

Even if the goal was mandatory, it’s still a pretty weak RPS. For example, electricity from any already-existing renewable energy source (like pre-WW2 hydro projects and wood-burning electricity plants) count towards the RPS, so utilities don’t necessarily have to build any new renewable plants.

Coupled with that disappointment, the fine print of the RPS notes that the goal is actually 15% of all non-nuclear electricity. Taking nuclear energy into account, the actual goal drops down to only about 7%, not 15%.

While certain states have used RPSs to really build and solidify their solar industry, it’s simply not the case in Virginia, where their RPS is a like a car without a motor: pretty worthless.

More: Renewable Portfolio Standard (RPS)

Electricity Prices

Electricity prices vary wildly across the country, from Washington’s $0.10 per kWh (the lowest in the country) to Hawaii’s staggering $0.30 per kWh (the highest in the country and the reason there’s so much solar on the islands.)

When you install solar and produce your own solar electricity, you’re avoiding purchasing electricity from the utility, so it stands to reason that the more your utility charges for energy, the more you can save by avoiding it.

Consider two solar homeowners with the exact same solar installation, but one is in Hawaii and one is in Washington. Who is going to save more money? The Hawaiian homeowner of course, because if she doesn’t install solar, she has to pay that exorbitant electricity price.

To boil all this down to one phrase: the higher your utility rates, the more money you can save by going solar.

Currently, Virginia’s average electricity prices are just under $0.12 per kWh, a penny lower than the national average, so homeowners in the state are going to need a longer time period to see a return on their investment. However, current electricity prices aren’t everything.

With solar being a long term investment, you also need to estimate future energy prices as well. Virginia’s electricity rates, while lower than average now, are actually rising right in line with the national average of 2.6%. While prices are low now, they’re actually rising at a pretty consistent rate. By installing solar, you get to avoid all those future increases!

Net Metering

Net metering is one of the basic building blocks of solar savings. Without it, you don’t stand to save nearly as much money over the life of your system.

Net metering is how your utility keeps track of all the electricity you put into the grid (when your solar system produces more energy than you can use) and all the electricity you pull from the grid (at night, for example, when your solar system isn’t producing at all). At the end of the month, the utility then finds the difference. If you put more electricity into the grid than you used, your utility will credit your account for that amount.

The best net metering laws require utilities to credit your account at the full retail-rate, the amount you pay for your electricity. With retail rate net metering, if you pay $0.12 per kWh, the utility credits your account at $0.12 per kWh. Thankfully, Virginia is actually one of those states that requires retail rate net metering. Awesome!

At the end of 12 months, you can either choose to continue moving your credits forward indefinitely or get paid out at your utility’s avoided cost, usually around $0.04 per kWh.

Installations must be under 20 kW in size and the homeowner keeps all the Renewable Energy Credits the system produces. Unfortunately, net metering is capped at 1% of peak load, so enrollment is on a first-come, first serve basis.

Overall, Virginia’s net metering is actually pretty good.

More: Net Metering

Interconnection Rules

Interconnection rules force utilities to adopt a standardized process for giving homeowners approval to connect their solar installation to the utility grid. Without a state-wide standardized process, utilities can charge excessive fees and create long-winded, complicated requirements.

When states pass interconnection rules, they’re typically trying to ensure homeowners have an easy, painless experience connecting their installation to the grid. Virginia passed interconnection standards in 2000 and unfortunately, they somehow missed a lot of what makes interconnection standards so great for homeowners.

First, utilities can require homeowners to install an additional external disconnect switch. While not a huge deal, this can add cost to your installation, affecting your bottom line. In addition, if your system is larger than 10kW, the utility can charge the homeowner $50 for an inverter inspection – something we haven’t heard of in other states.

Next, if your installation is under 10kW you’ll need at least $100k in liability insurance, and $300k if it’s larger than 10kW. This is unfortunate, as other states specifically note that no additional liability insurance is needed for interconnection.

Overall, it’s great that Virginia has passed interconnection standards, but it seems like they were drawn up to protect the utilities themselves, not the homeowners.

Homeowners Associations and Solar Access

With rooftop solar exploding in the last 10 years, there’s bound to be some legal hiccups along the way in regards to solar rights and sunlight access.

Over the years, some HOAs have blocked homeowners from installing solar, typically on the grounds that it decreases the aesthetics of the neighborhood or affects home values.

Even after installing solar, some homeowners have had their neighbors put up an addition or plant trees that block sunlight from hitting the panels.

Virginia has actually taken steps to protect solar homeowners in both of these situations. The state bans all community associations from blocking solar installations, though organizations can enact ‘reasonable’ restrictions on the location and size of solar systems (moving to the back of the roof, away from the street, for example), a common stipulation in other states with similar laws.

They also allow homeowners to create solar easements that protect their access to sunlight. The easements must be in writing and express where the easement extends, how the easement will be terminated, and whether there’s any compensation for the other homeowner subject to the easement.

#4 Virginia Solar Incentives, Rebates, and Tax Credits

With virtually no state incentives in place, Virginia homeowners have one incentive to turn to: the federal tax credit.

virginia-capitol

Federal Tax Credit

While there aren’t too many incentives to write home about in Virginia, the federal income tax credit for solar installations certainly makes up for it!

This credit is equal to 30% of the total cost of your installation, so if you paid $17k, you’d avoid $5,100 at tax time. Unfortunately, the credit is nonrefundable, so you can’t get a refund if your owed taxes are below zero. However, if your tax liability isn’t high enough in a single year, you can break the credit down into chunks to claim over several years.

During the 2016 session, federal lawmakers extended the full credit until the end of 2019. In 2020, the credit drops to 26%, then 22% in 2021. Say goodbye in 2022.

More: Solar Federal Tax Credit

Virginia Tax Credits/Rebates

As of 2017, the state of Virginia does not offer any tax credits, rebates, or other incentives for solar.

Utility Based Incentives

While not incentives per se, both Dominion and TVA will buy all the electricity your solar installation produces through two different programs. These programs can be a great way to pocket some cash, but since they purchase 100% of your electricity, you actually don’t get to use the clean energy your panels are producing in your own home.

Dominion’s offering, which they call the Solar Purchase Program is a 5-year test program. Ending in 2018, the utility pays you $0.15 per kWh for all the electricity you produce. This is actually a pretty good deal when you look at current electricity rates (which are lower than $0.15 per kWh).

After the program ends, participants can either jump over to net metering or join a new program (if there is one). We’ll have to wait and see if the Solar Purchase Program becomes a full-fledged long-term offering.

TVA’s program, Green Power Providers, is very long term, offering to buy all your electricity at the retail rate over the next 20 years. Installations must be under 50kW –no problem for residential systems – and enrollment is first-come first-serve until a cap is met.

Green Power Providers offers you a chance to balance out your own electricity costs by becoming an ‘electricity producer’ and selling all your electricity to the utility. Since you aren’t using any of the renewable energy you produce and all the RECs you create go to TVA, you should consider enrolling in the Green Power Providers program as a business decision, not a way to decrease your carbon footprint.

Having said that, you’re still producing renewable energy that wouldn’t exist otherwise and you’re pocketing some cash. It’s up to you whether it’s worth it!

Property Tax Exemption

The state of Virginia allows each county, city, or town to decide whether to exempt solar installations (and other renewable projects) from property tax, with several cities and towns choosing to do so, including:

  • Warren
  • Albemarle
  • Pulaski
  • Alexandria
  • Wise
  • Charlottesville
  • Lexington
  • Chesterfield
  • Hampton
  • Winchester
  • Hanover
  • Prince William
  • Harrisonburg
  • Spotsylvania
  • Henrico
  • Lynchburg
  • The Isle of Wight
  • King and Queen
  • Roanoke
  • Loudoun

Regulations like this can change fairly often, so be sure to call up your city or county’s building department to see if solar installations are exempt in your area.

The average property tax in Virginia is 0.797% of the assessed value of the home. With a property tax exemption, adding an $18,000 solar system to your home means you can save about $145 in the first year alone – definitely worth making that phone call.

Sales Tax Exemption

Virginia does not offer a sales tax exemption for solar equipment. While you probably don’t think about sales tax when you’re calculating your solar costs, you definitely should!

Solar equipment like the panels and inverter typically account for about 40% (pg. 33) of your total installation cost. Virginia’s state sales tax is currently set at 5.3%. For an $18k installation then, you could have saved about $380! Oh well, maybe they’ll pass something in the future.

General Increase in Home Value

There’s some strong evidence that purchasing and installing solar on your Virginia home adds substantial value to your property.

In 2015, the federally-funded Lawrence Berkeley National Lab studied 22,000 home sales across 8 states and found that homes with solar installations owned by the homeowner warranted a premium price, typically around $4 per watt, though that amount changes with the age of the installation (higher for brand new installations, lower for older installations).

Even at just $2 per watt (half the average), a 5kW installation can bring $10k in value to your home, almost canceling out your original investment!

While Virginia wasn’t part of the study, with the state’s net metering policies and average electricity prices, solar brings value to the homeowner just like solar in any other state and you can bet that home buyers will like guaranteed financial savings!

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 Virginia Beach Solar Informationvirginia-beach

If you live in Virginia’s largest city and are thinking about going solar, you’re not in for too many surprises. Just like any utility in the state, Dominion must offer net metering to solar homeowners and of course, you’re eligible for the federal tax credit to drop your total investment.

For their residential rates, Dominion actually charges more (link to residential rates, automatic PDF download) during the summer months when demand is high. This can be good for you, as solar installations typically produce more during the sunny months of summer, giving you a bit more bill credits that you can pull from during the winter months.

Dominion also charges all customers a flat $7 monthly fee to cover infrastructure costs (poles, wires, etc) regardless of how much electricity you use, so ensure your solar savings estimates take this fee into account. Even if you produce 100% of all the electricity you use, you’ll still have to pay Dominion that $7!

What to Do Next?monticello-viginia

Hopefully, you’re now ready to confidently move forward with Virginia solar. Despite the somewhat negative atmosphere to renewables in the state legislature, with their good net metering policy in place, homeowners can save thousands!

First things first, though, talk to a few installers, get a customized quote for your home, and ask all the questions you can think of. Solar can be hugely rewarding – both financially and for the environment – so do your homework, then get out there and do it!

Image Credit under CC License via Pixabay - 14, 5 & Flickr - 2, 3

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