Interested in going solar in coal country? You’ve come to the right place! Despite the fact that West Virginia sees the highest percentage of electricity generated from coal in the whole country (a whopping 94%), the state has passed a handful of regulations to make the process of going solar much easier for homeowners.
And, even though there’s no state or local incentives to drop the total investment homeowners must bring to the table, you can still come away with $14k in savings by installing solar – though it takes quite a few years to see a return on your investment.
Read on for more information on cost and savings, relevant policies, and solar incentives available in the Mountain State.
Avg. Payback Time (For Cash Purchase)
Estimated IRR (Return on your investment on cash purchase over 25 years)
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.
Despite virtually no incentives, going solar in West Virginia can save you upwards of $14k, though you’ll need to be patient to recoup your initial investment.
Buying solar in cash allows you to avoid those pesky interest or lease payments that bump up your total investment and claw away at your savings. Paying in cash also allows you to take advantage of the lucrative 30% federal tax credit to further increase your savings. On top of all this, you’re adding a tangible value-adding asset to your home, which can help when it comes time to sell (you can read more about this later).
Exactly how much you will spend (and save) installing solar in West Virginia depends on your installation size, but let’s take a look at a medium-sized 5kW installation to get an idea.
Looking at installation costs in West Virginia from a few different sources, we estimate a 5kW installation to cost $17,650 before the 30% federal income tax credit, and $12,355 afterwards. This mid-sized installation will put out about 6,426 kWh the first year, equal to $710 at the average utility rate of $0.11 per kWh (6426 kWh*$0.11). At this rate, you’ll recoup your initial investment in 15 years, admittedly longer than in many other states.
However, after 25 years (the lifespan of the majority of solar installations), you’ll reap about $14,461 in total cash savings, equal to a 6.1% investment return – certainly not bad at all.
Unfortunately, West Virginia doesn’t allow power purchase agreements (PPAs) and none of the big solar installers that offer leases work in the state. If you were hoping to take out a lease to go solar, you’ll have to reconsider.
With that said, it’s not a total loss. Once-popular solar leases are on their way out as ownership (either in cash or via a loan) takes its place. While leases allow homeowners to go solar without any upfront cash (like loans), leases – with all their fees and additional costs – drop your total savings more than any other financing.
More: Solar Leases
Don’t have the cash to put out upfront? Take a look into loans to pay for your system. With solar so popular these days, you can take out a loan through a dedicated solar loan company, or your bank or credit union via a Home Equity Line of Credit or a 2nd mortgage.
Obviously, you’ll have to pay interest on your loan and your bottom line savings will suffer as a result. But for little to no money down, you’re not sacrificing much. Instead you’re saving money in the long-term, and you’re lessening your carbon footprint at the same time.
Signing off on a fairly standard 5% 15-year loan on the 5kW system above tacks on an additional $7,001 in interest, cutting your total savings to $7,460 ($14,461 – $7,001) with a return of just 2.3%. That probably doesn’t sound too great, and don’t forget you’re going to be upside down financially until Year 20.
If you’re planning to stay in your home for the long-term, a 20-year payback doesn’t really affect your life. But if you’re planning to move in the short to mid-term, taking out a solar loan probably doesn’t make sense.
On the plus side, as you’re still the owner of the installation, you can take advantage of the federal tax credit (which is accounted for in our calculations above). And, just like a cash purchase, you’re adding a tangible, money-saving asset to your roof that can add quite a bit to your home’s property value.
More: Solar Loans
Passing policies that support and encourage homeowners and businesses to install solar is the single greatest catalyst to a local solar boom. That’s how important good solar policy is. West Virginia’s done a great job in some areas, like net metering and solar rights, but is severely lacking in others.
You’re probably not familiar with Renewable Portfolio Standards, also known as RPSs, but they’re actually fairly common, with 29 states having adopted one in some form or another. RPSs are state-level mandatory goals that a specified percentage of electricity comes from solar, wind, or other renewable sources.
Since utilities are in charge of generating and selling electricity, the burden to adopt renewables falls on these organizations, typically with stiff penalties if they don’t comply. Utilities can generate renewable energy themselves, purchase renewably-sourced electricity, or even purchase Renewable Energy Credits from businesses and homeowners (like yourself) to meet these requirements.
As such, RPSs are the underlying foundation for much of the solar policy and industry growth in a state. Without an RPS, utilities have no reason to adopt or encourage others to install solar, so green industry remains stagnant.
Unfortunately, West Virginia – along with most other southern states – have yet to adopt any form of RPS.
Electricity prices have a direct, causal relationship to your solar savings. Since you’re generating your own energy and avoiding pricey utility-sourced electricity, high electricity prices leads to high solar savings. In the same way, low electricity prices mean lower solar savings and a longer time required to see a return on your investment.
As of February 2018, West Virginia’s average electricity price is just over $0.11 per kWh, more than a penny less than the national average of $0.12 per kWh. A penny probably doesn’t sound like much, but that’s almost a 10% discount – which can add up quickly!
But that’s not the whole story. Utilities also regularly increase their electricity prices due to rising operating and generating costs. The average utility in the US increases their prices 2.6% each year, but in West Virginia that number climbs up to 4.1% – the 6th fastest growing state in the US!
What does all this mean? Well, you’ve already seen the results above. Even though savings increase by $20 – $40 annually thanks to the rising utility rates, solar installations in West Virginia need quite a bit of time to recoup that initial investment because the electricity rates right now are so low.
West Virginians looking to install solar can rejoice in that the state passed excellent net metering regulations in 2006. Solar homeowners receive full retail rate credit for all unused electricity that goes into the grid. Under this system, if you pay your utility $0.11 per kWh for electricity, they’ll also credit your account at $0.11 per kWh for any solar electricity you send to the grid. That’s great news, but there’s more!
In some states, if you have any credits left in your account at the end of 12 months, you either forfeit them or the utility pays you at their avoided cost (the amount they would pay to generate that electricity, typically about 1/3 of the retail rate). In West Virginia, though, your credits rollover indefinitely, allowing you to use them years down the line if available. That’s pretty cool!
Unfortunately, the state passed new regulations in 2015 limiting solar to just 3% of total generation. We’re obviously still miles away from that cap – solar makes up just 0.01% of all electricity in the state – but limiting clean renewable energy before any issues even exist isn’t something you want to see.
Even more worryingly, they passed a bill allowing utilities to adopt new regulations (with approval, of course) if net metering begins to cause a financial burden on non-solar customers (one part of what’s known as the utility death spiral).
While this could allow for new, balanced regulation at some point in the future, we’ll have to wait and see exactly what happens – and how it affects existing, and future, solar homeowners.
More: Net Metering
Like net metering regulations, West Virginia’s interconnection regulations – or the rules around connecting your solar installation to the utility grid – are also pretty solar friendly.
Homeowners looking to install systems under 25kW (which is the max size allowed for net metering) pay a max $30 application fee and installations do not need an additional external safety disconnect switch, allowing homeowners to avoid that additional cost required in some states.
However, unlike in most other solar-friendly states, WV homeowners are required to maintain $100k insurance for installations, which can certainly eat into your savings.
Your installer will have all the details for your specific utility, but overall these rules aren’t too bad at all.
Because many see renewable energy as a key piece of our future energy and environmental security, many states have taken steps to protect homeowners’ right to go solar, specifically in two distinct ways:
First, a handful of states have passed legislation protecting homeowners’ right to install solar by banning HOAs, covenants, or any other organizations from barring or placing overly strict rules around solar installations. West Virginia’s done a great job with this one, voiding any document that prohibits or unnecessarily restricts solar installations, though organizations can impose ‘reasonable restrictions’ on solar – a common caveat in other states’ solar right policy as well.
Second, some states have passed laws protecting the airspace directly in front of a homeowner’s solar panels from shade due to trees, buildings, or anything else. Many states allow homeowners to create a solar easement on their property to protect that valuable sunlight. Unfortunately, West Virginia has yet to pass any rules around the right to sunlight, so be sure to talk to your neighbors about your solar plans beforehand!
West Virginians are only eligible for the federal tax credit to lower the total investment to go solar.
While the state of WV and local utilities don’t offer any tax credits themselves, all WV homeowners can take advantage of the Residential Renewable Energy Tax Credit, also known as the Investment Tax Credit or ITC.
This tax credit is just that, a credit (as opposed to a tax deduction), and as such decreases your owed taxes dollar-for-dollar (as opposed to decreasing your taxable income). Equal to 30% of the total installation cost, the credit would knock $5,295 off the $17,650 total installation cost for the 5kW system described above. Needless to say, that’s a pretty sweet deal!
However, there are a couple of important facts to know. First off, this is a non-refundable tax credit, so the feds aren’t going to cut you any checks if your taxes goes below zero. However, if your owed taxes aren’t high enough to claim the entire credit in the first year, you can break it down into chunks and claim it over multiple years.
Secondly, the full 30% credit is set to expire in 2019. In 2020, the credit will drop to 26%, then 22% in 2021, after which it will completely phase out. If you’re dilly-dallying about installing solar, you better get on it before this credit expires!
More: Solar Federal Tax Credit
While the state of West Virginia briefly offered a 30% income tax credit for solar systems installed between 2009 and 2013, they currently offer no such benefits.
As an added bonus to encourage local homeowners to install solar, some states allow homeowners to exempt the additional value solar adds to property when calculating property taxes. While this usually equates to only a few hundred dollars, every little bit certainly helps! Unfortunately, West Virginia does not offer this incentive as of this time.
Similar to the property tax exemption above, some states also exempt solar equipment costs from sales tax. Depending on the tax rate and installation size, this can save homeowners hundreds of dollars and chop a year or more off the payback period. Again, unfortunately West Virginia does not offer this benefit to solar homeowners.
We’ve mentioned solar installations adding value to homes several times now, so let’s finally dig in to this. The Lawrence Berkeley National Lab published a 2015 study of home values across 8 states (not WV) over the previous 14 years and found that homes with solar owned by the homeowner (financed via cash or loan) sell for an average of $4/watt more than homes without. Newer solar installations command more and older installations less.
While the study doesn’t provide any data on West Virginia specifically, a solar installation adds an asset to your home that provides real savings. It might not add as much value as in areas like California, where utility rates are sky high, but it will increase your home’s resale value. Even at just half the rate the LBNL study found ($2/watt), you’re looking at $10k for the mid-sized installation above, allowing you to potentially recoup your initial investment.
Of course, before you make any decisions, be sure to talk to a few local installers and/or realtors to get the scoop on your own area.
If you’d like to dig even more on local incentives and rebates, check out the DSIRE database.
If you live in the Charleston area, you might be wondering if there’s anything special you need to know when going solar. Occasionally, cities pass their own legislation to encourage or protect homeowners and businesses going solar with solar easements, tax breaks, or special permit regulations (fast track building permits for solar installations, for example).
Well, you don’t need to think about any of that. Installing solar in the Charleston area is just like installing solar in any other part of the state: you’re still eligible for the federal tax credit, and you’ll need to calculate your savings and payback period carefully just like anywhere else.
Installing solar in West Virginia can be a rewarding financial experience, but no matter what, expect a long turnaround time on your investment. If you decide to finance with a loan, you’ll lower your savings and increase your payback time, but you can still save thousands, decrease your carbon footprint, and contribute to your own energy independence – all with putting little to no money down.
Have any questions about going solar in West Virginia that we didn’t answer above? Ask us in the comments below!
Two states, two different approaches to clean energy. In Virginia, lawmakers said “yes” to solar power, passing a number of bills in its latest session that will bolster solar in the state. But next door in West Virginia, the governor approved a bill to rewrite net energy metering rules for on-site distributed solar generation after vetoing the nearly identical bill a few weeks before. What does this mean for each state?Continue reading