Solar energy is becoming increasingly accessible, and much of this affordability is due to federal and state policies. These policies make solar energy more attainable for homeowners, renters, and businesses by reducing costs, offering tax incentives, and creating new ways to access solar power through programs like community solar. This article explores the incentives and policies that help you save by going solar, including specific programs for those who can’t install panels on their own roofs.
Community Solar Programs and other State-Level Incentives
While federal policies provide a broad foundation for solar affordability, state-level policies often directly impact the availability and savings of solar for local residents. Here’s how state policies make solar more affordable:
1.Community Solar: A State-Level Solution for Solar Access
The good news about community solar is that it is a state-level solution, which means that any formalized community solar program is legislated by the state. Regardless of which government is in place federally, community solar programs will continue to operate. The flip side is that the incentives and how community solar operates differs a great deal from state to state, and just over 20 states have a formal community solar program in place.
Despite the patchwork of formal programs, community solar is a powerful way for those who can’t install rooftop solar to access the benefits of solar energy. Through community solar programs, participants subscribe to a portion of a shared solar array (or solar farm) and receive credits on their utility bills based on their share of the electricity generated. While it is easier to participate in community solar in states that support it, it doesn’t mean it’s impossible in the states where community solar is not yet state authorized.
How Community Solar Works:
- Solar Farm Participation: A large solar installation is built within the community, and residents subscribe to a portion of the energy produced.
- Bill Credits: Subscribers receive credits on their electricity bills, reducing their monthly costs based on their subscribed share of the solar energy.
- Accessible and Flexible: Community solar often requires no upfront investment, making it accessible for renters and those without suitable roofs.
States Leading in Community Solar:
- New York: The NY-Sun Initiative supports community solar projects across New York State. Low- and moderate-income households are eligible for additional incentives to reduce the cost of participation.
- Minnesota: The Solar*Rewards Community program allows residents to join local solar gardens, which has become one of the most successful community solar programs in the country.
- Colorado: Colorado's community solar policy ensures that utilities offer community solar as an option, allowing participants to save on their energy bills without installing solar panels on their properties.
Community solar programs are primarily governed at the state level, and these programs depend on state regulations and policies to determine eligibility and availability.
2. Net Metering
Net metering allows solar panel owners to earn credits on their electric bills for the excess energy they generate and send back to the grid. These credits offset future energy costs, meaning homeowners can save significantly on their monthly bills. Although each state has unique net metering regulations, states like California, New York, and New Jersey offer favorable policies that maximize financial returns on solar investments.
To see which states offer net metering and the specifics of each policy, visit DSIRE (Database of State Incentives for Renewables & Efficiency).
3. Solar Renewable Energy Certificates (SRECs)
States with Renewable Portfolio Standards (RPS) often allow solar owners to earn Solar Renewable Energy Certificates (SRECs) for the electricity their systems produce. Utilities buy these certificates to meet their renewable energy requirements, creating a market where solar owners can sell their SRECs. States like New Jersey, Massachusetts, and Maryland offer strong SREC markets, providing an extra source of income for homeowners with solar systems.
4. State Tax Credits and Rebates
In addition to federal tax credits, many states offer their own tax incentives to reduce the cost of solar. These include:
- State Tax Credits: These work similarly to the federal ITC by allowing you to deduct a percentage of your installation costs from your state taxes.
- Cash Rebates: Often provided by state energy offices or local utilities, these rebates can be applied directly to the cost of a solar system, reducing the initial investment.
- Property Tax Exemptions: In many states, solar installations are exempt from property tax increases, so your property tax bill won’t rise even if solar panels increase your home’s value.
Visit DSIRE to view a full list of solar incentives available in your state.
Federal Policies for Solar Savings
Federal incentives have played a significant role in expanding solar energy across the U.S., reducing the financial barriers for both residential and commercial solar installations. Key federal programs supporting solar energy adoption include:
1. The Federal Solar Investment Tax Credit (ITC)
The Investment Tax Credit (ITC), often called the solar tax credit, allows homeowners and businesses to deduct 30% of their solar installation costs from their federal taxes. Established in 2006, this incentive was recently extended through 2032 under the Inflation Reduction Act (IRA) of 2022, with a gradual reduction in the credit rate afterward. The ITC is available for both residential and commercial solar systems, significantly reducing upfront costs.
For more information on the ITC, visit energy.gov’s ITC Guide.
2. Modified Accelerated Cost Recovery System (MACRS)
The Modified Accelerated Cost Recovery System (MACRS) is an IRS policy that allows businesses to recover solar investments through accelerated depreciation. MACRS lets businesses reduce their tax liability by spreading the cost of their solar installation over five years, which is particularly beneficial for commercial solar projects.
The MACRS incentive is detailed on the IRS website.
3. Greenhouse Gas Reduction Fund (GGRF)
The Greenhouse Gas Reduction Fund (GGRF), introduced under the IRA, includes $27 billion to finance clean energy projects across the U.S. through local green banks. A significant portion of these funds supports solar and other renewable energy projects, especially in low-income or underserved communities, indirectly benefiting consumers by making solar projects easier and more affordable for developers to finance.
Learn more about the GGRF at EPA.gov.
Staying Updated on Policy Changes
Solar incentives are constantly evolving, with both federal and state policies subject to legislative changes. Keeping up to date with the latest incentives can help you make informed decisions about going solar. As the federal government changes, these incentives may expand or shift to reflect new priorities. We’ll continue to update this article to reflect changes to solar policies, ensuring you have the most current information on opportunities for solar savings.
