Washington has three main areas of incentives that you should check out.
1) State Incentives
Net metering is a contract that you sign with your utility that allows you to trade your power with them at retail rates. You get credit on your bill for your excess Kilowatt Hours (kWh) when your system is producing more than you consume. At night or when your system isn’t producing, you buy power from the utility like you do now.
Typically in Washington State we produce vastly more than we consume during the summer and build up big credits. Then during the less-sunny winters we use the accumulated credits. The fiscal year for net metering is from May to April. If you still have kWh “in the bank” at the end of April, you forfeit their value, although this is rare. It’s for this reason you don’t usually see systems designed to more than 100% of your annual consumption. It’s also important to understand how your utility handles minimum charges and how solar production impacts your bill.
We can help you understand the balance of production and consumption on an annual basis. Net metering is a Washington State law and does not expire.
The main production incentive in our area is provided by Washington State and managed by your local utility. A production incentive is a program that pays you (you can receive a check!) for every kWh you produce whether you consume that solar electricity in your building or not.
Where net metering gives you value at retail rates for your power, the production incentive pays you a premium starting at $0.15/kWh up to $0.54/kWh, depending on whether or not you’ve chosen Made in Washington equipment (that will give you the $0.54/kWh). Production incentives are paid on top of the net metering benefit you are already receiving. It’s possible that rate reductions can occur depending on individual utility customer adoption rates. Our design consultants can walk you through how this might affect your return on investment.
This program is in place until June 30, 2020 and is measured from July to June. How the value of the production incentive is applied to your bill changes from one utility to the next. We can fill you in with the details, or feel free to contact your utility directly for more info.
2) Tax Credits
INCOME TAX CREDIT
This is actually a federal incentive, and it’s awesome. The 30 percent tax credit was scheduled to expire at the end of 2016 and will now extend through 2019. In 2020, the credit will drop to 26 percent and then to 22 percent in 2021. Non-residential solar systems will continue to qualify for a 10 percent tax credit indefinitely, even after incentives run out for residential systems. A tax credit is a dollar-for-dollar reduction of the federal income tax you owe. If you can’t use the full value in one year, you can roll over the remainder to next year. You should certainly check with a tax advisor to make sure you can claim the entire value, but make sure they’re referring to the most recent tax documents. The ITC is applicable to your Alternative Minimum Tax (AMT) as well.
SALES TAX EXEMPTION
At the 11th hour, the Washington State Legislature extended the Sales Tax Exemption for solar until 2018, and in some cases until 2020. This means you pay no sales tax on the full invoice for installing a solar photovoltaic for systems smaller than 10kW (most residential systems) saving you close to 10 percent on your system price. For larger systems, a 75 percent remittance for sales tax paid can be claimed immediately after your system is paid for.
MODIFIED ACCELERATED COST RECOVERY SYSTEM (MACRS)
MACRS is the current tax depreciation system in the United States. Under this system, the capitalized cost (basis) of tangible property is recovered over a specified life by annual deductions for depreciation. Qualifying solar energy equipment is eligible for a cost recovery period of five years. This incentive is typically only available for businesses and rental properties.
3) Rebates, Grants, and Group Buys
Rebates in solar work much like solar anywhere else. Think of these incentives as “Cash Back” after you complete your installation. In Washington, most rebates are coming from your local utility. Check out the utility’s website to see if there is anything available, or look at the Database of State Incentives for Renewables & Efficiency.
There are a couple of grant funding sources out there.
- SnoPUD Planet Power – Run by Snohomish PUD “the program supports local small-scale solar demonstration projects on buildings such as schools, libraries, city halls, and other community sites where customers can learn about solar and see the technology in use.”
- Rural Energy for America Program (REAP) – REAP provides grants and loans to farmers and rural small businesses to help purchase renewable energy systems and make energy efficiency improvements. The program pays up to 25 percent of the project.
- BEF Solar 4R Schools – Developed and managed by Bonneville Environmental Foundation (BEF), Solar 4R Schools provides schools nationwide with hands-on teaching tools such as science kits, lesson plans and photovoltaic solar arrays so students can learn about solar, wind and other renewable energy technologies.
These programs reduce the upfront purchase price by aggregating people in a local geographic area to provide bulk prices for a limited time. Some of these are led by a contractor and some by community groups and nonprofits like Northwest SEED, Community Energy Solutions, and Pacific Northwest Pollution Prevention Resource Center.