The following is a summary of the main tax credits and incentives that are currently in place to make solar more affordable to those who have solar installed to offset their own electrical use.
Washington State Renewable Energy System Incentive Program
Renewable Energy System Incentive Program Notice: Previously certified systems must re-apply with the WSU Energy Program by April 30, 2018. Click for details.
Governed by RCW 82.16.165, a Production Incentive is paid per kilowatt hour (kWh) to those who install solar based upon the size of the solar system, date of certification/installation and whether or not the solar modules are Made in WA according to the following schedule:
|Fiscal Year Ends||Base Rate: Residential or Community Solar (per KWH)||Base Rate: Commercial or Shared Commercial Solar (per KWH)||Bonus for Modules (solar panels) Made in WA|
Solar systems of 1 kW through 12 kW are classified as “residential” regardless of the type of facility where they are installed. The maximum annual incentive payment for residential scale is $5,000/year. Solar systems larger than 12 kW are classified as “commercial” unless they are installed as a Community Solar Project. The maximum commercial annual incentive payment is $25,000/year.
Participating utilities read the newly added Production Meter and report readings to solar customers. Production Incentive payments are made annually following the June 30 state fiscal year-end. Payments last for 8 years or until payments add up to 50% of the total system cost including sales tax, whichever occurs first. Utility participation in the program is voluntary. Payments are made after June 30 and by December 15.
Systems installed after 6/30/2021 do not receive a WA State Production Incentive.
Further, there exist upper caps (limits) - per utility - on the total dollar amount that can be paid out for Production Incentives. The WSU Energy Office website shows these caps as well as progress toward reaching the caps. Additionally, there exists an overall cap on the total amount of money available for this Incentive Program. The utility cap is 1.5% of taxable power sales in calendar year 2014 or $250,000, whichever is greater. The total program cost is limited to $110 million.
The Washington State University (WSU) Energy Program is the administrator for this incentive program.
Residential Scale (1-12 kW): Pre-Approval is not needed. To receive the state incentive, the owner or the installer registers the system after it has been inspected and approved by the local authority having jurisdiction.
Commercial Scale, Shared Community, or Shared Commercial: These categories of projects are defined in the legislation. All require pre-approval from the WSU Energy Program before incentive funds can be obligated.
WSU Energy Program is accepting the following types of applications:
- Incentive Application for Residential-scale or Commercial-scale renewable energy systems
- Precertification Application for Shared Commercial Solar or Community Solar Projects
Applicants will use this online account to:
- Create and submit a new incentive application
- Check the status of their application as the review process gets underway.
Solar Systems that were installed under the previous incentive program must re-apply: All people and businesses who have been receiving solar incentive payments under the Legacy program, must re-apply by April 30, 2018 in order to continue receiving annual incentive payments through 6-30- 2020. Re-application may occur via your utility.
Links to additional information
- Learn more about the Renewable Energy System Incentive Program at the WSU Energy Extension website.
- The WSU Energy Program has filed both Emergency Rules and proposed Permanent Rules concerning the new production incentive program. Click for more information.
Click to view a list of utilities participating in the program.
Federal Income Tax Credit
The Solar Investment Tax Credit (“ITC”) is a federal tax credit for solar systems placed on residential (under Section 25D) and commercial (under Section 48) properties. In December 2015, Congress acted to extend the 30% tax credit through 2019 with a step down in subsequent years: to 26% in 2020, to 22% in 2021, and thereafter it is 0 (zero) for homeowners and 10% for businesses. Link to SEIA's website with a breakdown on the ITC.
The Wind Production Tax Credit declines on a different schedule than the tax credit for solar. Learn more about wind from the American Wind Energy Association and the Distributed Wind Energy Association.
The federal government also offers income tax credits for the purchase of a variety of energy efficiency improvements. Click to learn more at Energy Star.
The Modified Accelerated Cost Recovery System (MACRS) is a method of depreciation for some tangible property for tax purposes. Qualifying solar energy equipment is eligible for a cost recovery period of five years. The market certainty provided by MACRS has been found to be a significant driver of private investment for the solar industry and other energy industries. For equipment on which an Investment Tax Credit (ITC) or a 1603 Treasury Program grant is claimed, the owner must reduce the project’s depreciable basis by one-half the value of the 30% ITC. This means the owner is able to deduct 85 percent of his or her tax basis. The amount of the project cost that is eligible for a Bonus Depreciation is based upon the year of installation.
Net metering allows system owners to receive credit for excess electricity produced by their system. Net-metered systems that produce more electricity than needed are credited for the excess production at retail electric rates on the next month’s utility bill. Credits carry forward month to month for a year period ending annually on April 30. Remaining credits are zeroed out on May 1 with no payment to the customer. Currently in Washington State, net metering is a one-for-one crediting system. Get more information.
- Link to the law governing this incentive
- Visit your utility’s website and search on “net metering” to learn about their specific requirements for interconnection to their grid and net metering.
Many utilities offer incentives and rebates for energy efficiency upgrades that help their customers reduce their use of electricity. Review a comprehensive list of PUDs and utilities in Washington state. Check your utility’s website to find out what they have to offer.
Washington State Department of Commerce Energy Efficiency and Solar Grants
For higher education, local governments, state agencies and K-12 public school districts
The State Department of Commerce manages the Energy Efficiency and Solar Grants program. Eligible entities include state public higher education institutions, local government facilities, state agencies and K-12 public school districts. This program focuses on funding the best projects possible to increase energy and cost savings in the publicly-built environment. The grants are awarded through a competitive process and must be used solely for energy and operational cost saving and solar installations. Click for more information about the program.