Solar Incentives, Tax Credits, Net Metering & More

Net Metering

For installed systems, Washington state has a net metering law that lets customers of power companies offset their electricity consumption with the production from renewable energy system such as solar panels. Consumers may need to apply to their electricity power provider to obtain the credit for net metering. Many providers have forms on their websites.

The process is straightforward. Net metering customers can purchase electricity from their electricity provider when they need it and can send electricity generated by their solar panels back to the electric grid when they do not need it. A meter records both the electricity from solar panels that is delivered to the power company and the amount of electricity from the power company that they use, spinning forward when you are using electricity from your power company, and spinning backward when you are delivering electricity from your solar panels to the grid. Customers receive a credit if they produce more electricity than they use, or they are charged if they purchase more than the produce.

In accordance with Washington state law, net metering credits expire on March 31 every year and credits from any excess electricity generation are “zeroed out”.

Net-metering is the result of a series of legislation that requires utilities to offer this option. The goal of the law, Net Metering of Electricity - RCW 80.60, is to stimulate development of renewable energy sources. Per Engrossed Second Substitute Senate Bill 5223 (2019), an electric utility shall offer to make net metering, pursuant to RCW 80.60.030, available to eligible customer-generators on a first-come, first-served basis until the earlier of either: June 30, 2029; or the first date upon which the cumulative generating capacity of net metering systems equals four percent of the utility's peak demand during 1996.

Sales Tax Exemption

Benefits for installing solar panels include sales tax exemption from Washington State for qualifying solar equipment. From July 2019 and through December 2029, equipment for solar energy systems smaller than 100 kilowatts is exempt from state and local sales and use taxes. There is also a 50 percent tax exemption available for larger solar energy systems that are between 101 and 500 kilowatts.  Different rules apply for systems 100 KW to 500 KW.  Click to the bill report as passed during the 2019 legislative session

Federal Income Tax Credit

At the federal level, consumers can receive a 30 percent federal tax credit for solar installations and this now includes energy storage devices that have a capacity rating of 3 kilowatt hours or greater. The Investment Tax Credit, or ITC, which was expanded and extended as part of the Inflation Reduction Act that Congress approved earlier in 2022, offers a tax credit for solar systems on residential that can be applied for a dollar-for-dollar reduction in the amount of income tax that would otherwise be owed.  For commercial (under Section 48) properties, credit can be applied to both customer-sited commercial solar systems and large-scale utility solar farms. The credit drops to 26 percent in 2033 and 22 percent in 2034, then disappears in 2035 unless Congress extends it. 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.

For 2022, under Section 25D, it offers a 26 percent tax credit for solar systems on residential that can be applied to a homeowner's personal income taxes.  For commercial (under Section 48) properties, credit can be applied to both customer-sited commercial solar systems and large-scale utility solar farms.  The 26 percent tax credit will fall to a 22 percent rate for projects that begin construction by the end of 2023, and then fall to 10 percent for large-scale solar projects and to zero percent for small scale solar projects in 2024.  In August 2022, with the Inflation Reduction Act, Congress passed an extension of the ITC, raising it to 30% for the installation of which was between 2022-2032. 

See the Homeowner’s Guide to the Federal Tax Credit for Solar Photovoltaics for more information.

Local Incentives for Energy Efficiency

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 Renewable Energy System Incentive Program (RESIP)

The Renewable Energy Incentive Program (RESIP) is still an active program, however, it is fully subscribed and no longer taking new applicants. Due to the popularity of RESIP, this program ended June 30, 2021 and the Washington State Legislature has not authorized additional funding at this time.  In 2017 Engrossed Substitute Senate Bill (ESSB) 5939 directed the WSU Energy Program to launch and administer a new program for citizens and businesses of Washington known as the Renewable Energy System Incentive Program (New Program).


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