Washingtonians who are considering solar energy for their homes are lucky to benefit from a wide range of extremely solar-friendly state and federal policies that are designed to make it easy for homeowners to make the switch. And, despite Washington’s infamous rain, solar panels in the state still produce a considerable amount of green energy! Germany is the world’s leading producer of solar energy, yet the country shares a very similar climate to Washington’s. Thanks to the Pacific Northwest’s long, sunny days in the summer and more mild temperatures, which increase the lifespan and durability of solar panels, solar systems in Washington produce a great deal of solar energy, especially in the summer, and homeowners with solar benefit from that energy year-round (even in the winter). Combined, all of these factors make solar panel installations an incredibly smart, cost-effective investment for most homeowners in the state of Washington.
How Solar Panels in Washington Affect the Climate
Washington is teeming with enviable natural beauty, multiple climates, and extreme biodiversity. There’s a beautiful nature retreat for everyone in this state, which is home to bucket-list locations like Mt. Rainier National Park, Olympic National Park, and North Cascades National Park, as well as 100 state parks. Many Washington residents are incredibly passionate about preserving the state’s greenery and natural beauty, which has resulted in a generally positive attitude toward solar energy throughout the state.
One of the greatest benefits of going solar is that, in addition to lining your pocket with savings, it’s one of the most impactful steps any individual can take to combat climate change and keep Washington’s natural beauty green and thriving for years to come. Adding solar panels to your home can reduce your home’s carbon footprint by about 80%. When you go solar, you limit your household’s reliance on fossil fuels, drastically reduce your greenhouse gas emissions, and you lower the overall demand for coal energy. With a relatively small system size of 5kw, your impact on climate change is incredible. Over 25 years, your solar system will eliminate nearly 300,000 pounds of carbon dioxide emissions.
Renewable Portfolio Plans in Washington
The state of Washington recognizes the importance of going solar, as do many Washingtonians. In Washington, going solar is relatively easy and incentivized by a variety of state, utility, and government programs. But Washington’s plans for solar energy don’t stop with homeowners. The state has undertaken a variety of impressive solar projects. Over 70 schools in Washington are powered by solar energy. The state’s most ambitious solar project is currently underway in Klickitat County, where the Lund Hill public-private partnership installation of 193 MW across 1800 acres is planned for completion in 2021.
RPS, or Renewable Portfolio Plans, vary from state to state. Washington was an early adopter of RPS initiatives in 2006. Washington’s RPS has made an impressive commitment to producing 100% of its energy from renewable sources by 2045—a commitment set in 2019. Renewable is defined as an energy source that can be used repeatedly, such as the sun or wind, because it is naturally replaced. Washington is only the fifth state to commit to such an aggressive renewable energy portfolio that entirely phases out coal energy. Additionally, before this requirement takes effect, Washington utility companies are required to achieve carbon-neutral energy production by 2045.
Washington RPS Solar Carve Outs
Solar carve outs are a type of renewable energy mandate that some state governments apply to utility companies. These carve outs require utility companies (and sometimes residences and/or commercial properties) to “carve out” a specific percentage of their energy usage and ensure that the specified percentage of total energy use is powered by renewable energy. Utility companies that don’t meet these carve outs then have to pay a penalty to the state. This is one of the reasons that states and the federal government offer cash incentives (more on those later!) which help put these ambitious solar production mandates in reach for businesses and homeowners alike. Washington’s solar carve out only applies to utility companies, so it’s not something a homeowner or business owner will need to face during their transition to solar energy.
Washington State Department of Commerce Energy Efficiency & Solar Grants
The Department of Commerce in Washington recognizes the value of solar energy, and has designated a pool of grant funds called the Energy Efficiency and Solar Grants Program to encourage solar projects at state public higher education institutions, local government facilities, state agencies, public school districts, and federally recognized tribal governments. As of 2021, the state has designated over $3,570,000 to fund grantees with a maximum of $500,000 per project.
Switching to Solar in Washington Can Save You Money
Washington offers several incentives to make solar installations more affordable for those who opt to buy, rather than lease, their solar PV system. At Smart Solar Energy Co., we typically always recommend that our customers buy their solar system, for several reasons. Solar panels increase the value of your home by about 3%. So, if your home’s pre-solar value is $400,000, solar panels will add an additional $12,000 to the overall value of your home.
Additionally, the solar incentives made available by the state of Washington and the federal government, as they stand in 2021, are so valuable that you essentially never have to come out of your own pocket to pay for your solar system. We’ll break down how this works below. These incentives include:
Washington State Solar Tax Exemption: All Washington homeowners who install solar projects less than 100 kW in size are exempt from state and local use tax. This tax exemption helps homeowners save thousands of dollars on the cost of going solar. All tax obligations are waived when purchasing a solar PV system in the state of Washington. The savings will depend on the local tax rate in the city where the system is being installed, but a homeowner purchasing an average-sized solar install will save about $6,000 on the cost of making the switch from this tax exemption alone. Find how much you will save on solar in Washington using this sales tax calculator or with one of our free audits.
Federal Solar Investment Tax Credit (Solar ITC): The federal government incentivizes homeowners to switch to solar energy by offering a dollar-for-dollar cash rebate on the overall cost of your solar system installation, which is applied to the taxes you file for the year you installed solar on your home. In 2021 and 2022, the government is offering a 26% rebate, which means that 26% of the overall cost of your solar system will be deducted from your overall taxes due to the government at the end of the year. In 2023, this tax credit will be reduced to 22%. In 2024, this credit will be further reduced to 10% for commercial solar installations and it will be eliminated completely for residential solar installations. For this reason, the sooner you make the switch to solar, the more you’ll save on the overall cost.
If your solar system’s total cost is $20,000 and you switch to solar in 2021 or 2022, your ITC cash rebate would be:
$20,000 x 0.26 = $5,200
If your solar system’s total cost is $20,000 and you switch to solar in 2023, your ITC cash rebate would be:
$20,000 x 0.22 = $4,400
…and if you switch to solar after 2023, you will not receive a cash rebate.
At Smart Solar Energy Co., part of your solar purchase includes our assistance with filing all the necessary paperwork to ensure you reap all the benefits of this valuable tax credit.
Net Energy Metering: When you switch to solar with a grid-tied solar system, utility companies in Washington are required to keep track of the energy you produce, in addition to the energy you consume. This is important because when you install solar panels, there will be times when your panels are producing more energy than your home needs – like long sunny days in the summer – and that excess energy gets fed back into the power grid. Additionally, there will be times when you draw energy from the power grid because your home is using more energy than your panels produce – like at night or during short winter days. Net Energy Metering allows utility companies to keep track of energy as it moves in both directions. At the end of the month, the power company will subtract the total amount of energy that your solar panels produced and fed into the power grid from the total amount of energy you consumed from the power grid, which will drastically reduce your monthly power bill. Your excess energy credits will be rolled over each month, and for most Washington power companies, every kilowatt hour (kWh) is equivalent to the retail market value of a kWh through the utility company. This means that you will essentially “bank” all of the excess power your home produces in the summer and benefit from it through a reduced power bill all winter long.
Note About Net Energy Metering: Some homeowners who switch to solar have dreams of building a large solar system that generates more energy than their home uses, in order to make money by selling the surplus of power back to the utility company. This isn’t a practice we recommend because, while net energy metering benefits you financially by drastically reducing the overall cost of your power bill, the net energy metering system is different than being reimbursed for excess power. Typically, it is not worth it to build a solar PV system that generates so much solar energy that you end up creating far more than you will use. While you may get a check from the utility company in exchange for the excess energy that you sent back to the power grid, the actual dollar value of the check will often be less than the true retail value of the energy your solar panels produced. Additionally, in Washington, net energy metering credits roll over month over month, they don’t roll over year over year – meaning that your ‘bank’ of net metering credits restarts at zero each year. For this reason, installing extraneous solar panels in order to produce a surplus of energy will cost you, especially if your roof doesn’t have much space for extra solar panels, and you have to spend more on your solar install by installing ground mounters. Overall, the potential check you might receive from the utility company by generating an energy surplus won’t exceed the investment you would make in order to generate such additional power.
Rural Energy for America Grant Program: Agricultural producers and rural small businesses who wish to install solar on their Washington properties can qualify for the REAP program to receive grants and/or guaranteed loans to alleviate the costs of commercial solar projects for businesses that are based in rural areas or in the agriculture sector. The REAP Program offers grants and guaranteed loans to rural businesses and agriculture businesses across the US. The grants are renewable energy-focused and include the purchase of commercial solar systems. The REAP program aims to enhance energy independence by increasing the supply of renewable energy to the commercial sector while also reducing energy demands. Ultimately, the goal of the REAP program is to decrease the costs of energy for agricultural businesses and companies based in small (50,000 population or less) towns in America.
The REAP program offers grants that range from $1,500 to $250,000. If your solar installation exceeds $200,000, you must provide a technical report and submit to an onsite evaluation prior to the start of your solar install. In order to qualify for the grant, applicants must provide 75% of the cost of their solar installation.
Agricultural producers who generate at least half of their annual revenue from farming (regardless of locale) and small businesses of any sector, located in towns of less than 50,000 people qualify for REAP loans. The application must be submitted by the business owner, and the business cannot owe federal taxes or have any outstanding judgement or debarment. The business itself must also be financially solvent. Applicants must apply through the state office and must be enrolled in the System for Award Management, in addition to having a Dun & Bradstreet number. You must provide bank statements, share funding commitments from any other funding sources, provide an interconnection agreement if interconnecting with your utility company, as well as provide documentation of any associations with USDA employees. These items can be time-consuming if you’re not already participating, so advance planning is crucial to successfully applying for a REAP loan.
Buying vs. Leasing Solar Energy in Washington
All of the above incentives are only accessible to those who buy their solar systems, which is why buying solar is such a great investment. When you combine the outright cost reductions of the Washington state tax exemption and the federal ITC with the long-term cost savings of net energy metering, the costs of purchasing solar are drastically reduced.
Additionally, if you opt to purchase your system with financing, you’ll pay nothing up front, and when you receive your cash rebate and tax credit, you can put those dollars directly toward your monthly financing payments – meaning you might not have to come out of your own pocket for quite some time (potentially, for a few years). Additionally, as the price of power continues to increase by 2-3% per year (as it has done historically), you lock in your monthly payments and insulate yourself from those never-ending incremental increases the moment you go solar. After your financing period is over, you’ll pay nothing but the power costs that your net energy metering doesn’t cover. Additionally, if you sell your home, your solar panels will increase your home’s value by an average of 3%.
Homeowners who lease their solar systems in Washington won’t benefit from all of Washington’s incredible incentives, and they may also struggle to sell their homes if they choose to sell before the 20-year lease on their solar system is up. Leasing a solar system adds a layer of complexity to selling your home, because you’ll either need to pay the rest of your lease entirely, or find buyers who wish to take over your lease. And, because you don’t have to make a down payment to finance a solar system in Washington, leasing doesn’t have much of an upside in comparison to buying your solar panels.
Some people choose to lease a car simply because cars depreciate in value so quickly and there isn’t much long-term value in car ownership, aside from not having car payments. On average, cars depreciate by 20-30% in the first year of ownership! Following the first year, cars then depreciate by 15-18% every subsequent year. Luckily for homeowners, solar panels aren’t like cars, because it takes a very long time for their production value to decrease. In fact, at Smart Solar Energy, your solar panels are guaranteed to still produce at least 85% of their original production capacity 25 years after you install them. This means it takes 15 years for your solar panels to depreciate the same amount that a new car would depreciate in 6 months.
You won’t increase your home’s value or save money over time if you lease your solar system, whereas purchasing your system with a reputable local bank or credit union that offers low-interest financing will benefit you financially for years to come, you’ll continue to benefit from solar energy long after your system is paid off, and your home value will increase, putting more money in your pocket if you sell your house.
Solar Panels & Property Taxes in Washington
Even though installing solar panels increases your home’s value by an average of 3%, solar panels are completely tax-exempt in Washington. This means that in addition to the state tax exemption on purchasing solar, the federal tax credit at the end of the first year you install your solar system, and a lifetime of net energy metering, you also won’t pay any taxes on your solar panels throughout their lifetime. This is a big deal, considering that your panels can add anywhere from $10,000 to $20,000 to the value of the average home in Washington. Here’s how you can expect to see your home increase in value, depending on your home’s pre-solar value:
First, let’s look at the average home in Washington, which is worth $397,900.
(Average Washington home value) $397,900 x (Value increase) .03
= Increased Washington home value by $11,937
This means the average Washington home will increase by almost $12k after installing solar panels – and none of that added value will be taxed! Now, let’s look at some of Washington’s cities. In Seattle, the average home value is $813,137; in Olympia, the average home value is $411,230; in Spokane, the average home value is $303,564.
(Average Seattle home value) $813,137 x (Value increase) .03
= Increased Seattle home value by $24,394
(Average Olympia home value) $411,230 x (Value increase) .03
= Increased Olympia home value by $12,336
(Average Spokane home value) $303,564 x (Value increase) .03
= Increased Spokane home value by $9,106
So, the average Seattle home will increase in value by about $24k, while the average Olympia home will increase in value by about $12k, and the average Spokane home will increase in value by about $9k after installing solar panels. And none of this added value will be taxed, throughout the life of the solar panels. Seems like a pretty good deal, right?
Washington State Solar Easement Laws & Solar Rights
To help homeowners feel secure in their decision to switch to solar, the state of Washington does now allow homeowners’ associations to prohibit homeowners who belong to a homeowner’s association from installing solar panels on their homes. Homeowners’ associations may issue guidelines on color and aesthetic elements of solar panels, but that’s it. The easement laws in Washington don’t provide a “right to sunlight” for owners of solar; rather, the law allows neighbors to enter voluntarily into easement contracts that ensure solar installations will receive proper light and won’t be blocked by new trees or growth of existing trees.
Is Solar Worth the Investment in Washington?
So, is installing solar panels worth it for Washington homeowners? We sure think so! Switching to solar is one of the most impactful choices you can make in preserving the environment and reducing your carbon footprint, and it will also save you money, lock in your monthly electric bill, and increase the value of your home.
In the Pacific Northwest, solar naysayers might claim that solar energy is only worth the investment if your solar panels can offset your entire power bill. In reality, this claim is totally false. People often assume that solar panels fare best in hot and sunny climates like Florida, Arizona, and California. While the production power of solar panels in these locales is excellent, they also come with a downside: solar panels suffer when they’re placed in relentless heat. The solar cells burn out more quickly in these extremely hot and sunny climates, which has a negative impact on the lifetime efficiency of the panels and reduces the longevity of a solar panel system. Conversely, the mild temperatures of the Pacific Northwest are ideal for extending the lifespan and reliability of solar panels.
While shade, trees, and the fact that the average roof in the Pacific Northwest is not large enough for a solar panel array that will offset the homeowners’ entire power bill means that it may be true that the average Washington home may not be capable of producing enough power to completely eliminate the need for grid electricity, this isn’t a bad thing. You can still save with solar and qualify for many cost-reducing incentives.
Imagine for a second that you own a well on your property that produces the world’s cleanest, purest drinking water, completely free of cost. However, the well only provides a quarter of your family’s water needs—so you’ll need to purchase the other quarter of water from your utility company. The well would still be totally worth it, right? Of course! Solar in the Northwest is very similar. When you install a solar system, you own your own power source. You will produce great quantities of the best green energy in the world for less than what you would have paid the utility company for energy. While you may still have to buy some additional energy from the utility company as needed, it’s still worth it, because your overall costs have been greatly reduced. Additionally, Net Energy Metering will drastically reduce the cost of any energy that you do use from the utility company–keeping your costs low, no matter what.
Solar Savings Breakdown in Washington
The average electricity bill in Washington is $88 each month, and typically, utility costs increase by 2-4% each year. On the other hand, a typical price for a solar PV install is about $15,000 in Washington. Sounds costly in comparison to $88 per month, right? Not so fast! To really understand the difference between solar and utility energy costs, we need to look at the big picture and break down long-term costs. Let’s look at how much you might spend over 25 years with a Washington utility company vs. how much you will spend on energy with a solar panel installation over the same span of time.
What you’ll spend with the utility company over 25 years:
Conservative estimate of utility increases = 2%
$88 x mo x 2% annual increase
= $33,824 spent on your power bill over 25 years
More realistic estimate of utility increases = 4%
$88 x mo x 4% annual increase
= $43,978 spent on your power bill over 25 years
What you’ll spend on solar panels over 25 years:
$15,000 initial cost
Financed with a 2% interest 10-year loan:
Payments of $138 for 10 years
Then, we need to factor in the incentives that reduce this cost:
Federal ITC tax credit: 26% of total installation = $3,900
So your total cost is…
= $12,682 spent on your solar power over 25 years (Note: You’ll likely pay this over 10 years and have no payments for the following 15 years.)
So for an average Washington homeowner, you will spend $12,682 on energy over 25 years if you install solar panels. In contrast, you will spend $33,824 -$43,978 over the same span of time if you continue to rely on energy from the power company. At the very least, you will save over $21,000 – potentially more like $31,000 – by going solar.
Oftentimes the initial installation costs of solar panels sound daunting and make solar seem expensive, but the breakdown makes it clear – solar energy is significantly more cost-effective than utility energy. The current incentives from the federal government and the state of Washington, combined with low-interest solar financing, create a situation where homeowners spend far less to go solar than they will spend on a lifetime of utility payments. If you don’t go solar, your utility bill will always be due every month, for the rest of your life, and it will continue to rise in cost perpetually. Solar allows you to pay a fixed price for your home energy needs, which you’ll eventually pay off!
Between the state of Washington’s solar tax exemption, the federal ITC, net energy metering, and Washington’s ideal conditions for solar production, Washingtonians are in an excellent position to go solar. At Smart Solar Energy Co., we encourage homeowners to find out if their homes qualify as soon as possible – because the earlier you make the switch, the more you’ll save.