Sunrun’s essential guide to solar panel incentives in 2018

Learn about solar incentives and how they work

Solar energy in the U.S. is growing at an unprecedented rate. With more than 53 gigawatts (GW) of solar photovoltaic (PV) capacity installed to date, our nation now generates enough power to electrify over 10 million homes—a number expected to double by 2023. In the next five years, approximately 15 GW of solar PV capacity will be installed annually in the U.S.¹

Is the Government Giving Out Free Solar Panels? 

The government is not giving away solar panels; however, they are providing many incentives for people to go solar. Between federal solar credits and state and local government incentives, there are plenty of opportunities to reduce the final cost of going solar. Here’s more information about how that works. 

To encourage more homeowners like you to go solar, governments, electric utilities, and other organizations offer financial incentives, rebates, and tax credits that make solar more affordable when you purchase a system through a solar plan, such as Sunrun’s BrightBuy™ or BrightAdvantage™. Depending on the state you’re living in, you could reduce the cost of your new solar panels by 30% to 50%.² That’s a lot of savings. 

5 types of solar rebates and incentives in the U.S.

1. Federal Solar Tax Credit 

Many homeowners are left wondering, do you get a tax credit for solar panels? The short answer is yes. Tax credits and other incentives can be available for going solar, but you must take advantage of government solar panels programs available in your area. The federal solar tax credit gives you a dollar-for-dollar reduction against your federal income tax. Currently, the residential federal solar tax credit gives you a dollar-for-dollar reduction against your federal income tax equal to 26% of the final cost of solar energy systems you install on your home.

The Federal Solar Tax Credit is not cash. It is a lump sum you apply to any income taxes you owe. For example, if you have $20,000 in federal solar tax credits and you owe $25,000 in federal income tax, you can use those $20,000 worth of solar tax credits to reduce your income tax bill to $5,000. It is a dollar-for-dollar benefit. 

This benefit exists through December 31, 2022. In 2023, the residential tax credit will step down to 22%. In 2024, the tax credit for residential solar will end, making now the perfect time to install a solar energy system. If you’re considering going solar, learn more about the fed’s solar tax credit and how much your system could generate in tax credits. 

2. Net Energy Metering (NEM)

Net Energy Metering (NEM) is a billing arrangement that measures the energy your home pulls from your utility’s electrical grid and the excess energy your solar panels produce and export back to the grid. Not all states have net energy metering policies, and these policies vary by state. When you install solar panels, your system can actually earn money. 

To keep track of the energy going in and out of your home, your utility company will provide you with a net meter. If there’s a surplus, your energy meter will run backward, and you’ll get a monetary or kWh credit. You can use your kWh credit on days when your system isn’t producing enough energy, such as cloudy days or at night.⁴

Net energy metering can be set up on rental properties too. Even properties with more than one electrical meter can benefit from NEM. The process works by dividing the credits between rental units. Net metering is useful as a way to help reduce the cost of the energy you use from the grid or to cash in and help recoup the cost of your solar system by selling back excess energy created by your solar panels. 

3. Solar Renewable Energy Credits (SRECs)

In some states, homeowners can earn and sell Solar Renewable Energy Credits (SRECs) for the electricity their solar system produces. These differ from a tax credit. Many utility companies must purchase a certain amount of SRECs each year to meet sustainability requirements set by their state’s Renewable Portfolio Standard (RPS) programs. They also do this to prove that a certain portion of their energy comes from clean, renewable energy sources.⁵ This process helps to highlight the way that solar panels on residential and commercial buildings assist in supplying green energy for the entire community. 

For every 1,000 kilowatt-hours (kWh) of electricity generated by the solar panels on your roof, you’ll earn 1 SREC, which you can later sell to your utility to earn additional income. An SREC could be worth as much as $3006, but prices may fluctuate since they’re sold on an open market. Think of the SREC market like the stock market, so the more demand for SRECs there is from utilities, the higher their price will be.

The only way to own your SRECs is to fully purchase your solar system. If you choose to go solar through a PPA/lease solar plan, such as BrightSave™ Monthly or BrightSave™ Prepaid, we’ll hold the SRECs and pass the value onto you as savings via a lower electricity rate. On the bright side, you’ll get the financial benefits of the SRECs without the market risks. These options make solar available for nearly everyone. Which option works best for you? Ask our experts. 

4. Solar Tax Exemptions

Aside from federal solar tax credits, several state and local governments also offer property and sales tax exemptions to help make your switch to solar as affordable as possible.⁷

• Property Tax Exemptions

These allow homeowners to remove the added value of their solar panels from the valuation of their homes for tax purposes. This means that even if you experience a jump in property value due to the solar installation, you’ll be taxed as if your panels aren’t there. Having solar panels and a property tax break can add value to your home. This benefit transfers if you sell your home. 

• Sales Tax Exemptions

These provide an exemption from the state sales tax (or sales and use tax) for purchasing a home solar system. This type of exemption lets you reduce the upfront costs of your solar panel installation and may include sales, storage, and use of components used in solar energy systems.

5. Cash Rebates

Some state and local governments, utility companies, and other organizations offer cash rebates to homeowners who choose to buy a PV system. These can be in addition to the Federal Tax Credits available. These rebates are usually available for a limited time and end once a certain number of solar systems are installed in the area. Cash rebates can help you reduce your solar system cost even more, sometimes by as much as 10% to 20%.⁸ 

What are the available solar tax incentives for my state?

For the most comprehensive and up-to-date information about the current state solar incentives in the U.S., check out the Database of State Incentives for Renewable Energy. The information here helps you discover all the incentives available in your state. Talk with a solar expert about how to benefit from the programs available for your home. 

Now that you know more about the tax credit and incentives, it is time to learn about the solar incentive programs by state where Sunrun offers solar products and services.

Is Solar a Smart Investment without Rebates and Incentives?

Even if your state has zero solar incentives or rebates, once you purchase your system, you can still enjoy the federal solar tax credit while reducing your electricity bill, saving money each month, and helping the environment. Going solar enables all of these benefits, plus you gain energy independence and more control over your home’s energy production. 

If you live in a state where power often fails, then going solar with or without incentives is likely a good action plan. Thanks to programs such as Net Metering, going solar means you are not only helping the environment by creating and using green, clean energy, but you are also able to help supply your community with green, clean energy. That’s a big win for everyone.