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Top Solar Incentives in Virginia (Tax Credits, Solar Rebates, SRECs)

Virginia is considered a solar-friendly country, not only because of its weather but also because of the state’s attitude towards renewable energy. In 2020, the state of Virginia set one of the most ambitious energy goals for the next couple of decades. The Virginia Clean Economy Act (VCEA) aims to generate 100% of its electricity from renewable sources by 2050.

Seems far-fetched? Not really!

Thanks to many solar incentives in Virginia, solar power is a rapidly growing industry in the state. According to the Solar Energy Industry Association, Virginia has 3,885 MW of solar installed, enough to power over 435,000 homes. At the moment, it ranks 11th among solar states. But for the next five years, it is projected to rank 9th, with 5,977 MW of solar expected to be installed.

This growth is due in part to the various solar incentives available to Virginia residents and businesses.

If you are a resident of Virginia and want to turn to solar power, read through our article. Below, you will find a list of all the top solar incentives available to you.

Available solar incentives in Virginia

As we will see below, solar incentives help homeowners big time. As per some estimates, they help reduce the upfront cost of solar systems by up to 40%, and in some cases, even up to 50%.

The following is a list of solar incentives you can qualify for in Virginia. The first one, i.e., the Federal Investment Tax Credit, is available to the residents of the United States. The rest are exclusive to Virginia.

Federal Solar Investment Tax Credit

We may call the Federal Solar Investment Tax Credit (ITC) the biggest of solar incentives. It recovers your solar system’s 30% upfront costs, though you are not paid the incentive in cash. Instead, it is a 30% tax credit against your income tax which you can claim after installing a solar system. So, if you install a system worth $30,000, you will get $9,000 in the form of a tax credit.

If you do not have enough tax liabilities, say you owe $3,000 in income tax, you can roll the remainder to the coming years. The qualifying expenses include almost all the equipment essential to solar PV systems (such as solar panels, inverters, batteries, wiring, etc.), permitting costs, labor costs, and interconnection costs. But note that you must be a homeowner and an active taxpayer to claim the credit. Also, the system must be new and installed either on your primary or secondary residence.

Formally called the Clean Energy Credit, it will expire in phases. For the next nine years, it is 30%, but starting in 2033, it will fall to 26%, then 22%. There won’t be any tax credit from 2035 onward unless Congress renews it.

If you want to know more about the Federal Income Tax Credit, read our detailed guide, where we have taken a close look at everything, from all the qualifying expenses to the eligibility criteria.  

Did you know?

Pleinmont Solar in Spotsylvania was developed by sPower and came online in 2020-2021. A 393.6 MW project, it produces enough electricity to power 44,866 homes.

Source: seia.org

Solar Renewable Energy Certificates (SRECs)

As discussed in the introduction, Virginia’s goal is to generate 100% of its energy from renewable energy resources, including solar, by 2050.

Does Virginia have to build large solar farms to meet the demand? Not necessarily!

One way to achieve the target is by setting a Renewable Portfolio Standard (RPS). This means that utilities do not always have to generate electricity themselves, but they can buy energy credits that would help fill the gap. These credits are called Solar Renewable Energy Certificates (SRECs).

It works like this. The state demands that utilities generate their electricity from sources like solar. Since many homeowners generate energy through solar, why not pay them for the energy they generate and take credit for it? So, when your solar system generates 1000 kWh of electricity with solar power, you will earn one SREC. To avoid the penalty for non-compliance with the RPS, utilities like Dominion buys these SRECs from the open market.

But how much is one SREC in Virginia?

The price varies based on the market dynamics. In some areas, such as Washington D.C., one SREC may fetch homeowners a price of up to $400, while in other states, one SREC may be equal to $20. In Virginia, the SREC market is relatively new, with the value of one certificate ranging from $30 to $70. You cannot get more than $75, as the value of one SREC is capped at $75.

If you have a 7 kW system installed, you can earn around $3,000 to $8,000 over the course of your solar system’s lifespan. With a 10 kW system, the savings may go above $15,000.  

Net metering in Virginia

Most homeowners in the United States install grid-tied systems, meaning that their solar systems meet their energy demands during the day. But for the nighttime needs, they import electricity from the grid. But what if their systems generate more electricity than their need during the daytime?

It is exported to the grid, against which homeowners receive energy credits. They can use these credits when they consume power coming from the utility company. At the end of the billing cycle, the unused credits are either rolled over to the next year, paid for in cash, or wasted. This arrangement is called net metering; how much it can benefit you depends on your state’s net metering policies.  

In Virginia, Dominion Energy and Appalachian Power offer excellent net metering programs. Unlike many other states, they will compensate you for your energy credits at the full retail rate. (Full retail for monthly excess generation rate; for annual excess generation rate, you will be compensated at the avoided cost rate). You can also choose to carry your unused credits forward to the next year or be paid for them.

Homeowners can interconnect their solar systems of up to 25 kW, while non-residential systems can be as large as 3,000 kW. However, if you are a Dominion Energy customer with a system larger than 15 kW, you may be required to pay standby and transmission charges. Appalachian Power customers do not have to pay any extra demand charges. 

Property tax exemption in Virginia

Installing solar is akin to a home extension or renovation project—it increases the property’s value by up to 4%. So, when the value is increased, the tax must be higher, right?

Technically, yes! But not if you live in Virginia. Starting from January 1, 2023, residential and agricultural properties having systems of up to 25 kW shall be wholly exempt from state and local property taxes. At the moment, this incentive is in place only in around 30 cities and counties.

Check with your local building inspection officials if your city or county offer this incentive.

What about local solar incentives in Virginia?

Many cities and counties offer property tax exemptions or discounts on solar installations, while others may have programs that provide grants or rebates for solar adoption. In the case of Virginia, despite being a solar-friendly state, there are no local incentives for going solar at the moment (as of December 2022).

Note, however, that local incentives neither permanently go nor are they permanently in place. Your county or utility company may roll out a solar rebate in 2023. Check with your utility and local government before installing the system to see if you may claim any latest incentives.

Overall, the state of Virginia has a strong commitment to solar power, with a range of solar incentives and support programs available to encourage adoption. These incentives, the state’s ample sunshine, and relatively higher electricity costs make Virginia an attractive place to go solar. In addition, they reduce the cost of installing a system by 30% upfront and can save you up to $25,000 throughout your system’s lifespan.

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