Washington State Solar Incentives

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    Washington State Solar Incentives for 2024

    Solar energy is becoming increasingly affordable and feasible for Washingtonians. As solar technology rapidly improves, equipment prices are dropping and more solar incentives are being introduced on a national, state, and local level. You can combine several different applicable incentives to dramatically reduce the upfront cost of adding solar energy to your home or business. In this article, we’ll cover all of the incentives that are available to Washingtonians in 2022.

    Federal Investment Tax Credit for Solar

    The 30 percent credit for solar installations expires at the end of December 2032, dropping to 26 percent in 2033 and 22 percent in 2034 before disappearing entirely unless Congress takes action to extend it. This new law supersedes an older law that would have provided a 26 percent credit this year and 22 percent next year, but that is set to expire in 2024.

    How Does It Work?

    The credit lowers your federal taxes, so if you spend $24,000 on a system, you can subtract $7,200 from your federal taxes (which is 30% of the system price). If, say, you would owe $7,000 in taxes before the credit, a $7,200 credit would drop what you owe to zero. You can’t get a tax refund for the $200 remainder, however, you can carry forward that remainder into a later tax year.

    ITC Timetable

    Year Residential Commercial
    Now to 2032 30% 30%
    2033 26% 26%
    2034 & Beyond 0% 0%

    Washington State Solar Sales Tax Exemption

    Washington also has a state-level incentive in the form of sales tax exemption for qualifying solar equipment. Starting in July of 2019 and currently running through December of 2029, all equipment for solar energy systems smaller than 100 kilowatts is exempt from state and local sales and use taxes. From January of 2020, there is also a 50% tax exemption available for solar energy systems that are between 101 and 500 kilowatts.

    The state sales tax rate is 6.5%, although with additional local sales tax and use taxes, some regions of Washington have a total sales tax rate of over 10%. Looking again at our average Washington residential solar energy system gross cost of $13,750, this tax exemption can save you anywhere up to $1,375 in taxes.

    Source: WA Dept. of Revenue

    Net Energy Metering

    Net metering in Washington State is a solar incentive that allows you to only pay for the net amount of grid energy that you use, and store excess solar energy in the grid. When your interconnection to the grid is approved, your utility company will install a special two-way meter at your home or business. This meter will measure how much grid energy flows into your home as well as how much solar energy from your panels flows into the grid. Then at the end of the billing period, you only pay for the difference or, if your panels have produced more energy than you used, you will be credited on your account.

    This incentive means that you can take advantage of every watt of energy that your panels produce, regardless of whether it’s used right away in your home. Without net metering or a storage system of some kind, you would either need to use the energy as it’s produced by your panels or it would be wasted.

    This is unfortunate because solar production is of couse highest during the middle of the day, when most people are at work or school and not using a ton of energy at home. Then, in the evenings when people are home and using more energy, solar production is low to nonexistent.

    With net metering, all the unused power your panels produce during the day will feed into the grid, essentially turning back your electricity meter. Then when you need power at night, you can pull the energy back from the grid, essentially using the energy you had ‘stored’ earlier in the day. In a commercial setting, high solar production on days when the business is closed can help offset higher energy consumption during operating hours.

    Net metering can be helpful for keeping your energy bills low throughout the entire year, since you can amass credits on your account during sunny summer months and then apply those credits against winter months’ bills when solar production is low.

    Washington State Commercial Solar Incentives

    The previous incentives all apply to both residential and commercial solar customers, but there are a few additional incentives that only apply to commercial solar energy systems.

    USDA REAP for Solar

    The Rural Energy for America Program (REAP) is offered by the United States Department of Agriculture and it provides grants and loans to qualifying rural small businesses and agricultural producers to install new renewable energy systems or improve the energy efficiency of existing systems.

    Eligible renewable energy systems include not only solar, but also geothermal, biomass, hydropower, hydrogen, wind power, and ocean power systems. Energy efficiengy projects can include upgrades like installing more efficient HVAC systems, doors, windows, and/or refrigeration units, improving lighting or building insulation, transitioning from diesel irrigation motors to electric ones, and so forth. You can check if your business is eligible here.

    Applications for REAP grants and loans are divided into three tiers based on the total cost of the proposed project, so that small efficiency upgrade projects aren’t competing against massive ocean power projects for funding. Tier One is for projects costing less than $80,000, Tier Two is for projects costing between $80,000 and $200,000, and Tier Three is for projects costing more than $200,000.

    REAP has a permanent funding baseline of $50 million per year and there is often additional discretionary funding available as well in order to provide funding to as many projects as possible. You can apply for either a grant, a loan, or a combination of the two as best fits your proposed project.

    Source: United States Department of Agriculture REAP Program

    Modified Accelerated Cost Recovery System (MACRS)

    MACRS is a depreciation system that allows business owners to recover some of the cost of assets that they have purchased over time via an income tax deduction. For solar equipment, the cost recovery period is five years. Over that period, business owners can deduct a total of 85% of the cost of qualifying solar equipment from their tax liability amounts.

    Source: Investopedia.com

    Solar is certainly worth it in Washington. New solar panels are capable of generating energy from both direct and scattered sunlight, so even on overcast Pacific Northwest days, your system will still be working for you. And, with nearly 15 hours of daylight on the summer solstice, solar production can be extremely high throughout Washington summers. With net metering, this can help reduce your energy costs year-round.

    Solar energy is also very affordable in Washington, ranging on average from $2.29 to $3.09 per watt, which is lower than the national average cost. The average solar payback period in Washington is 12.88 years.

    Washington is committed to transitioning to 100% clean energy sources by 2045, so making the switch to solar energy now will put you at the forefront of this movement. Solar incentives may not be around forever, and we are currently in a sweet spot that balances advances in solar technology, low equipment costs, and generous solar incentives. There has never been a better time to invest in solar energy for your home or business.

    Does Power Northwest Service Washington State?

    Currently, our Washington state service area includes Clark County and Cowlitz County.

    power northwest washington solar service area

    Free Power Northwest Solar Consultation

    At Power Northwest, we specialize in solar energy for the Pacific Northwest. As long-time PNW residents ourselves, we are intimately familiar with the sometimes challenging weather conditions of the region as well as the solar regulations and incentives for Washington.

    We offer free solar consultations to help you determine if your property is suitable for solar energy, taking into account your location, your power needs, and the solar potential of your property. Our team of friendly experts will be more than happy to answer any questions that you may have, identify which incentives will apply to you, and offer a free project quote. Contact us today to get started!

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