Solar Energy System Costs and Incentives - Cost Of Solar Installation
Cost depends on a number of factors (e.g. roof complexity). Most residential systems in Seattle are 4 to 5 kilowatts (kW) in size with an average installed cost of $5,000–$7,000 per kW for a total investment of $20,000 –$35,000.
Net Metering
Net metering allows solar customers to receive retail electricity rates for the electricity they generate. If you generate more electricity over a billing period than you consume, City Light will credit your electric bill for every kilowatt-hour of electricity sent back to the power grid. The credit is applied at the retail rate for power. Net metering will continue for the life of the solar electricity installation.
Federal Income Tax Credits
The federal Energy Policy Act of 2005, as amended by the Emergency Economic Stabilization Act of 2008, includes provisions for individuals and businesses to claim a 30% federal income tax credit for the cost of solar installations. Tax credits apply to systems placed in service through December 31, 2016.
Washington State Sales Tax Exemption
Until June 30, 2018, all solar electric systems less than 10 kW in size are exempt from the state sales taxes.
RESOURCE
Your Installer will provide the required forms. Exemption legislation: RCW 82.08.963
Washington Renewable Energy Production Incentive
As of August 2006, Washington State provides financial incentives for electricity generated from renewable energy resources. Eligible electricity producing renewables include solar, wind, and anaerobic digesters (converts methane gas captured from livestock manure to electricity). The state production incentive program is administered by City Light.
The incentive is based on the total number of kilowatt-hours (kWh) of electricity generated between July 1 and June 30 (or the closest regular billing cycle) of the following year. Customers with eligible generation systems that have been certified by the WA Department of Revenue (DOR), will receive a letter and application form once per year from City Light. The letter documents the system’s production based on City Light production meter readings. Once the customer approves the kWh amount and returns the signed application back to City Light, they will receive a check or bill credit for the incentive payment. Utility incentive payments are reimbursed by a credit on their state taxes.
The program authorizes utilities to pay the following for the electricity produced by PV systems:
- $0.15 /kWh for systems with no “Made in Washington” components
- $0.18 /kWh for systems with “Made in Washington” inverters
- $0.36 /kWh for systems with “Made in Washington” panels
- $0.54 /kWh for systems with “Made in Washington” panels and inverters
Incentives are capped at $5,000 per year, per customer, and expire June 30, 2020.
Green Tags or RECs
Owners of renewable energy systems own the “green tags,” also known as Renewable Energy Certificates or Credits (RECs) for an additional revenue source associated with the production of renewable energy. As demand for RECs from states, businesses, and individuals increases, we expect the value of RECs to increase as well.
Example Cost Calculations
The two examples below illustrate how different sources of revenue and savings come together and compare to initial investment in a solar electric system. They focus on the first five years after installation, as that is when most of the financial benefit will be received. However, savings on your electricity bill through net metering will continue for the lifetime of the system. Both examples below assume a 1 kW PV system that produces 1,000 kWh per year and that the system is exempt from state sales tax. The examples show the financial impact of using Washington-made solar equipment.6
Example #1
1 kW PV system (producing 1,000 kWh/year) -- non-WA equipment
PV System Installed Cost $5,000
Federal Incentive — Tax Credit, 30% of total cost $1.500
State Incentive (non-WA equipment) —15 cents /kWh, 5 year total $750
City Light Net metering — @ 8 cents /kWh, 5 year total $400
Total Incentives after 5 years $2,650
Percent of system cost recovered after 5 years 53%
Cost after 5 years of receiving incentives $2,350
Example #2
1 kW PV system (producing 1,000 kWh/year) — WA equipment
PV System Installed Cost $5,000
Federal Incentive —Tax Credit, 30% of total cost $1,500
State Incentive (WA equipment) — 54 cents /kWh, 5 year total $2,700
City Light Net metering — @ 8 cents /kWh, 5 year total $400
Total Incentives after 5 years $4,600
Percent of system cost recovered after 5 years 92%
Cost after 5 years of receiving incentives $400
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