Ohio Solar Incentives and Rebates Guide
Key Takeaways
- The state of Ohio offers loan options that can beat out regular bank interest rates. These alternatives help residents who may be on the fence about initiating energy improvements due to high upfront costs.
- Federal incentives include the Federal Solar Tax Credit, which offers a 30% tax credit through the year 2032.
- Net metering continues to be a viable option for Ohio residents. This regulatory policy applies to commercial, residential, and industrial sectors.
Let’s take a closer look at the Ohio-specific programs available.
Ohio Solar Incentives
Solar Sales Tax Exemption
Ohio has a number of state-wide solar incentives available for commercial and industrial sectors looking to save. For example, the Energy Conversion and Thermal Efficiency Sales Tax Exemption is a sales tax incentive offered by the Ohio Department of Taxation. This incentive provides 100% exemption for commercial or industrial sectors. According to the Database of State Incentives for Renewable and Efficiency (DSIRE), “Qualifying energy conversion facilities are those that are used for the primary purpose of converting natural gas or fuel oil to an alternate fuel or power source excluding propane, butane, naphtha, fuel oil, or natural gas.”
Air-Quality Improvement Tax Incentive
Another state-level tax incentive is offered by the Ohio Department of Development. DSIRE explains how this financial incentive helps small and large businesses save on new projects aimed at improving the overall air quality. Eligible projects include ones that swap out older, existing infrastructure that may be contributing to air pollutants or air contaminants. The eligible technologies for this tax incentive include a variety of solar sources: solar water heat, solar space heat, solar thermal electric, solar thermal process heat, and solar photovoltaics. Since some of the benefits of solar energy include reducing carbon emissions and contributing to cleaner, better air quality, this is a great opportunity for businesses looking to improve the environment while taking advantage of financial incentives.
Property Tax Exemption
Ohio Development Services Agency and local county commissioners offer property tax exemptions for projects 250 kW or less. According to DSIRE, if your solar project qualifies, you can be exempt from public utility tangible personal property taxes and real property taxes. The financial incentive amount can be up to 100% tax exemption. This benefit is mostly for commercial properties, investor-owned utilities, and municipal or corporate utilities. One of the stipulations for this program is that the solar system size must be 250 kW or less to be eligible for the exemption.
For a solar panel system over 250 kW, however, the Qualified Energy Property Tax Exemption for Projects over 250 kW (Payment in Lieu) provides potential property tax exemptions.
Loan Programs
The Energy Conservation for Ohioans (ECO-link) Program is a state-offered loan program offered by the Ohio Treasurer of State that caters to residents. This loan term varies by bank, but it aims to help homeowners obtain reduced financing rates for energy conservation and efficiency upgrades. According to the DSIRE database, in order to qualify, applicants must be residents of Ohio, own an existing home or condominium, receive approval through a participating bank, and use the loan proceeds for a primary residence’s projects, including energy efficiency and home improvement.
Ohio Local Solar Incentives
Ohio also offers state-provided options that help a wide array of parties, including local, agricultural, residential, and commercial residents. PACE Financing, offered by the state of Ohio, can provide a low-interest, 30-year loan that allows property owners to borrow money to finance any energy-improvement projects. This option is also available to low-income residents. Those interested should investigate to see if there are available local programs at the city or county level. PACENation can help you find out more details to see if you live in an area that qualifies for this loan.
For hyperlocal incentives, Hamilton County offers loans for home improvements at 3% below the lowest rate that a bank would normally offer. Also in Hamilton County: Cincinnati includes a Residential Property Tax Abatement program so that residents can pay taxes on the pre-improvement value of their property for up to 15 years.
These offers may make all the difference for residents who want to make home improvements but are hesitant because of increased property taxes.
For a complete list of all of your state and local incentives, visit the DSIRE database and be sure to reach out to your local utility company to ask directly if they offer incentives. You can also visit the county or town websites for specifics, as shown in the example above with Hamilton County.
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Federal Incentives
Federal Solar Tax Credit
At the federal level, governmental policies encourage the country to reach overall energy goals. The federal government has extended its national incentive, Federal Solar Tax Credits (ITC), sometimes known as the Inflation Reduction Act of 2022. For solar systems installed from 2022 through the end of 2032, users can receive up to a 30% tax credit. Starting in 2033, the credit will reduce to 26%, and it will reduce to 22% for any installations in 2034. One of the benefits of the solar tax credits program is that there is no cap to the incentive provided, which means large installation projects can see valuable savings.
| Through 2032 | 30% |
|---|---|
| 2033 | 26% |
| 2034 | 22% |
Net Metering in Ohio
With net metering you can earn credits while making the natural daylight work to your advantage. Net metering involves harnessing whatever energy your solar system picks up during the peak sunshine hours, which amounts to usually more than you can use. If your solar system is producing more energy than you consume, you are charged 0% for this period. Then, when you use electricity at night, you would be charged at your regular consumption rate, but with a credit provided back to your account in exchange for the excess energy made during the day. This beneficial exchange helps reduce your overall electricity bill and makes efficient use of daylight hours.
Ohio’s net-metering law was first passed in 1999 as part of their electric industry restructuring legislation. Since then, the state laws have evolved, and current laws require electric distribution utilities to offer net metering to customers who generate electricity using solar energy. Benefits can be significant during hot summer months with longer daytime hours, no matter where you live. And if you reside in a particularly hot area, participating in a net metering program can easily reduce those steep electric bills from higher air conditioning needs.
Solar Renewable Energy Certificates (SRECs)
Solar Renewable Energy Certificates (SRECs), sometimes referred to as solar renewable energy credit, are another incentive for people to invest in solar panels for their homes. SRECs work within the framework of Renewable Portfolio Standards (RPS), which requires increased electricity production from renewable energy sources.
These certificates, offered at the Ohio state level represent the amount of electricity generated per megawatt-hour. Owners of solar panel systems can sell these certificates to their utility companies or SREC brokers in exchange for cash. This financial incentive encourages users to continue to use their solar panels for electricity. The certificate sales help with Ohio homeowners’ overall electricity bills, although this option is also applicable to commercial and industrial sectors, as well as agricultural and nonprofit organizations.
It’s important to note that SRECs are taxable in Ohio. Unlike other Ohio incentives or solar rebates, you must report them as income. That being said, the amount you earn is typically minimal so it won’t prove to be too much of a tax burden.
Impact of Payback Period on Your Solar Energy System
People opting for solar panel installation may wonder how soon they will see energy savings once they complete their initial investment into solar installation. The payback period for any investment is defined as the length of time it takes for the savings generated by an investment to match its cost. Solar incentives play a crucial role in shortening the payback period for solar installations.
Solar-Estimate can help you determine the cost of installation. You can learn more about what to expect when installing your solar panels in Ohio and when it comes to returns on your investment.
Without state, local, and federal incentives, the payback period for solar panels cost is generally almost a decade, depending on the size of the installation and local electricity rates. But energy savings add up, and a payback period of less than 10 years, along with decades of energy savings in the long run, can help when deciding to make the switch.
The exact amount you’d save depends on the incentives available in your particular area, the cost of your solar power system, and your average electricity rates. The good news is that solar panel systems can last at least anywhere from 30-35 years total—plenty of time to see a return on upfront costs.
| Typical 6kW solar system installation cost | $17,700 |
|---|---|
| 30% Federal Tax Credit | $5,310 |
| Total Cost After Incentives Not including local incentives, which vary | $12,390 |
| Assumed Electricity Produced by a 6kW Solar System in New Jersey | 8,591 kWh |
| Annual Electricity Cost Reduced or Offset Assuming 100% utilization by the home | $1,520 |
| Sample Payback Period | 8 years |
Sources: https://www.nrel.gov/docs/fy22osti/83586.pdf, https://globalsolaratlas.info/map (Columbus); https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a
Conclusion
Residents of Ohio have an abundance of opportunities to take advantage of when it comes to making the switch to solar energy. No matter if you live in a major Ohio city or on a farm, you can participate in initiatives at the local, state, or federal level that will save money in the long run.
For those who think that the hefty price of solar panel installation is too far of a reach, financing, loan programs, and tax credits all add up to reduce a seemingly large sticker price. Furthermore, if you live within a historically disadvantaged community, take advantage of the incentives specific to you. Solar-harnessed energy is not only beneficial for your wallet but for the environment, and with the variety of incentives, it is now easier than ever to make the switch.