Virginia Solar Incentives and Rebates Guide
Key Takeaways
- The Rural Energy for America Program provides loan grants and guarantees for agricultural producers and small-business owners.
- The federal solar tax credit provides residents of Virginia a 30% tax credit on new solar photovoltaic systems through the year 2032.
- Virginia offers both net metering and solar renewable energy credits (SRECs) to help solar system owners get money back.
The historic state of Virginia recognizes that local, state, and federal incentives are crucial in order to reach its clean energy goals. With solar being a key renewable energy source, homeowners, business owners, local governments, and nonprofits may be interested to learn how they can use solar incentives and also save money on their energy bills.
Fortunately, Virginia offers various initiatives that can help, including Green Building incentives for developers and businesses, agricultural-specific programs, and opportunities for homeowners. Virginia also benefits from federal programs, including loan and grant options, for owners of multifamily and commercial properties who are looking to switch to solar panels.
Switching to solar may come with questions, especially about expenses and how long it might take to see a return on investment in a solar panel system. By exploring financial incentives, energy users can see how they might reduce associated costs and feel more confident in making solar part of their energy solution.
Let’s explore what solar incentives are available to make the transition to solar easier and cost-efficient.
Virginia Solar Incentives
Residential Property Tax Exemption for Solar Equipment
According to the Database of State Incentives for Renewables & Efficiency (DSIRE), Virginia’s solar property tax exemption provides “the option for any county, city, or town to exempt or partially exempt solar energy equipment and recycling equipment from local property taxes.” Incentive amounts vary by location and are administered by the Virginia Department of Energy.
VirginiaSAVES Green Community Program
The VirginiaSAVES Green Community Program offers financing options for nonprofit, local governmental, commercial, and industrial organizations to get solar panels, other renewable energy systems, and energy efficiency upgrades. In fact, both new construction and retrofits for existing buildings are included in this program, which is offered by the Division of Energy within Virginia’s Department of Mines, Minerals, and Energy.
Green and Alternative Energy Job Creation Tax Credit
Taxpayers who create new green jobs with a salary of at least $50,000 will be eligible for a credit that goes toward their income tax. This program is a win for both employers who are looking to lower their regular income taxes and new employees who have green jobs.
It is also a win for the environment—the more green jobs that exist in a community, the greater the contribution toward reaching Virginia’s energy goals that the community can make.
Solar Renewable Energy Credit (SREC) Program
Instead of offering a state tax credit to help homeowners make the switch to solar, Virginia participates in a SREC program. This program allows solar system owners to earn a credit for every megawatt-hour of electricity their system generates, which they can sell back to their electric utility company (usually through a broker) for cash. The amount of money system owners get back is determined by market rates, so it varies.
To participate in the SREC program, users must own their own solar panel systems; this means that individuals who rent solar system panels are not eligible to sell back the energy produced.
SREC owners may use the money from selling their credits toward their solar loan, for example. According to EcoWatch, Virginia has a credit cap, so you would not earn more than $75 per SREC.
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Local Incentives
Arlington County Green Building Incentive Program
Residents of Arlington County can take advantage of the Green Building Financial incentive. In an effort to be completely carbon neutral by 2050, the county has allowed solar technologies to count toward obtaining a green building status, like LEED certification.
Federal Incentives
Federal Solar Tax Credit
The Inflation Reduction Act of 2022 modifies and extends the federal solar tax credit, also called the investment tax credit (ITC), which offers a 30% tax credit on systems installed from 2022 through the end of 2032.
The tax credit reduces federal income tax payments for everyone, from businesses and local nonprofit organizations to homeowners who purchase solar energy systems.
Qualified low-income individuals with residential solar energy equipment projects can obtain further tax credits.
Rates vary depending on the year of construction, the solar project’s status, and labor details.
If you install your solar panel system after 2032, you will be eligible for a 26% tax credit. For installations in 2034, solar system owners will be eligible for a 22% tax credit.
Large installation projects can see valuable savings since this program does not have a financial cap, unlike some smaller programs.
Federal Solar Investment Tax Credit
| Through 2032 | 30% |
|---|---|
| 2033 | 26% |
| 2034 | 22% |
Rural Energy for America Program (REAP) Loan Guarantees
The United States Department of Agriculture provides loan guarantees and grants for rural small businesses and agriculture producers so they can buy, install, and maintain solar panels, as well as other renewable energy systems and equipment to improve energy efficiency. REAP loans approved in fiscal year 2024 will receive an 80% guarantee.
The program offers the following:
- Loan guarantees on loans up to 75% of total eligible project costs.
- Grants for up to 50% of total eligible project costs.
- Combined grant and loan guarantee funding up to 75% of total eligible project costs.
Modified Accelerated Cost-Recovery System
Modified Accelerated Cost-Recovery System (MACRS) is a financial incentive offered by the U.S. Internal Revenue Service intended to help recover the costs of solar investments for the commercial, industrial, and agricultural sectors. The Solar Energy Industries Association states that under this program, eligible solar system equipment can be included in a cost recovery period of five years.
The purpose of this program is to encourage private businesses to install solar systems. The incentive works because businesses will be able to reduce the amount of taxes they owe, therefore encouraging more participation in solar installation. This program also accelerates the payback period of the initial solar equipment investment.
Fannie Mae Green Financing
This federal loan program helps multifamily residential properties obtain a loan to make energy improvements and reduce their energy expenses. For example, this property participated in the green financing program and is expected to reduce its energy costs by at least 45% and cut electricity costs by 90%. The initial investment would not have been possible without the loan, and now the residents are helping combat the effects of climate change through cleaner energy production.
Net Metering in Virginia
Net metering is the process of receiving credit for the excess solar energy your system may produce. For example, during the sunnier hours, your solar system may generate more energy than you consume. Electric companies will not charge you for any energy produced during this time. At night, however, when you can no longer generate power from the sun, you are charged at your regular rate. The financial benefit comes through a credit in exchange for the excess energy produced during the day.
Dominion Energy offers net metering, crediting the excess energy generation to their customers’ next electric bill. Net metering is not just limited to homeowners looking to save. Commercial, industrial, nonprofit, residential, schools, agricultural, and institutional sectors can also take advantage of this incentive.
The Solar Payback Period
How long will it take to start seeing returns on your investment in solar energy? This question is common since solar panel installation costs can be high. The time it takes for savings to be generated by the investment to match its cost is called the payback period. Taking advantage of all the incentives the state and the federal government have to offer can help shorten this period for Virginia residents.
Ultimately, payback periods vary, depending on the size of the solar system installation and local electricity rates. The typical payback period in Virginia is about nine years.
| Typical 6kW solar system installation cost | $17,700 |
|---|---|
| 30% Federal Tax Credit | $5,310 |
| Total Cost After Incentives Total Cost After Incentives Not including local incentives, which vary | $12,390 |
| Assumed Electricity Produced by a 6kW Solar System in Illinois | 9,190 kWh |
| Annual Electricity Cost Reduced or Offset Assuming 100% utilization by the home | $1,378 |
| Sample Payback Period | 9 years |
Sources: https://www.nrel.gov/docs/fy22osti/83586.pdf, https://globalsolaratlas.info/map (Virginia Beach); https://www.eia.gov/electricity/monthly/epm_table_grapher.php
Conclusion
The state of Virginia has made great strides to attempt to reach its clean energy and energy efficiency goals at the local and state levels. Federal assistance continues to be available to those looking for further incentives—especially among agricultural producers and rural small business owners. Tax exemptions, solar incentive programs, net metering, and rebates do a lot to reduce the upfront solar equipment costs so Virginia homeowners and businesses can save money on their electric bills.
FAQs
Are local utility companies investing in solar projects?
Dominion Energy has engaged in a Solar Partnership Program, which means that the energy supplier can "construct and operate up to 30 megawatts of company-owned solar facilities on leased rooftops or on the grounds of commercial businesses and public properties throughout our Virginia service area."
How can I participate in net metering in Virginia?
Contact your local utility companies to find out about signing up for net metering. For example, Danville Utilities offers net metering for commercial and residential buildings in the city of Danville.
Does it make financial sense to switch to a solar power system as my main source of energy production?
Yes, especially if you take full advantage of the federal tax credit and other incentives mentioned above. Besides cutting tax liability, solar panel installation can help reduce monthly energy bills.