Will Maryland Pay For My Solar Panels?
With the increasing popularity of solar energy, many homeowners in Maryland are considering installing solar panels on their properties. Solar panels allow households to generate their own renewable electricity, reducing energy bills and dependence on fossil fuels. However, the upfront costs of purchasing and installing a solar panel system can be prohibitive for some homeowners. This raises the question – does Maryland offer any incentives, rebates, tax credits, or other programs to help offset the costs of going solar?
Federal Tax Credits
The federal government offers tax credits to help offset the cost of installing residential solar panels. The main tax credit available is the federal solar Investment Tax Credit (ITC). This tax credit allows taxpayers to deduct 26% of the cost of installing a residential solar system from their federal taxes. The ITC applies to both the cost of the solar panels as well as any associated equipment and installation costs. In 2023, the ITC will step down to 22% before expiring completely for residential projects in 2024 (source).
To qualify for the ITC, the solar system must be placed in service during the tax year when the credit is claimed. There is no maximum limit on the amount that can be claimed through the ITC. However, the credit is non-refundable – so any unused credit amount cannot be refunded or carried forward. The homeowner must have sufficient tax liability to take full advantage. The ITC can be combined with other incentives like state/local rebates (source).
Maryland Solar Energy Grant Program
The Maryland Solar Energy Grant Program provides grants to homeowners for installing solar photovoltaic (PV) systems on their primary residence. This program is administered by the Maryland Energy Administration (MEA).
The grant amount covers up to $2,000 for a solar PV system and up to $1,000 for a solar water heating system. To qualify, the home must be the primary residence of the applicant and located in the state of Maryland. The system size is limited to 20 kilowatts for solar PV. There are additional requirements around contractor selection and system siting.
Applications are accepted on a first-come, first-served basis during open enrollment periods. There is often high demand, so funds may run out quickly. The program has provided over $40 million in grants since it launched in 2015. Eligible costs covered by the grant include the solar panels, inverters, racking, wiring, permitting fees, and other system components.
More details on eligibility, grant amounts, and the application process can be found on the Maryland Energy Administration website.
Solar Renewable Energy Credits (SRECs)
SRECs are tradable credits that represent the renewable attributes of solar energy generation in Maryland. For every 1,000 kWh of electricity produced by a solar system, the owner earns 1 SREC (Maryland News). The SRECs can then be sold on the open market to electricity suppliers who are required to purchase a certain amount of solar energy each year under Maryland’s Renewable Portfolio Standard.
The SREC market provides an additional source of revenue for solar system owners in Maryland. SREC prices fluctuate based on supply and demand dynamics, but have traded between $50-$350 per SREC in recent years (SRECTrade). In 2020, the average SREC price was around $150. The typical residential solar system in Maryland earns 5-6 SRECs per year. So at $150 per SREC, that could mean an extra $750-900 per year over the life of the SRECs.
The money earned from selling SRECs can help offset the upfront cost of installing solar panels in Maryland. While SREC payouts are variable, they represent an attractive incentive that makes going solar more financially viable for many homeowners and businesses.
Net Metering
Net metering allows solar panel system owners to receive credits on their utility bills for any excess electricity they generate and send back to the grid. Maryland has had statewide net metering since 1997. The program is available from the state’s utilities until the total capacity of net-metered systems reaches 3,000 megawatts, according to the Maryland Public Service Commission.
When a homeowner’s solar panels produce more electricity than is needed, the excess is fed onto the local utility grid. The homeowner then receives kilowatt-hour credits on their utility bill. At night or on cloudy days when the solar system isn’t generating enough, the homeowner can use these credits to offset the cost of electricity drawn from the grid. This ensures solar customers are fairly compensated at the utility’s retail electric rate.
Property Tax Exemption
Maryland offers a property tax exemption for residential solar energy systems installed on homes and businesses. This policy was established in May 2007 under the state’s Tax-Property Article §7-242(a)(3) (1).
The exemption applies to the value added by a solar energy device, including solar panels, mounts, wiring, batteries, and other equipment used to generate electricity from sunlight. This means the added assessed value of the solar system is excluded when calculating property taxes. For example, if a solar system increases a property’s value by $20,000, that $20,000 would be exempt from taxation.
To receive the exemption, homeowners must submit a form to their county assessing office along with documentation on the solar system’s costs. The exemption remains in effect for as long as the solar device is operational and serves the purpose of generating electricity (2).
This policy aims to incentivize solar adoption by reducing long-term costs for homeowners and businesses. According to the Database of State Incentives for Renewables and Efficiency (DSIRE), over 6,500 Maryland properties have claimed the solar property tax exemption as of 2017 (2).
Sources:
(1) Maryland Assessment Procedure Manual
(2) Property Tax Exemption for Solar and Wind Energy Systems
Financing Options
When it comes to financing solar panels in Maryland, homeowners have a few options:
Solar Loans: You can take out a solar loan from a bank or credit union to cover the upfront costs of purchasing and installing a solar system. This allows you to own the system outright. The loan is then paid back over time through monthly payments. Pros are that you own the system and get all the benefits. Cons are that solar loans often have higher interest rates than a home equity loan or line of credit.
Solar Leasing: With a solar lease, a solar company installs and owns the system on your home while you pay a fixed monthly rate to essentially “rent” the system. Pros are no money down and fixed monthly payments. Cons are that you don’t own the system so don’t get tax credits or rebates. The monthly payments don’t go away if you sell the home. Sunrun and others offer solar leasing in Maryland.
Solar Power Purchase Agreement (PPA): A PPA is similar to a lease but instead of fixed monthly payments, you pay only for the power produced by the solar panels at a fixed rate that is lower than your utility’s rate. Pros are predictable pricing for solar energy and no installation costs. Cons are again that you don’t own the system. Companies like Sunrun offer PPAs in Maryland.
Overall, purchasing a solar system through a loan allows homeowners to get the most long-term benefit through ownership. But leases and PPAs can provide more affordable options for going solar with little or no money down. It’s important to read the fine print and understand your options when financing solar panels in Maryland.
Costs & Savings
The average cost of installing solar panels in Maryland ranges from $2.95 to $3.50 per watt, with most homeowners paying around $3.10 per watt according to Energysage (https://www.energysage.com/local-data/solar-panel-cost/md/). For a typical 5 kW solar panel system, this translates to an average cost of around $15,500 before any rebates or incentives.
Going solar can provide significant savings on electricity bills in Maryland. The typical homeowner saves around $1,350 per year, or $27,000 over the 20-30 year lifespan of a solar panel system according to EnergySage (https://www.energysage.com/solar-panels/md/). Exact annual savings depend on factors like system size, electricity rates, and production, but most homeowners in Maryland see a return on investment between 5-7 years after installing solar panels.
Incentives by Utility
Maryland’s major utility companies offer additional incentives for installing solar panels beyond the statewide programs.
Baltimore Gas and Electric (BGE) offers a rebate of $0.25 per watt for installed solar systems up to 20 kilowatts for residential customers. Larger commercial installations can also qualify for rebates. See BGE’s solar rebate program details at https://www.bgesolar.com/.
Pepco offers a Renewable Energy Credit purchase program, paying customers for the solar renewable energy credits generated from their solar panels. Rates vary by year and contract term. See Pepco’s solar programs at https://www.pepco.com/MyAccount/MyService/Pages/MD/SolarRenewableEnergyCredits.aspx.
Delmarva Power has a 10-year Solar Renewable Energy Credit agreement available for residential customers at rates of $150-280 per SREC depending on year and contract term. More details are available at https://www.delmarva.com/MyAccount/MyBillUsage/Pages/MD/RenewableEnergy.aspx.
Conclusion
Maryland offers several attractive incentives for going solar that can significantly reduce the cost of installing a solar energy system for your home. The main incentives include:
- Federal Solar Investment Tax Credit – Provides a 30% tax credit off the cost of installing a solar energy system.
- Maryland Solar Energy Grant Program – Offers grants to cover up to 40% of installation costs for eligible systems.
- Solar Renewable Energy Credits – Can be sold on the open market for additional income from your solar panels.
- Net Metering – Allows you to reduce your electricity bills by getting credit for excess energy fed back into the grid.
Property tax exemptions on solar equipment and attractive financing options through solar leases or power-purchase agreements can further maximize savings. Be sure to also check with your local utility for any additional incentives.
For more information on going solar in Maryland and current incentive programs, check out the following resources:
