Renewable Energy Incentives
The following information focuses on renewable energy incentives for Washington State residents. For incentives available in other states, please visit the Database of State Incentives for Renewables & Efficiency, DSIRE.
Federal Tax Credit of 26%
You earn 26% of the total project cost back as a Federal Tax Credit when you have for solar electric (PV) installed. Individuals use IRS tax form F5695 to get the tax credit. This incentive requires that you owe enough in federal income tax that you can take a tax credit.
For systems installed in 2021 and 2022, it is 26%. It falls to 22% the following year (2023), and from 2024 on, the tax credit is 10% for commercial systems and zero for residential systems.
Businesses can take advantage of an Accelerated Depreciation (MACRS) over 5 years and are allowed to depreciate 85% of the cost of the solar system.
Net metering is a bill structure for people who produce some of their own power. Through net metering, grid-tied solar systems earn retail rate “credits” with your utility whenever your system produces excess electricity (more than you are consuming at the moment). Then, when you need more electricity than you produce, you spend those credits. This can be thought of as spinning your meter backward, but in reality, your utility will report to you on each bill the KWH you send to the grid and the amount you draw from the grid. The “net” amount is what you pay for electricity that month, however, you can never owe less than the monthly minimum for your utility. Credits roll over month to month but at “year-end”, they zero out. Year-end for net metering in Washington is March 31, with some exceptions for agricultural uses with some utilities (for example, farmers who run irrigation pumps only during summer).
Net Metering is a contract you sign with your utility. Your utility’s website has further details; look for “net metering” or “customer generation.” Net-metered customers still pay their utilities fixed base rate which is designed to cover the utility’s fixed assets like poles and wires.