Pennsylvania Solar Rebates and Incentives

How Much Can You Save on Solar in Pennsylvania?

Key Details

• Pennsylvania has several federal and state incentives available to help make going solar easier
• The Federal Solar Tax Credit allows residents to deduct 30% from their taxes when installing solar panels in their homes
• As of 2023, Property Tax Exemptions are not available in Pennsylvania; however there are other tax credits and rebates that can be utilized.

Pennsylvania Energy Profile

Pennsylvania receives 3,939 kilojoules (kj) of average sunlight annually. As of 2023, the number of solar installations in Pennsylvania stands at 53. Solar generation increased from 260 megawatts (MW) in 2015 to 1,002 mW in 2022.

Solar energy is a major source of renewable energy in Pennsylvania, producing 11% of the state's total renewable electricity in 2021. Within the same year, Pennsylvania generated about three-fourths of its solar energy from small-scale generating systems like rooftop solar panels and other solar generating facilities.

Pennsylvania Solar Tax and Incentives at a Glance

How Cheap or Affordable is Solar Energy in Delaware?

According to the US Energy Information Association (EIA), the average retail cost of grid electricity in Pennsylvania (as of 2022) is 9.97 cents per kWh. In comparison, the average cost of solar panels per watt stands at $2.38.

If you're using a 6 kilowatt (kW) solar system in your home in Pennsylvania, you're likely to pay an average installation cost of $15,420, which saves you about $3,392 after deducting your federal tax credit.

According to the 2020 Energy Information Administration (EIA) data, the total energy consumption per capita in Pennsylvania is 262.7. The state's residences recorded 65.4 in energy consumption, commercial establishments (40.4), industrial establishments (96.5), and transportation (60.4).

Renewable Energy in Pennsylvania

In 2021, Pennsylvania's renewable energy sources (wind energy, solar energy, hydropower, and biomass) produced 3% of the state's electricity. Wind was the largest renewable energy resource in Pennsylvania, producing about two-fifths of the state's renewable electricity.

Another major renewable energy source in the state is hydropower, which accounts for three-tenths of Pennsylvania's renewable electricity. The state is blessed with two pumped storage hydroelectric plants, one of which has 452 MW of generating capacity and the other with 1,070 MW of capacity.

Federal Solar Tax Credit in Pennsylvania

The federal solar tax credit, also known as an Investment Tax Credit or ITC, offers a dollar-for-dollar reduction in iincome taxes, allowing homeowners to reduce the cost of their solar system by 30%.

In 2020 and 2021, the ITC was set at a 26% rate for solar panel systems installed within this period. In August 2022, Congress raised the rate to 30% for solar systems installed between 2022 and 2032.

This rate is scheduled to drop to 26% for systems installed in 2033 and 22% for systems installed in 2034. Unless it is renewed again, the federal tax credit is set to expire in 2035.

Eligibility

You are eligible for federal solar tax credit in Pennsylvania if you meet any of the following requirements:

• You own a solar panel system either with a cash purchase or through a solar loan. You must not have signed a lease or PPA with a solar company.
• The solar system is located at your primary or secondary residence in Pennsylvania. You won't be eligible for the tax credit if you're a renter.
• The solar system was installed between January 1, 2017, and December 31, 2034.
• Your solar system is new or is being used for the first time. You can only receive the credit on the original installation of the solar equipment. This means that you won't be eligible if you bought a house that came with an already installed solar panel system.
• You must pay enough federal taxes to qualify for the tax credit. It’s a tax credit and not a rebate.

Note

Even if you don't purchase your solar system outrightly, you may still take advantage of the tax credit with a solar loan or even a solar lease in some cases.

When you sign a lease or power purchase agreement (PPA) with a solar installer, you can't claim the tax credit directly. But you may be able to enjoy any leasing discounts related to the credit that the solar installer receives.

How do I claim the Federal Solar Tax Credit in Pennsylvania?

To claim the 30% federal tax credit you'll need four IRS tax forms to file for your solar tax credit. These are Form 1040, Schedule 3 (Form 1040), Form 5695, and Instructions for Form 5695.

Here is a quick step-by-step guide on how to claim your solar tax credit in Pennsylvania:

• Step 1: Make sure you fulfill all eligibility requirements for the tax credit.
• Step 2: Complete IRS Form 5695 to claim your residential energy credits. To complete this form, you'll need to calculate the total cost of your solar system, including labor, equipment, and installation costs. You will have to deduct any rebate you've received for installing your solar panel from the total installation cost.
• Step 3: Enter the total cost of your solar system on line one of Form 5695. If you're not claiming any other residential energy credits, move to line five and write the same figure again. Then, multiply the amount by 30% (for systems installed in 2022 and 2023) and enter the result on line six.
• Step 4: Parts of Form 5695 relate to fuel cells and credits that roll over from last year's taxes. If these situations do not apply to you, skip to line 13 and write the same amount you wrote on line six.
• Step 5: Add the tax credit to your IRS Form 1040 using Schedule 3. You'll need to write the same figure that you wrote on line six in line five of Schedule 3.
• Step 6: Complete the rest of Schedule 3 and add up your total sum of refundable tax credits on line 8. Enter the amount from Schedule 3 line eight into Form 1040 line 20. Do not forget to attach Form 5695 when filing your taxes.

Net Energy Metering in Pennsylvania

Net metering allows you to earn full credits on your power bill for any excess electricity that you sent to the grid. With this program, you can enjoy the full benefits of your home solar power and also maximize your long-term energy savings.

In Pennsylvania, net metering came into operation after the passage of the 2004 Alternative Energy Portfolio Standards Act (AEPS). The Act defined how residents who own small renewable facilities like home solar panels can connect to the grid, and how they can get paid for the clean energy their system produces.

Pennsylvania law requires all electric utility companies in the state to purchase excess renewable energy from eligible system owners at the full retail rate. This means that you can participate in the state's net metering program, as long as you're a customer of any utility company in Pennsylvania.

These include companies like FirstEnergy (Penn Power), Duquesne Light Company, and Pennsylvania Electric Company (PECO).

How to Enrol for Net Energy metering in Pennsylvania

Enrolling for net metering in Pennsylvania is an easy process and won't require much effort from you. Here are a few steps to take when setting up for net metering:

• Step 1: Contact your electric company and confirm that you have a bidirectional meter installed in your home. You'll need this type of meter if you want interconnection to be possible.
• Step 2: Make sure your electric company offers net metering. You can call the company to confirm if the program is available. Remember to also confirm the credit rate associated with the program.
• Step 3: Find a local solar installer and confirm that they will enroll you for net metering. Once this is done, be sure to complete the installation process.
• Step 4: Pay close attention to your electricity bills for a month or two and ensure your credits are updated as expected.

Pennsylvania Property-Assessed Clean Energy (PACE) Financing

In addition to solar rebates, Pennsylvania offers financing programs like the Property Assessed Clean Energy (PACE) to help with the costs of solar. PACE financing provides long-term and low-interest loans to residential or commercial property owners to pay the up-front cost of their solar panel systems. The repayment is done through a voluntary property tax assessment collected by local authorities in Pennsylvania.

Payment is made over a specified timeframe, usually 10 to 20 years. Keep in mind that a PACE assessment is a debt of property, meaning the debt is attached to the property and not the property owner. The obligation to repay the loan may therefore transfer with property ownership, especially if the buyer has agreed to assume the PACE obligation.

State Sales Tax Exemptions in Pennsylvania

As of 2023, Pennsylvania doesn't offer sales tax exemptions to solar owners. This exemption excludes you from paying any state sales tax after buying solar panels, solar batteries, and other types of solar equipment.

In states where it's offered, a sales tax exemptions can help reduce the total costs of purchasing a solar system, making it more affordable to go solar. However, although Pennsylvania doesn't provide sales tax exemptions, residents can still enjoy discounts wih the 30% federal tax credit.

Pennsylvania Property Tax Exemption

As of 2023, Pennsylvania doesn't offer property tax exemptions for homeowners with solar panel systems. With property tax exemptions, you can exclude the added value of your system from the valuation of your property for tax assessment purposes.