How Much Can You Save on Solar in Vermont?
Vermont receives about 3,826 KJ/m2 of annual sunlight, sufficient for solar energy generation. As of 2022, 18.44% of the electricity generated in the state came from solar. About 417 MV of solar was installed in Vermont, powering about 73,356 homes. There were also 9 solar companies in the state offering 1,193 solar jobs to residents.
Federal, State and Local Solar Credits Available in Vermont
|Vermont Solar Incentives||State or Federal||Program Overview|
|Sales Tax Exemptions||State||Solar customers save on their upfront costs when they go solar in Vermont.|
|Property-Assessed Clean Energy (PACE)||State||This program helps finance energy-efficient home improvements by loaning money to homeowners. The loan repayment is tied to the property rather than the owner.|
|Property Tax Exemption||State||Exempts solar customers from some or all of the property taxes related to an increase in home value due to solar installation.|
|Net Energy Metering||State||This solar energy incentive allows solar customers to get credit on their electric bills for each kWh of energy sent back to the grid.|
|Federal Solar Tax Credit||Federal||It gives property owners a 30% reduction in solar system costs.|
How Cheap or Affordable is Solar Energy in Vermont?
As of 2021, Vermont’s average retail cost of grid electricity was 16.34 cents/kWh. The average cost of solar panels per watt in the state is $2.85.
|State||Number of solar Installations||MW Installed||Average cost for grid power (2021)||Average cost per watts|
The cost of installing a 6kw solar system in Vermont is $16,620. Homeowners can save up to $3,656 with the federal solar tax credit.
|State||Cost of installing a 6kw system||Federal tax credit value 2023 (30%)|
Vermont had a total energy consumption per capita of 195.6 Million Btu in 2020. Approximately 68 Million Btu of this energy consumption was from residential properties. The consumption for commercial establishments was 39.4 Million Btu. The table below shows sever
Renewable Energy in Vermont
Vermont's largest share of in-state electricity net generation comes from renewable resources like hydroelectric plants, biomass, solar, and wind energy. Vermont has about 47 hydroelectric plants that generate 46% of the total electricity used in the state.
Biomass accounted for 23% of the state’s total net generation. This biomass energy comes from wood and wood wastes. Most houses and schools in Vermont rely on wood for heat. The biomass resources also feed the wood pellet manufacturing plant in Vermont. The plant has an annual production capacity of 16,000 tons.
As of 2021, solar energy installations accounted for 16% of Vermont's total in-state net generation. In late June 2022, solar systems with a total capacity of 288 megawatts were installed at large- and small-scale sites in Vermont.
Vermont's largest solar farm has a capacity of 20 megawatts.
In 2021, the utility-scale wind farms in Vermont accounted for 14% of the state's total net generation. These wind facilities have a combined 150 megawatts of capacity.
Per 30 V.S.A. § 8002-8005, Vermont enacted a renewable energy standard (RES) that electric distribution utilities (DUs) must meet. The RES projects that all retail electricity suppliers will obtain 75% of their annual sales from eligible renewable sources by 2032.
This projection includes customer-sited facilities with 5 megawatts or less capacities, producing 10% of this energy. Vermont projects that 25% of its energy needs will come from renewable sources by 2025, 45% by 2035, and 90% by 2050. The state also allows net metering of up to 500 kilowatts of capacity from solar customers.
The Internal Revenue Service (IRS) issues federal solar tax credits to reduce taxpayers' income taxes on solar system costs. Both commercial and residential solar systems can benefit from this credit. Federal solar tax credits for businesses come in two types:
The calculation of PTC is based on the electricity a system produces, while that of ITC is based on the cost of building the system. The IRS does not allow taxpayers to claim both the ITC and the PTC for the same property.
However, PTC and ITC can be claimed for co-located systems. The percentage taxpayers can save on solar system costs varies by installation year. The table below shows the value of the federal solar tax credit by installation year:
|Solar Installation Year||Federal Solar Tax Credit For Home||Federal Solar Tax Credit For Business|
|Between 2020 and 2021||26%||26% for ITC|
|Between 2022 and 2032||30%||30% for ITC; 2.6¢ for PTC|
|2033||26%||30% for ITC; 2.6¢ for PTC|
|2034||22%||22.5% for ITC; 2.0¢ for PTC|
|2035||0%||15% for ITC; 1.3¢ for PTC|
The federal solar tax credit does not cover all expenses. For example, roof installation costs for commercial properties are generally excluded. Eligible expenses for the federal tax credit are:
Solar projects must meet the following eligibility requirements before property owners can claim federal tax credits:
An eligible property owner can apply for a Vermont tax credit for solar panels while applying for federal solar tax credits. This is because Vermont solar panel tax credit does not reduce federal tax credits and vice versa. However, a property owner's taxable income on federal taxes may be higher when receiving a Vermont renewable energy tax credit.
Property owners can follow the steps below to claim federal solar tax credits in Vermont:
Property owners must determine their eligibility before applying for federal tax credits. Check the resources the U.S. Department of Energy Solar Energy Technologies Office (SETO) provides to determine federal solar tax credit eligibility. Generally, only solar systems located in the united states qualify for solar tax credits.
After determining eligibility, homeowners must complete and attach IRS Form 5695 to their federal tax returns.
In contrast, commercial property owners must attach IRS Form 3468 and 8962 to their tax returns to claim ITC and PTC, respectively. Property owners can file these forms online on the Internal Revenue Service (IRS) website.
It is recommendable to speak to a licensed tax professional before claiming a federal solar tax credit. These experts can help determine eligibility and file the appropriate federal solar tax credit forms.
In Vermont, net metering helps to measure the difference between the electricity a customer receives from the utility and the electricity the customer’s electric generation system sends back to the utility.
Customers in the same utility service territory can share in a net-metering system output. Per 30 V.S.A. § 8002(16), a customer’s solar system must meet one of the following requirements to qualify for net-metering:
The solar system must:
The system must:
The Vermont Public Utility Commission regulates the construction and operation of net-metering systems. A net metering customer must comply with the rules outlined in 30 V.S.A. § 8010. An example of how net metering works in Vermont using a residential solar system is:
Note that the energy used in the customer’s home will be drawn from the grid. While the excess energy produced by the solar panel is sent to the electric grid.
Customers who want to participate in net energy metering must send registration forms to the Public Utility Commission (PUC). All applicants must file the net metering forms online, except one of the exceptions stated in Commission Rule 2.110 applies to them. This is how to file a net metering registration form online:
After submitting the form, the ePUC will then send an email notification of the customer’s filing to their electric utility service provider. Additionally, an email notification will be sent to appropriate state agencies.
Alternatively, customers may apply for net metering manually. However, only the following types of systems can be registered:
Clerk of the Commission
Public Utility Commission
112 State Street, 4th Floor
Montpelier, VT 05620
Copies of the completed form must be sent to the following state agencies:
After filing the net metering form, there will be a 10-business-day comment period for systems that are 15 kW or less. A 30-calendar-day comment period for systems greater than 15 kW.
Customers are not permitted to start solar system installation if an objection to the installation of the facility is filed. They would have to address the issues raised in the objection. If there are no objections, PUC will issue a certificate of public good after the applicable comment period has expired. Afterward, the customer can commence site preparation or construction of the solar system.
The Vermont Department of Taxes provides property tax exemption to eligible properties in the state. Per 32 V.S.A. § 3802(17), real and personal property owners with renewable energy plants with a capacity that does not exceed 50 kW are exempted from property taxes. Specifically, the plant must:
Per 32 V.S.A. § 3802(19), real and personal property owners of energy storage facilities with a plant energy rating of less than 600 kWh are exempted from property tax. Note that the underlying land is not eligible for property tax exemption. Review the FS-1068 Taxation of Solar Plants guide for more information on property tax exemption for solar energy plants.
In 2009, Vermont passed legislation on the property-assessed clean energy (PACE) program. Per 24 V.S.A. § 3261, the legislative body of a town, city, or incorporated village must get votes from eligible voters to designate the municipality as a property-assessed clean energy district.
As of 2023, about 50 towns in Vermont have voted to create their own PACE districts. A municipality can fund the solar installation costs for residential properties by creating a PACE district.
Per 24 V.S.A. § 3262, eligible property owners who decide to participate in the PACE program will agree with the municipality to make assessment payments.
Note that PACE loans are only for approved energy efficiency and alternative energy projects on residential homes in Vermont Towns. PACE helps homeowners save more on energy than the cost of financing the project.
Homeowners pay back PACE loans through added assessments to the homes’ property tax bills. The loan is on the property, not the property owner. The new owner will take on the loan if the home is sold. A lien secures the loan on the property until it is paid off. The table below shows the eligibility requirements for PACE financing:
The amount available for PACE financing in Vermont is between $3,500 and $30,000. The duration of the PACE assessment cannot exceed the average lifetime of all energy improvement based on cost and cannot exceed 20 years.
The PACE program interest rate in Vermont depends on the cost incurred in getting and administrating funds for the program.
After receiving the written analysis, the homeowner can submit an application form provided by the PACE processor. The following must be submitted alongside the application form:
The homeowner’s application can either be denied or approved. The PACE processor will inform the homeowner about the reasons for the denial. However, a 30-day advance notice would be given to existing mortgage holders and the property owner if the application is approved. Then the PACE processor will set a closing date.
Note: Homeowners can terminate the PACE agreement after 3 days of executing the assessment agreement. The homeowner is responsible for energy improvement installation.
In Vermont, retail sales of tangible personal property are subject to sales tax unless exempted by law. Therefore, taxation applies to tangible personal properties incorporated into or consumed by renewable energy systems like biogas generation facilities and solar installations. However, the following properties incorporated into renewable energy systems are exempted from sales tax (32 V.S.A. § 9741):
Manufacturing sales tax exemption
This exemption is available for equipment, machinery, supplies, and monitoring devices purchased and used by renewable energy generation facilities (32 V.S.A. § 1.9741(14)). The table below shows the items that qualify for manufacturing sales tax exemption:
|Manufacturing Machinery and Equipment||Manufacturing Supplies||Monitoring Device|
|The item must be machinery and equipment||The material or supply must be a tangible personal property||The monitoring device must be used during the production of electricity|
|The item must be used or consumed directly in manufacture||The material or supply must be used in the manufacturing process||The monitoring device must be used to monitor manufacturing machinery and equipment or used to monitor the electricity produced.|
|The item must be used or be consumed exclusively in manufacture||The material or supply must have a useful life below 1 year|
|The item must be used to manufacture tangible personal property for sale, machinery or equipment, components, or supplies used in the manufacturing process||The material or supply must become a component part or be consumed or destroyed or lose its identity in the manufacture of tangible personal property for sale|
|The item must be used during the manufacturing process.|
Exemptions for home and business energy systems
Per 32 V.S.A. § 9741(46), home and business systems that produce electricity for personal use are excepted from sales tax. The table below shows tangible personal property incorporated into systems that qualify for sales tax exemption:
|Net Metering System||Off-the-Grid System||Solar Energy Water Heating System|
|The item must be tangible personal property.||The item must be tangible personal property like equipment, machinery, monitoring equipment, and supplies.||The system must be a hot water heating system|
|The item must be incorporated into the system, like safety equipment.||The item must be incorporated into the home or business energy system.||The system must be able to use and convert solar energy into thermal energy for heating water.|
|The system must be net-metered (30 V.S.A. § 8002(16). A net metered system must have a certificate of public good issued by the Public Utility Commission.||The system must meet net metering requirements. A certificate of a public good is not necessary.||Only a property that is directly needed for and used to capture, transform, or store solar energy is eligible.|
Purchasers must complete a tax exemption certificate and submit it to the seller. The certificate includes the type of exemption, information on the buyer and the seller, and purchase details.
The certificate can be provided to the seller before, during, or _90 day_s after the purchase. The seller must keep the exemption certificates for at least three years after the sale date.
As of 2022, over 647,000 people lived in Vermont. In 2021, Vermont had a housing unit of 336,779, with 72.1% of them ower-occupied and 27.9% available for rent. The state had nearly 270,000 households, with 2.35 persons per household. About 2,319 building permits were issued in Vermont in 2021.