Vermont Solar Rebates and Incentives

How Much Can You Save on Solar in Vermont?

Key Details

• Eligible expenses for the federal tax credit include solar PV panels, sales taxes and labor costs for solar installation.
• Property owners must determine their eligibility before applying for the credits.
• A Vermont net energy metering policy allows customers in the same utility service territory to share a net-metering system output up to 500 kW.
• The Vermont Department of Taxes offers property tax exemption for eligible properties.

Vermont Energy Profile

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

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.

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.

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.

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.

Federal Solar Tax Credit in Vermont

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 investment tax credit (ITC)
• The production tax credit (PTC)

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:

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 PV panels cost
• Sales taxes on eligible solar expenses
• CSP equipment costs for commercial properties
• Solar equipment costs, including inverters, wiring, and mounting equipment
• Labor costs for solar installation, including permitting, inspection, and developer costs
• Cost of circuit breakers, step-up transformers, and surge arrestors for commercial properties
• Cost of energy storage devices with a capacity rating of 3 kilowatt-hours (kWh) or greater for residential properties and 5 kilowatt-hours (kWh) or greater for commercial properties

Eligibility

Solar projects must meet the following eligibility requirements before property owners can claim federal tax credits:

• The solar system must be new
• The commercial solar system must not be leased to a tax-exempt entity.
• The solar system must be located in the U.S. Commercial properties located in the U.S. territories are also eligible.
• Residential solar systems must be installed between early January 2017 and late December 2034.
• The homeowner must own the solar system or purchase an interest in an off-site community solar project. The homeowner must not be leasing the system or buying electricity generated by the system from a solar company.

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.

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

Property owners can follow the steps below to claim federal solar tax credits in Vermont:

Step 1. Determine Eligibility

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.

Step 2. File the required forms

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.

Step 3. Seek Professional Tax Advice

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.

Net Energy Metering in Vermont

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:

• Not exceed 500 kW capacity
• Employ a renewable energy source
• Be constructed to offset the solar customer’s electricity requirements

The system must:

• Use any fuel source in compliance with air quality standards.
• Be a qualified micro-combined heat and power system (as defined in 30 V.S.A. § 8015(b)) that does not exceed 20 kW.

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:

• The customer’s solar panel transforms energy from the sun into electricity.
• The house has an inverter that converts the electricity from direct current to alternating current.
• The energy is used to power the home.
• A bi-directional meter already installed in the home measures energy from the grid and excess energy produced by the solar panels.

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.

How to Enrol for Net Energy metering in Vermont

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:

• Create an ePUC account
• Log in to ePUC
• Scroll to the left navigation menu and select net metering from the list of case types
• Fill out and submit the net metering registration form

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:

• Hydroelectric facilities that do not exceed 500 kW
• Ground-mounted photovoltaic systems that do not exceed 15 kW
• Roof-mounted photovoltaic systems that do not exceed 500 kW

Applicants must file the “Request for Waiver of Requirement to Use ePUC and Notice of Appearance” form. This form, alongside the original Net Metering Registration Form, must be mailed to the PUC at:

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:

• The Vermont Department of Public Service
• The Vermont Agency of Natural Resources, Office of Planning and Legal Affairs
• The customer’s electric utility service provider

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.

Vermont Property Tax Exemption

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:

• Be operated on a net-metered system or
• Not be connected to the grid and only provides power on the property on which the plant is located.

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.

Vermont Property-Assessed Clean Energy (PACE) Financing

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:

• Eligible property owners: Only property owners who meet the following minimum eligibility requirements are allowed to participate in the PACE program:
  • They must have current tax payments
  • No delinquent payments for 3 years before applying for PACE
  • No involuntary liens like mechanics and judgment liens on the property
  • The property owners must not be in bankruptcy
  • The property must meet housing codes
  • The property owner must PACE Assessment Underwriting Criteria and Standards provided by the Vermont Department of Financial Regulation.
• Eligible properties: Only residential properties where property owners pay property taxes on their dwellings can participate in the PACE program. These properties could be residential structures or mobile homes with individual units of condos or cooperatives or four-family housing units. Be aware that residential property cannot be an asset in a bankruptcy case.
• Eligible energy projects: Only measures that are permanently attached to the property, reduce the net energy requirements for the building, and are energy-related repair, health, and safety measures are eligible. Below are the eligible energy projects:
  • Heat pumps
  • Insulating pipes
  • Installing ceiling fans
  • Small wind systems
  • Micro-hydro systems
  • Solar water heating systems
  • Sealing and insulating ducts
  • Blower-door guided air sealing
  • Hot water heat recovery systems
  • Heat-recovery ventilation systems
  • Insulating walls, attics, basements
  • Biomass energy heating systems
  • Solar water or space heating systems
  • Solar electric (photovoltaic) systems
  • Small wind or micro-hydro systems
  • Installing energy-efficient light fixtures
  • Replacing/renovating windows or doors
  • Efficient exhaust-only ventilation systems
  • Services of an energy expert/professional
  • Upgrading heating systems and water heaters to higher efficiency

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.

Before a homeowner can participate in PACE program, they must get a written analysis from a qualified entity. This entity could be Efficiency Vermont or Burlington Electric Department.

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 property deed
• The property’s assessed value
• The non-refundable application fees
• The total amount of the debts on the property
• A written analysis of the proposed energy improvement
• Any document that reveals the identity of the property owner’s installation contractor (s)
• Additional information needed to meet the underwriting criteria established by the Vermont Department of Financial Regulation.
• Standard representations like:
  • No tax debts for the past 3 years
  • No previous foreclosure action
  • Not a party to a legal action
  • No bankruptcy filings for the past 7 years
  • The property must be up to code

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.

State Sales Tax Exemptions in Vermont

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):

• Facilities used to manufacture and sell electricity
• Home and business energy generation systems

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:

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:

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.

For manufacturing exemption, the purchaser must submit an S-3M exemption certificate. Use the S-3E exemption certificate for home and business renewable energy systems sales tax exemption.

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.

Vermont Household Profile

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.