Virginia Solar Rebates and Incentives

How Much Can You Save on Solar in Virginia?

Key Details

• As of 2023, Virginia is the tenth-highest electricity consuming state in the US.
• Solar, wind, and biomass are the main renewable energy sources for Virginia.
• In 2020, Virginia's total energy consumption per capita was 263.3 million BTUs.
• Virginians can take advantage of solar incentives such as Federal tax credits and other solar rebates to reduce their electricity bills

Virginia Energy Profile

As of 2021, Virginia was the 10th leading electricity-consuming state in the US, consuming an estimated 125.25 terawatts per hour. In the same year, the state generated 93.5 million megawatts from both renewable and non-renewable energy sources.

Non-renewable sources, nuclear power and natural gas, power 87 percent of the state's electricity demand. In contrast, renewable energy sources account for less than 10 percent of the power consumed in the state.

Virginia is the 14th leading solar energy-producing state in the US. It generated 949,111 megawatts-hour of solar energy in 2021. Note that the solar output is set to increase as the state takes measures to install more solar farms before 2030.

Virginia Solar Energy Incentives at a Glance

What are the major renewable energy sources in Virginia?

Solar, wind, and biomass are the major renewable energy sources in the state. Of these options, solar energy is the most - developed and popular energy source in the residential sector.

In comparison, wind energy is still in the developmental stage. As of 2023, the state has installed two 6-megawatt wind turbines via the Coastal Virginia Offshore Wind (CVOW) pilot project. Nevertheless, the Virginia Energy Agency projects to install 10 gigawatts of offshore wind turbines by 2030.

Biomass is also another important renewable energy resource in the state, accounting for up to 40 percent of renewable energy production. The state uses wood pellets and other solid waste to power its Biomass facilities. Liquid biodiesel is also another form of biomass used in energy generation.

Here's a breakdown of the energy sources responsible for Virginia's electricity consumption.

Virginia is yet to fully develop biomass as a source of renewable energy. According to Virginia's Department of Environmental Quality, renewable energy sources will produce 30 percent of the state's electricity demand.

Note: Virginia allows residents to purchase 100 percent of their electricity from renewable energy sources. Furthermore, it implemented the Virginia Clean Economy Act which requires utility companies to invest more in the wind and solar energy-producing facilities.

Virginia Household Profile

According to the Energy Information Administration report for 2020, Virginia's total energy consumption per capita is 263.3 million BTU. A further breakdown of the energy consumption in different sectors showed that:

• Housing units in the residential sector consumed 63.7 million BTUs in energy per capita.
• Commercial establishments consumed 70.7 million BTUs in energy per capita.

Note: BTU is the abbreviation for British Thermal Unit. It's the heat level required to raise a pound of water by one degree Fahrenheit. A million BTU is equivalent to energy derived from eight gallons of motor gasoline.

As of 2021, there were 3,652,388 housing units in the residential sector. About 66 percent of these housing units are owner-occupied. Furthermore, owner-occupied units have a median value of $295,500. The state also issued 39,388 building permits in 2021. This means more housing units will be set up over the next two years. That said, there'll be a higher demand for energy as more housing units get completed. Also, shared housing units will consume more BTUs in energy per capita.

Residents will also push to install renewable energy sources as energy consumption increases. Thankfully, there are tax credits for solar panels, such as the federal tax credit and other solar energy rebates. These incentives will also boost the median value of owner-occupied units in Virginia.

Federal Solar Tax Credit in Virginia

The federal solar tax credit helps reduce your federal income tax for installing a solar energy system. Virginia’s solar users can deduct 30% of the cost of installing solar from their income tax. So, if the PV system costs $20,000, you can request a $6,000 (30%) reduction in your federal taxable income.

Solar users can also get additional incentives under the ITC program. If you meet labor requirements, you can obtain an additional 10% each for the following:

• Energy community bonus
• Domestic content bonus.

However, the ITC program has a lifeline. The program will expire in 2036. Before it expires, here's the rate schedule:

• The ITC only offers 30 percent tax credits for PV systems installed before the end of 2033.
• The tax credit will fall to 22.5 percent for PV systems installed between 2034 and 2035.
• The rate will further decrease to 15 percent for systems installed by 2035 Furthermore, you will receive a 15 percent ITC

So, what expenses will the Solar Investment Tax Credit Cover?

Virginia residents can claim ITC for any of the following solar equipment:

• Solar inverters, panels, and use taxes on this equipment.
• Solar batteries with a capacity rating of 5 kWh and above.
• Expenses on the distribution of generated solar power within the peppery and to the electricity grid. This applies to solar systems that generate less than 5 MW.
• Cost of circuit breakers, set-up transformers, and surge arrestors.
• Installation costs. However, this does not cover the cost of roof installation.
• Cost of installing structures designed for supporting solar energy.

Eligibility

The ITC will only cover PV systems that meet these criteria:

• The PV system must be installed in the US or U.S. territories.
• Must not be leased to a tax-exempt entity like religious organizations and schools. These entities receive the ITC as direct payments, and not in the form of tax write-offs.
• The PV system must be new or previously used, but still in good condition.

Solar users can access the Energy Community bonus if they reside in an energy community. An energy community is one of the following:

• An area where the tax revenue is higher due to the extraction or processing, or transport of fossil-based energy sources. Also, the area must have an unemployment rate equal or greater than the national average.
• The area is a brownfield site.

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

You can claim the federal solar tax credit in Virginia by attaching Form 5695 to your tax return. Here's a step-by-step guide for the process:

1. Download the IRS Form 5695

The IRS Form 5695 is the official document for obtaining solar tax credits. It also contains information on how to fill out the form. You will find specific instructions on filling out Part I (Residential Clean Energy Credit) and Part II (Energy Efficient Home Improvement Credit).

2. Fill out the Line 1 section

This section is for the total cost of solar installation. It does not include any cash rebates received for the installation. You can find the total cost on your invoice.

3. Next, complete the rest of the form

Calculate the solar tax credit and input the answer in lines 5 and 6. Solar users may fill the Line 12 if there are remaining solar tax credits from the previous tax year.

4. Include your tax credit on line 5 of Schedule 3 of the IRS Form 1040.

Complete Form 1040 and send both documents to the mailing address below:

Internal Revenue Service
P.O. Box 931000
Louisville, KY 40293-1000
Department of the Treasury
Internal Revenue Service
Kansas City, MO 64999-0002

Net Energy Metering in Virginia

Net metering in Virginia is a billing agreement between Dominion Energy and renewable energy users. Under this rule, solar users connect their PV system to the grid. Furthermore, they will earn credits for generating solar energy. At the end of each month, Dominion Energy will subtract the earned credits from the monthly electricity bill.

For example, Jenny's PV system generates $1,500 in credits per month. However, her total energy usage for the month was $1,900.

Dominion Energy will subtract the credit from her total energy bills. In this case, she will only pay $400 to the utility company. Keep in mind that utility companies may charge extra fees for maintenance and other expenses.

What if Jenny's PV system generated more energy than she used in a month? In this situation, the utility company will pay her for the excess energy.

How to Enroll for Net Energy metering in Virginia

Virginia residents can enroll for net energy metering via these steps.

1. Submit an online application form or download and send it via mail to Dominion Energy. Fill out sections 1 to 4 on the form. In addition to this, you must include a Proof of Insurance form. For the online application, scan the Proof of Insurance form.

   On the other hand, you may send a mail request containing these documents to:

   Dominion Energy Virginia
   Net Metering
   600 Canal Place, 11th Floor
   P.O. Box 26666
   Richmond, VA 23261

2. Wait for approval from the utility company. Dominion Energy will send a signed copy of the notification form. Furthermore, it will include a list of recommendations about the required updates for connecting to the grid.

   Note: you are responsible for complying with all the government-enforced codes and regulations. Take note of your county's zoning requirements, electrical code, and other restrictions.

3. Next, fill out section 5 of the application form and re-submit. You may skip filling out this step if the PV system was installed by a licensed Class A or B General Contractor. That said, Dominion Energy will complete the net metering process and send a written authorization for you to operate the system.

What is the Virginia Clean Economy Act?

The Virginia Clean Economy Act (HB 1526 and SB 851) requires the state's utility companies to generate power from only renewable energy sources. Virginia's utility companies, Appalachian Electric Power and Dominion Energy, must adhere to this law before 2050.

In addition, the act requires Dominion Energy to adopt renewable energy by 41 percent in 2030. On the other hand, Appalachian Electric Power must meet this requirement by 30 percent in 2030.

The Virginia Clean Economy Act comes with these initiatives:

• The Act requires Dominion Energy to develop 5,200 megawatts of offshore wind power by 2030.
• The law also increases the limit on the power purchase agreement from 57 megawatts to 1,076 megawatts.
• The act also limits the monthly bills of those living in low-income areas in the state.

So, what is the overall impact of the Virginia Clean Energy Act on homeowners?

The act will protect Virginia's homeowners from unfair increases in electricity costs. Through this program, the average home will save up to $3,500 within 30 years.

There will be less pollution since utility companies no longer beef to burn fossil fuels. Furthermore, the act will create over 13,500 jobs in the energy sector. Overall, this program provides up to $69.5 billion in net benefits.

Will the Virginia Clean Economy Act increase SRECS?

Yes. The VCEA will boost the demand for SRECS and consequently increase the prices. Currently, solar users get between $30 and $70 for one SRECS certificate. The demand for SRECS will increase since the act requires solar companies to source one percent of their energy from consumer-owned solar systems.

Note: SREC is a solar energy incentive in which you earn money for generating solar power. Utility companies will issue an SREC certificate for every 1,000 kWh of solar power generated.

What is the Virginia Energy Efficient Buildings Tax Exemption?

This is a popular solar energy incentive in which solar users are exempt from paying local property taxes on their property. However, not all buildings are eligible to obtain this incentive. Here's how to know if your building qualifies for this incentive:

1. The building must exceed the standards in the Virginia Uniform Building Statewide Code by 30%.
2. The building must be Energy Star-qualified. The US Environmental Protection Agency covers these requirements in the Energy Star program.
3. The building must exceed the requirements outlined in Green Globes Green Building Rating System.

Local Virginia Property Tax Exemption

Virginia has a local property tax exemption for residential and commercial solar users

Under Chapter 496 (SB 686), agricultural and residential solar installations up to 25 kWh in capacity are exempt from local property tax. Commercial solar users can also apply for the local property tax exemption on their property. However, the installed system must be up to 150 MW in capacity.