Washington Solar Rebates and Incentives
How Much Can You Save on Solar in Washington?
Key Details
- Homeowners can save on solar installations in Washington using federal tax credits.
- State laws like the Washington Energy Independence Act (2006) and Clean Energy Transformation Act (CETA) help provide affordable financing options.
- Net metering enables residents to sell excess energy that their system generates to the grid and offset their utility bills.
- Residents may be eligible for sales tax exemption for equipment below 100 kW.
Washington Energy Profile
Washington is one of the largest producers of renewable energy in the United States. The Evergreen State receives 2170 hours of sunlight annually, the state has 36 solar installations with a combined capacity of 585 MegaWatts (MW).
Washington renewable energy rebates and incentives.
| Washington Solar Incentives | State or Federal | Program Overview |
| Investment Tax Credit | Federal | The government shoulders a portion of your installation cost through a reduction in your income tax. |
| Property-Assessed Clean Energy (PACE) Financing | State | Helps private-owned commercial buildings get competitive and low-interest loans for their energy system. |
| Sales Tax Exemption | State | The state does not charge its compulsory sales tax on solar equipment. Hence saving you some money when you get one. |
| Net Metering | State | The program enables solar users to sell excess energy that their system generates to the grid to offset their utility bills. |
As of 2020, Washhington’s total energy consumption per capita was 230.5 million Btu. Within the same period, the state recorded a population of 7,705,281 residents and 2,931,841 households.
The state’s residential sector accounts for 60.2 Million Btu of energy per capita, around one-fourth of the state’s energy consumption. At the same time, commercial and industrial energy consumption per capita stands at 42.9 and 62.1 Million Btu, respectively.
As of 2021, the state had 3,257,185 housing units, with 63.6% occupied by owners. The median household income within the period is $82,400.
How Cheap or Affordable is Solar Energy in Washington?
According to the US Energy Information Administration (EIA), the average retail price of grid energy in Washington is 8.75 cents per kilowatt hour (kWh). This makes Washington one of the states with the lowest average US electricity rate.
| State | Number of solar Installations | MW Installed | Average cost for grid power (2021) | Average cost per watt |
| Washington | 36 | 585 | 8.75 cents/ kWh | $2.73 |
As of 2023, the average cost of installing a 6kw solar energy system in Washington is around $18,900. But this gross cost reduces by 30% when the federal solar tax credit is applied.
As such, through this credit, homeowners can expect to save up to $5,670 when they install solar in Washington.
Between 2012 and 2022, the cost of solar panels in the state dropped 53% to around $2.73 per watt.
In addition to the Washington solar panel tax credit, eligible homeowners can also enjoy several other solar energy incentives that reduce their installation costs and provide affordable financing.
| State | Cost of installing a 6kw system | Federal tax credit value 2021 (26%) | Federal tax credit value 2023 (30%) |
| Washington | $18,900 | $4,914 | $5,670 |
Renewable Energy in Washington
One of the states leading in renewable energy production, Washington generates 90% of its power from renewable sources. Hydroelectric power consists of the most significant portion of the state’s net production, accounting for 67%.
Eight of the state’s largest power plants by capacity and size are hydroelectric facilities. This makes Washington the largest producer of hydroelectricity in the US. The state also generates a significant amount of its electricity from wind and natural gas.
The state wind-powered capacity is 3,400 megawatts, with its largest wind farm located along the Snake River.
The enactment of the Washington Energy Independence Act in 2006 and the Clean Energy Transformation Act (CETA) in 2019 provided a roadmap to the state’s switch to renewable energy.
Under these legislations, by 2020, utilities with 25,000 or more retail customers must generate a minimum of 15% of power sold from renewable sources.
Furthermore, all energy sold within the state should be generated from renewable sources by 2045. These laws have been the driving force for the introduction of several renewable energy incentives in Washington.
Federal Solar Tax Credit in Washington
The federal solar tax credit or investment tax credit (ITC) was introduced in 2016 as compensation for people that install renewable power systems. Eligible persons and businesses can claim tax credits equivalent to a percentage spent on their installation.
The tax credits are then applied as a reduction on their federal income tax. Basically, the government foots a portion of your solar installation cost by reducing the income tax you pay. And there’s no maximum amount you can claim through the solar tax credits.
Note: The federal solar tax credit has different rates depending on when the solar system was installed. As such, a 26% tax credit applies to solar systems installed in 2020, 2021, and 2033.
Between 2022 and 2032, the rate would be 30%. The renewable energy tax credit is set to expire in 2035 if no legislation extends it.
| State | Cost of installing a 6kw system | Federal tax credit value 2021 (26%) | Federal tax credit value 2023 (30%) |
| Washington | $18,900 | $4,914 | $5,670 |
Eligibility
To be eligible for the federal solar tax credit in Washington, you must meet the following requirements
- Own a solar electric system or purchase an interest in an off-site community solar project. The Washington tax credit for solar panels only applies to homeowners that own their energy system. People that use solar under lease agreements or power purchase agreements cannot claim the Washington solar panel tax credit.
- The solar must be in a residence of yours within the state.
- The solar energy system must be new or used for the first time.
Note that you can only enjoy the renewable energy tax credit rate for the tax year that your installation was completed.
Additionally, eligible installations are those done between January 1, 2017, and December 31, 2034. The solar tax credit factors in the cost of panels, installation, equipment, and power storage.
How do I claim the Federal Solar Tax Credit in Washington?
To claim your federal tax credit in Washington,
Step 1. File the IRS Form 5695 as part of your tax return. Your solar installation will come under qualified solar electric property costs.
Step 2. To fill out Form 5695, you need to calculate the total cost of your installation. Then deduct the value of other solar energy incentives you have received.
Step 3. Next, multiply the result by the applicable credit rate to get your federal solar credit. Remember that the credit rate depends on the year of your solar installation.
Step 4. Calculate your tax liability and determine whether you can get all your credit in one tax year.
Step 5. Calculate the maximum credit you can receive in the year and the amount you’d have to carry over.
Step 6. Transfer the result of your calculation from IRS Form 5695 to IRS Form 1040.
Net Energy Metering in Washington
Net metering allows solar users in the state to get credits for excess generation that their installation sends to the grid. These credits can be used to reduce or offset your energy bills during low energy production periods, such as during winter.
If your consumption is more than the value of your credits, you’ll only be billed the difference or net value.
Net metering credits accumulated in a year can only be applied to your bill that year. They reset to zero every March 31, which is the beginning of another billing period.
Per state law, Net Metering of Electricity - RCW 80.60, the net metering program is only open to systems that generate 100kW or below. The program will stop accepting users when the total generation from net metering reaches the peak utility demand as of 1996. Till then, eligible customers will be admitted on a first-come, first-serve basis.
How to Enroll for Net Energy metering in Washington
To take part in Washington’s net metering program, you must:
- Ensure you are connected to any of the three investor-owned electric utilities in the state. They are Avista Corporation, Pacific Power & Light Corporation, and Puget Sound Energy.
- Approach the company for interconnection, which connects your energy system to the grid.
Washington Property Tax Exemption
As of 2023, solar users in Washington do not enjoy property tax exemption for their energy system. Generally, Washington residents pay property tax on their homes and other buildings. The tax payable depends on the value of the property in question.
Adding an installation or other improvements to your building increases the building’s value. As a result, the property tax increases after the building is assessed. When there is an exemption for an improvement made to your building, it means the improvements will not affect the value of the building for taxation purposes.
However, this is not the case for solar installations in Washington.
Washington Property-Assessed Clean Energy (PACE) Financing
Washington commenced its Property-Assessed Clean Energy (PACE) financing program in 2020. Pursuant to state law Chapter 36.165 RCW, the PACE program provides qualifying residents with the required financing for their solar and other renewable sources.
The repayment plan, usually in the form of a tax assessment, is tied to the property. As a result, the obligation passes with the building, and the current homeowner continues repayment. PACE is a voluntary program. Counties in the state can choose whether or not to participate in the plan.
PACE provides homeowners with a relaxed and accommodating financing plan for their renewable energy switch. The loan interest rates under this program range from 6.5% to 8.49%. Homeowners with good credit may attract an even lower rate. The solar energy incentive is currently open to commercial, industrial, religious, and multifamily residential properties in participating counties. Other eligibility requirements for the program include
- Legal ownership of the recipient building without any contention of the title.
- Private ownership. Government buildings cannot enjoy the incentive.
- Eligibility to pay property tax.
It is important to note that PACE debts take precedence over all other liabilities attached to the building besides taxes due.
State Sales Tax Exemptions in Washington
The State of Washington provides a sales tax exemption for solar system panels and equipment. Under state law WAC 458-20-145, residents are to pay taxes for retail sales made in the state.
The buyer pays it to the seller, who then forwards it to the appropriate authority. Washington's sales tax rate is made up of two rates. The state rate is 6.5%, and the local rates vary from locality to locality.
Solar installations below 100kW are exempted from these taxes from July 2019 to December 2029. Instead, installations between 100 kW to 500 kW enjoy a 50% exemption from sales tax. This makes the exemption more encompassing than other renewable energy incentives in Washington, as it benefits systems of different sizes.
