Virginia Solar Incentives (Rebates, Tax Credits & More in 2023)
In this Virginia solar incentives guide, we’ll answer:
- What solar incentives can Virginians take advantage of in 2022?
- How much can I save with solar incentives in Virginia?
- How can I apply and qualify for each solar incentive in Virginia?
Disclaimer: This article is for informational purposes only. It should not be relied on for and is not intended to provide accounting, legal or tax advice.
Do Virginia Solar Incentives Make It Affordable for Homeowners to Go Solar?
The average cost of a solar panel system in Virginia is $30,250. That’s considering the per-watt price of solar equipment and the average energy consumption per household in the state.
Thankfully, residents can benefit from solar incentives in Virginia, including the 30% federal solar investment tax credit, Virginia’s Solar Renewable Energy Credits program, property tax exemption and net metering.
Virginia’s favorable incentives, ambitious renewable energy goals and below-average cost of solar equipment make it a top state for solar panel installations.1
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The below table highlights the main solar incentives available in Virginia:
|Solar Incentives in Virginia||Incentive Type||Description||Occurrence||Estimated Dollar Amount You Can Receive|
|Federal Solar Investment Tax Credit (ITC)||Federal||Virginia homeowners are eligible for a credit on their federal tax returns worth 30% of the cost of their solar panel system||Will apply to your federal tax returns and will roll over for up to five years||On average, $9,075 in VA|
|Virginia’s Solar Renewable Energy Credits (SREC) Program||State||Virginia’s SREC program allows homeowners to earn and sell energy credits for every 1,000 kilowatt-hours (1 megawatt-hour) they produce with their PV systems2||One SREC is earned every time you generate 1,000 kilowatt-hour (kWh) of energy||$20-$50 per SREC (an average-sized system in VA will generate around 13.2 SRECs each year)|
|Residential Property Tax Exemption for Solar in VA||State||Virginia’s property tax exemption prevents your property taxes from increasing as a result of going solar3||Exempted annually on tax returns||N/A|
|Net Metering in Virginia||State||Net metering programs offered by local utility companies — primarily Dominion Energy in Virginia — allow homeowners to sell excess energy back to their power provider||Monthly on electric bill||Up to the full cost of your electric bill each month|
What Do Virginia Residents Need to Know About the Federal Solar Tax Credit?
The federal solar investment tax credit, commonly abbreviated as the ITC, is a solar incentive offered to all Virginia residents by the federal government. The credit is applied to your federal income taxes owed for the year you install and commission your solar project.
The amount of the credit varies between systems, as it will equal a massive 30% of your entire solar system cost. In Virginia, where the average system totals around $30,250, the ITC is hugely beneficial, with the average credit being $9,075.
The 30% federal solar tax credit applies to all residential solar installations in the U.S. through 2032. It is set to reduce to 26% for photovoltaic systems installed in 2033 and 22% in 2034, and is set to expire in 2035 unless Congress renews it.
How to Claim the Federal ITC in Virginia
Claim your 30% solar tax credit on your annual federal tax return. If you’re filing yourself, you’ll need to:
- Download and complete IRS form 5695. Write the final cost of your solar installation on line one and calculate your credit on lines 6a and 6b. Your solar installer or a CPA can help you with this if necessary.
- On IRS form 1040, fill out your Schedule 3 using the figure you calculated on line 15 of your 5695 form.
Visit the IRS.gov website for full instructions on how to apply for the Federal ITC. We strongly recommend consulting with a tax expert and your solar panel company when applying for the federal solar tax credit.
EcoWatch’s Opinion on the Federal ITC in Virginia
The Federal Solar Tax Credit is worth 30% of the cost of your solar panels, easily making it the most valuable solar incentive available to Virginians.
That being said, you will only realize the full benefit of the Federal ITC if you expect to owe several thousand dollars in federal taxes within the next five years. The credit will only carry over for that length of time.
Solar Renewable Energy Credits in Virginia
Some states provide a state tax credit in addition to the federal tax credit to incentivize homeowners to convert to solar energy. Virginia does not have a state tax credit — it instead uses Solar Renewable Energy Credits (SRECs) to entice residents to adopt solar.
Virginia has a Renewable Portfolio Standard (RPS) that aims to generate 100% of the state’s electricity from renewable energy sources by 2050, and SRECs will help the state reach that goal.4
SRECs are energy credits that any solar customer in VA can earn simply by producing solar energy. For every 1,000 kWh (or 1 mWh) your system produces, you earn one SREC. You can then sell your SRECs on the SREC market, and the kickback you get for selling your credits can help you pay off your solar loan or recuperate your investment more rapidly if you paid cash for your solar panels.
There is a cap on the price of SRECs in Virginia, so you’ll never get more than $75 per credit. A more modest price between $20 and $50 is more realistic. With the typical 11-kilowatt system required to offset energy needs in Virginia, the average system will produce around 13.2 SRECs annually, which comes out to an average of around $462 or a maximum value of $990.5
How to Claim SRECs in Virginia
Even if you are not a customer of Dominion Energy or Appalachian Power, you can still claim SRECs for your solar panel system in Virginia. Here’s how:
- Complete the interconnection process to make sure your solar panel system is connected to the utility grid.
- Register your system with an SREC broker like SRECTrade.
- Once your system is registered, it will generally start generating SRECs within two months. Your SREC broker will automatically sell your SRECs on the market for you.6
Your solar panel installer in Virginia may complete this process for you. Ask the installer to make sure you’re taking advantage of this incentive.
EcoWatch’s Opinion on SRECs in Virginia
The market price for SRECs will fluctuate, as will the amount of energy your solar panels generate throughout the year. That means that how much you earn from SRECs will also fluctuate.
Sure, you won’t get rich off SRECs, but it’s nice to have some extra cash to put towards paying your solar panel system off faster. You’re basically getting paid for just having solar panels on your home.
Residential Property Tax Exemption for Solar in Virginia
Installing solar panels on your residence can cause the value of your home to increase. Without a property tax exemption, that means that you’ll be paying more each year in property taxes.
Through the end of 2022, Virginia does not have a statewide property tax exemption for new solar panel installations. The state does, however, allow local governments of municipalities to offer this incentive.7
Thankfully, starting on January 1, 2023, residential and agricultural solar panel systems in Virginia will be exempt from local and state taxes.8,9 That means if your home value goes up when you install solar panels, you will not be taxed on the increase.
How to Claim the Residential Property Tax Exemption for Solar in Virginia
To be eligible for the solar property tax exemption, your local building department or the Virginia Department of Environmental Quality must inspect and certify your solar energy equipment and installation. This is how your tax credit will be determined.10
EcoWatch’s Opinion on the Residential Property Tax Exemption for Solar in VA
A statewide property tax exemption for solar was long overdue in Virginia and we’re happy that the state is moving to offer this incentive for all Virginia residents.
A universal property tax exemption in VA further encourages the adoption of clean energy in the state, and it could possibly save you thousands of dollars in taxes over the lifetime of your solar panels.
The Solar Energy Industries Association (SEIA), a nationally operating solar nonprofit, commended the decision. The southeast regional director of SEIA, Will Giese, said that “this new law empowers millions of Virginians to choose the energy that works for them, while increasing the value of their homes and creating certainty to attract new businesses and jobs.”11
Net Metering in Virginia
Net metering is a billing policy designed to help property owners reduce or eliminate their electric bills. Normally, it can be quite difficult to provide constant power for your home with solar panels, as their efficiency decreases on cloudy days and they can’t produce power at night.
You can pull power from the grid as required when your panels are underperforming, and through net metering, when your panels are producing more power than you need, you can send the excess back to the grid. When this happens, your utility company will give you credits for the power, which you can use toward your utility bills.
Virginia’s investor-owned utility companies, Dominion Energy and Appalachian Power, must follow the state’s Net Metering guidelines spelled out in Virginia code §56-594.
If you are a customer of a municipal utility, you may not qualify for net metering in Virginia, as these smaller utilities are not required to offer a net metering program like Dominion Energy and Appalachian Power are.12
Customers of Dominion Energy and Appalachian Power in Virginia are eligible for compensation of the full retail value of any excess energy their solar panels generate.
Dominion Energy customers with residential solar systems larger than 15 kW may have to pay standby charges based on peak power demand. Dominion Energy customers with solar systems between 15 kW and 25 kW may have to pay transmission and distribution standby charges.13
How to Enroll in Net Metering in Virginia
How you enroll in net metering in Virginia will depend on which utility provider you use. For Dominion Energy customers, before you install your solar panels, you must:
- Apply for the Dominion Energy Net Metering Program by filling out sections one through four of the notification form.
- Submit the notification form with proof of insurance to Dominion Energy via email or U.S mail.
- Dominion Energy will review your application for approval. A representative will make sure that your proposed interconnection is compatible with the electric distribution system.
- Once your application is approved, Dominion Energy will sign and return your notification form and share any required changes to make your system compatible.
Then, once your solar panels are installed, you must complete the net metering application process by:
- Completing section five of the notification form and submitting it to Dominion Energy again.
- Dominion Energy will then complete the process and send you authorization to start your solar panel system and enjoy net metering benefits.
The full instructions for Dominion Energy customers to apply for net metering in Virginia can be found here.
If you are an Appalachian Power customer, click here to learn how to apply for its net metering program.
EcoWatch’s Opinion on Net Metering in Virginia
Unfortunately, Virginia’s net metering program is not universal to all residents in the state. Dominion Energy and Appalachian Power are the only utility companies that the state of Virginia requires to offer net metering to their customers.
There’s also a net metering cap, so the program is only available until the generating capacity from net metering customers reaches “1% of an electric distribution company’s adjusted Virginia peak-load forecast from the previous year.”14 So, even if you qualify for net metering, the benefit may run out before the year ends.
Dominion Energy customers may also be charged transmission and distribution standby fees depending on the size of their solar energy systems.15
Overall, we wish that all residents of Virginia with solar were eligible for net metering. The application process is long and complicated, and the net metering cap and fees for Dominion Energy customers can limit the benefits of this program.
Local Solar Incentives in Virginia
Some states’ municipalities and utility companies offer local incentive solar programs and rebates, which are often backed by the state. These programs typically either cover solar, specifically, or energy efficiency upgrades that can be coupled with solar panel installation to maximize energy savings.
Despite Virginia being a solar-friendly state, as of November 2022 there are no local incentive programs available to homeowners beyond property tax exemptions. Keep your eyes peeled in your locality for any new programs that may emerge.
What Do Virginia Residents Need to Know About SRECs?
Virginia’s Solar Renewable Energy Certificate (SREC) program was created in 2020 with the passage of the Virginia Clean Economy Act (VCEA).
When you sign up for SRECs, your SREC broker will automatically sell the SRECs your solar system generates at the going market price.
Are SRECs Taxable in Virginia?
There is some debate concerning whether or not SRECs are taxable, but the general consensus is yes, SRECs are considered taxable income on both federal and state income taxes.
Always consult with a tax expert to help you determine your taxable income. You will most likely report your SREC income on Form 1099-MISC if you have made $600 or more from selling your SRECs.
Or, if you don’t receive the 1099-MISC form, you’ll go to the Wages & Income section under your federal taxes and input your SREC earnings under Miscellaneous Income, 1099-A, 1099-C. You can find more detailed instructions from TurboTax here.
What’s the Near Term Outlook for More Incentives in Virginia?
There’s good news for solar incentives in Virginia in 2023! Through the end of 2022, only some counties in Virginia offered property tax exemptions on solar panel systems. However, thanks to the addition of Chapter 496 to the Code of Virginia, residential and agricultural solar panel systems will be fully exempt from local and state taxes starting on January 1, 2023.16
The Inflation Reduction Act passed in August 2022 also expanded and updated the Federal Solar Tax Credit. The Act increased the credit to 30% from 26% and extended the incentive through at least the end of 2032. All U.S. residents, including Virginians, can take advantage of this incentive.
FAQ: Solar Incentives Virginia
The EcoWatch team gets questions about solar incentives available in Virginia regularly. Since you might have similar questions about how incentives and rebates in the state work, we’ll include some of the most commonly asked questions below. If you have specific questions that aren’t answered here, reach out to our team of solar experts at email@example.com.
Starting on January 1, 2023, all residential and agricultural solar panel systems in Virginia will be exempt from local and state taxes.
The Inflation Reduction Act passed in August 2022 increased the Federal Solar Tax Credit from 26% to 30% and extended the program through at least 2032. Residents of Virginia are eligible for this federal solar incentive.
No, Virginia is not reducing solar incentives in the next 24 months. Dominion Energy customers should check with a representative, as net metering policies through the utility company are subject to change.
Virginia does not have a state solar tax credit as some other states do. However, the federal solar tax credit is available to all homeowners throughout Virginia. The ITC provides a tax credit in the amount of 30% of your total cost of going solar. In Virginia, the typical credit is $9,075, given the average solar panel system cost of $30,250. Keep in mind that if you are leasing your solar panels, you will not qualify to receive the tax credit.
Unfortunately, there are no Virginia solar rebates. However, there are many solar incentives provided to maximize the return on investment for solar customers and shorten the average payback period for solar panels. Solar companies can help check if you qualify for incentives and assist you in the application process.
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