Pennsylvania is making significant strides in clean energy despite its heavy fossil fuel production. The state launched the Alternative Energy Portfolio Standard (AEPS) in 2004, aiming to produce 18% of its electricity from renewable sources. Several solar incentive programs have been introduced since then to reward homeowners and businesses committing to clean energy. Read on for the full breakdown of available solar incentives in Pennsylvania so you’re ready to hire one of the best solar companies in the Keystone State.
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What Are the Pennsylvania Solar Tax Credits and Rebates?
Although solar power has been slow to grow throughout Pennsylvania, the state government continues to incentivize its residents to make the switch. Many of its programs focus on long-term solar payments, but the state lacks programs to reduce the initial cost of solar panels.
Pennsylvania doesn’t have sales or property tax exemptions for solar systems. This adds more tax burden on residents, but other federal and state incentives can still make going solar more affordable. We’ll explore Pennsylvania’s solar incentives below.
Solar Renewable Energy Certificates (SRECs)
Pennsylvania is one of the few states that offers solar renewable energy credits (SRECs). Also known as alternative energy credits, these programs reward Pennsylvania homeowners for using clean energy sources by providing credits for energy generated by your solar system. You receive one energy credit (or certificate) for every 1,000 kilowatt-hours (kWh) your panels generate. Homeowners then sell these credits for cash payments. Since you’re receiving payment for the sale, SREC payouts are taxable.
Pennsylvania’s Public Utilities Commission (PUC) offers the program to all solar residents in the state. Residents must apply to the PUC’s Alternate Energy Credit Administration to qualify. Although availability is statewide, the payout amount varies by area. According to SREC Trade, Pennsylvania SRECs pricing has risen to more than $40 on average. For example, a 6 kW home solar system could earn around $240 annually. A homeowner could earn up to $4,800 over a 20-year period.
More resources: Pennsylvania residents should review SREC program details on the PUC website.
Philadelphia Solar Rebate Program
The Philadelphia Solar Rebate Program is an incentive program that qualifies homeowners for a one-time rebate of 20 cents per watt. Your system is eligible after being approved for Permission to Operate by PECO Energy Company (formerly Philadelphia Electric Company). This means your system has passed the final inspection, and the electric company has approved the activation.
You must meet additional requirements to keep the payout. Your system must remain operational for 36 months after installation and produce at least 80% of its projected energy production for the next three years. The city may request a refund if either requirement is not met.
More resources: Philadelphia residents should check the City of Philadelphia government website for complete details. This program is currently not being funded by the Philadelphia government but may be restored in the future.
Net Metering
The most efficient solar panels generate more energy than your home needs. Pennsylvania residents can also get paid for their excess energy through net metering. This program allows homeowners to sell extra power back to the grid for electric bill credits. The PUC mandates that all investor-owned utilities (IOUs) must offer net metering to their customers.
While the policy enforces a 1:1 match for energy sold to credits issued, there is no requirement for full retail payment. This means the amount paid for your credits could be lower than the energy company’s standard sales rate. Despite the lower payback rate, this program can still reduce your energy bills and the total cost of going solar, particularly if your panels have high energy efficiency.
More resources: Check the Database of State Incentives for Renewables and Efficiency (DSIRE) for complete details on Pennsylvania’s net-metering program. Also, check with your local utility company to sign up for its program.
How Does the Federal Solar Tax Credit Work?
The federal investment tax credit (ITC) is a key incentive in the U.S. solar industry. It allows homeowners to claim 30% of their solar panel installation costs as a credit on their federal tax liability. Unlike a rebate or incentive payment, the ITC reduces your tax bill rather than providing a cash refund. If the credit exceeds your tax liability, it can carry over to future years.
To be eligible, you must own your solar panels. You can either purchase the system upfront or finance it with a loan. Solar lease agreements and power purchase agreements (PPAs) generally don’t qualify because you don’t own the system. For solar systems installed between 2022 and 2032, homeowners can claim 30% of installation costs, including equipment, labor, and permits, as a tax credit. The percentage steps down to 26% for systems installed in 2033 and 22% for 2034.
Cost of Going Solar in Pennsylvania
The cost of a solar energy system in Pennsylvania ranges from $11,495 to $15,553 for a 5 kW system, according to EnergySage. This is before factoring in tax credits and incentives. The average payback period for solar energy is around 6–10 years, depending on factors such as system size, energy usage, and market conditions.
Your choice of solar financing option also determines how much you save on going solar long-term. Here’s a breakdown of common solar payment options:
- Cash purchase: Paying upfront maximizes savings by avoiding interest and finance charges.
- Solar loans: Financing the system with a loan spreads costs over time with manageable monthly payments.
- Power purchase agreements (PPAs): This allows you to pay for the energy produced at a set rate without owning the system.
- Solar leases: You can lease panels for a fixed monthly fee without the responsibility of ownership.
The Process of Going Solar in Pennsylvania
Switching to solar power in Pennsylvania involves a clear five-step process:
- Consultation: Start by consulting with different solar companies to get an idea of your home’s solar potential. They’ll assess sunlight exposure, system size, and other requirements. This step usually involves online tools and an in-person survey and takes just a few days.
- Design: Your installer will design a custom system tailored to your roof, energy needs, and budget. Expect to receive various design options and hardware recommendations, including different types of solar panels, inverters, and batteries. This phase takes about 1 to 2 weeks, including back-and-forth communication to finalize choices.
- Permitting and approvals: Once you approve the design, your installer will handle permitting and approvals. They’ll consider local zoning rules, HOA guidelines, and utility policies. This process takes 1 to 2 months, but the timeline can vary based on your location and utility provider.
- Installation: After approvals, installation can proceed. Most companies complete the installation in just one day, typically within one to three months of your initial consultation.
- Final inspection and activation: Once installed, your system undergoes a final inspection. Your installer will help you understand your system’s operation, including how to switch from grid to off-grid solar power if needed. Additionally, they might highlight changes to your energy bill resulting from net-metering credits and show you how to use a solar monitoring tool.
Our Conclusion
Pennsylvania offers several payback programs to help homeowners offset solar panel costs and improve their return on investment. The federal solar tax credit also helps reduce initial investment costs. Remember that you must pay for your system upfront or take out a loan to qualify for some solar incentives.
We recommend requesting free quotes from at least three reputable solar companies in Pennsylvania before hiring one. Compare solar panel options, financing details, and warranty coverage. Here are our top choices for solar companies in the Keystone State:
- Momentum Solar: Provides a user-friendly experience by handling all solar installation steps in-house, eliminating the need for third-party installers
- Sunrun: Includes four diverse financing options that make going solar more affordable
FAQs About Solar Tax Incentives in Pennsylvania
Is it worth getting solar panels in Pennsylvania?
Yes, it’s worth getting solar panels in Pennsylvania. The federal solar tax credit, state SRECs, and additional incentive programs make installing a solar system more affordable for residents. The state’s net-metering program rewards customers for excess solar energy generation and helps reduce future energy bills.
Does Pennsylvania offer property tax exemptions for solar systems?
No, Pennsylvania does not have property tax exemptions for solar power systems. Since solar systems add value to your home, you will incur higher property taxes after installation.
Will I have to pay sales tax when I buy a solar system in PA?
Yes, you must pay sales tax when purchasing a solar panel system in Pennsylvania.
Do solar panels work in Pennsylvania?
Yes, solar panels work in Pennsylvania. Pennsylvania receives about 179 sunny days annually, lower than the national average of 205. Pennsylvania residents can still take advantage of long-term solar energy savings despite the lower average. The state government also provides solar incentives to make solar conversion less expensive.
Our Rating Methodology
We are committed to providing comprehensive and unbiased reviews to our readers. After over a thousand hours of research on solar companies, interviews with experts, and common customer needs, we’ve created a detailed rating system for solar providers based on six factors:
- Solar equipment, installation, and services (25%)
- Warranty and performance guarantees (25%)
- Brand reputation and certifications (15%)
- Financing options (15%)
- Experience (10%)
- Availability (10%)
Total scores are divided by 20 for a final 5-point rating scale.