In addition to energy bill savings, Vermont residents can take advantage of several solar incentives, including the federal solar tax credit, a sales tax exemption, and a utility-based program. The demand for solar panels in Vermont is growing, and using clean energy can help offset the state’s high electricity prices. Despite its overcast climate, Vermont gets 16% of its energy from solar panels, according to the Energy Information Administration (EIA).
Our guide talks about available solar incentives in the Green Mountain state. We recommend using one of our top-rated solar installers to help you access these programs.
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Available Vermont Solar Tax Credits and Rebates
Vermont provides multiple solar incentives to homeowners. These include a sales tax exemption policy and a program through the state’s largest energy company, Green Mountain Power (GMP). Learn more about each Vermont solar incentive available below.
Green Mountain Power’s Bring Your Own Device Program
Green Mountain Power services around 75% of Vermont. GMP doesn’t offer incentives for solar panel installations, but its Bring Your Own Device (BYOD) program provides solar rebates for solar batteries. Homeowners who make their energy storage capacity available to offset hours of peak electrical demand for 10 years can receive the following payments:
- An upfront payment of $850 per kilowatt (kW) of battery storage if you enroll in three hours of daily discharge.
- An upfront payment of $950 per kW of battery storage if you enroll in four hours of daily discharge.
The maximum incentive you can earn is $10,500 per battery system.
Home Solar System Sales Tax Exemption
Vermont has a state sales tax exemption for solar panel systems up to 500 kW of capacity. This exemption means you won’t pay sales tax on your home solar panel system. It’s available for residential, commercial, and agricultural solar projects. It also applies to solar water heaters and batteries.
A typical 6 kW system in Vermont costs $18,840, and considering the state sales tax is 6%, the exemption would save you $1,130 on your solar panel installation.
Note: All cost figures in this article are based on a report from EcoWatch.
Renewable Energy Systems Property Tax Exemption
Vermont also has a property tax exemption for solar energy systems. Solar panels increase home value by an average of $15,000. This means that if your property is worth $350,000 and your home value increases to $365,000 with solar panels, you would have to pay an additional $425 per year in taxes assuming you live in a municipality with a property tax rate of 1.7%. The property tax exemption waives these fees for Vermont residents.
The property tax exemption does not apply to solar panel systems with a capacity of 50 kW or more. Property owners must pay a uniform capacity tax of $4 per kW for these systems. For example, if you have a 100 kW system, you would pay $400 in property taxes annually. However, this shouldn’t be an issue for most homeowners since residential solar power systems are rarely bigger than 10 kW.
How Does the Federal Solar Tax Credit Work?
Every Vermont homeowner who owns their system qualifies for the federal solar investment tax credit (ITC). This reduces the amount of federal taxes you owe at tax time at a rate equal to 30% of your solar installation costs. If you owe less than the credited amount, it can roll over to the next tax period. This credit decreases to 26% in 2033 and 22% in 2034.
Note that you can only claim tax incentives if you own your system. Customers who lease their solar panels or enter into a PPA do not qualify for this credit because system ownership remains with the installer.
Is Net Metering Available in Vermont?
Vermont is working to reduce statewide emissions through a Renewable Portfolio Standard (RPS) goal that mandates 75% clean power generation by 2032. The state has a favorable net metering policy to help reach this target. Homeowners with renewable generation systems can send excess energy their systems generate to the grid for electricity bill credits.
Green Mountain Power has the largest net metering program in Vermont and provides energy credits at 19.99 cents per kilowatt-hour (kWh), which is the same as the retail rate of grid electricity purchased from the company.
How Much Does Solar Energy Cost in Vermont?
The average cost of solar panels nationwide is roughly $17,640 for a 6-kW system. This price is before applying any solar incentives. Most installation companies sell solar panel systems based on their wattage, with the average price being $3–$4 per watt. According to EnergySage, the average price of a 6-kW system in Vermont is $18,840. Applying the federal solar tax credit reduces this price by $5,652.
Your total cost and return on investment (ROI) depends on your chosen payment method. We’ve detailed each solar financing option below.
- Cash purchase: An up-front cash payment offers the best ROI and long-term savings. Paying for the system outright eliminates interest rates, credit checks, and loan fees. You also qualify for solar incentives and credits since you own the system.
- Solar loan: A solar loan is the second-best payment option. You own your solar system while making monthly payments over a fixed period, but you’ll pay more for the system due to interest rates.
- Solar lease: A solar lease lets you rent the system rather than buy it. This payment option is best for homeowners who don’t qualify for loans or can’t afford a large up-front cash payment. However, a solar lease disqualifies you from incentives since the solar company owns the system. It also doesn’t increase your home value like a cash purchase or loan.
- Power purchase agreement (PPA): A PPA involves only paying for your monthly energy use. Think of it as if you’re still paying your regular energy bill but for solar energy. Many solar companies include system maintenance and repairs with PPAs, but you won’t own the system and can’t take advantage of tax rebates or other incentives.
Is Going Solar in Vermont Worth It?
Going solar is worth it for most Vermont homeowners, based on our research. At 22.29 cents per kWh, Vermont’s average electric rate is almost 40% higher than the national average of 16.26 cents per kWh. This means you can save more on power bills by installing a solar panel system than homeowners in many other states.
You can also benefit from the state’s attractive incentives, including a favorable net metering program, a 30% federal tax credit, and a utility-based solar battery incentive. These incentives can help you recoup your initial investment and save on the upfront cost.
Our Conclusion
Vermont offers many incentives to make going solar more affordable. Our guide covers the most significant incentive programs, but smaller city- or municipality-specific incentives may be worth exploring. We recommend checking the Database of State Incentives for Renewables and Efficiency (DSIRE) for more information.
You can read our guide on the best solar companies in Vermont to determine which provider best matches your needs.
FAQs About Solar Tax Incentives in Vermont
Do solar panels need maintenance?
Solar panels don’t typically require extensive maintenance. A solar panel system has almost no moving components, which means you don’t have to worry about overheating problems and other forms of mechanical wear and tear. However, we recommend cleaning your solar panels every spring to improve their performance and your bill savings.
Do solar panels work in the winter?
Yes, solar panels work in winter since this equipment generates electricity using sunlight, but not the heat. However, the power generation from solar panel drops in cloudy wVermont’s solar incentives are as few as its annual sunny days, but you can still save thousands of dollars on your solar investment with the available incentives. Read our detailed guide to Vermont’s solar incentives and all there is to learn about them.eather or weakened sunlight.
How cold is too cold for solar panels?
There isn’t a specific “too cold” temperature for solar panels, but extreme temperatures might cause issues. Some solar power systems drop in performance when the temperature dips below 41 degrees Fahrenheit.
