Does Solar make sense in Maryland
Maryland has one of the fastest payback periods in the entire country with the help of multiple incentives being offered. Maryland’s state initiative is to run the state from 50% renewable sources by 2030. If your roof is not shaded by trees in the middle of the day and have a bill of at least $100, solar could make a lot of sense. With good light exposure on your roof, we see, on average, 8-10 year payback periods which is phenomenally fast. Maryland offers multiple incentives that help bring the net investment cost down to almost half the total cost. Combine the incentives with one to one net energy metering ( 1:1 NEM ) and already expensive and rising electricity rates, Maryland is setting itself up to have solar be a no-brainer for most homeowners. Below I am going to describe the incentives one by one and then give an average cost breakdown showing how much the incentives take off the total so you can see an ideal payback period example. This is “cash” deal so with financing the interest will add to the total cost.
1. Federal 30% tax credit
2. One to One Net Metering credits (1:1 NEM)
3. State Renewable Energy Credits (SRECS)
4. State Rebates (MD Residential Clean Energy Rebate Program)
5. Solar Equipment Sales Tax Exemption
6. Solar Property Tax Exemption
Every scenario will be different, but lets say that in this case, in order to go from a $130 dollar per month bill to a $10 a month bill, we are going to need a 8kW system producing about 11,000kWh a year. The price per kWh would be about 15 cents here. 10,000kWh x $.18/kWh = $1650 per year.
The 8kW system would be around $28,000 in this scenario.
Total cost- $28,000
(30% Federal Tax Credit -$8,400)
(SRECS – $600 a year for 10 years – $4,800 (amount will drop/fluctuate)
(State Rebate – $1,000)
———————
Net Cost – $13,800
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Even if the price of power does not go up…
$13,800 net cost /$120 a month in savings = 9.5 years. BUT, in reality with the cost of power rising quickly, we see a payback period of closer to 7-8 years.
Calculations:
Tax credit – $28,000 x .3
SRECS – $60 x 10 SRECS x 3 years
*One SREC is for 1000kWh of production*
Frequently Asked Questions
You are eligible for a federal tax credit in the amount of 30% of the total cost of your solar system investment. The average system in in the range of $15,000 on the low end, to up in the $40-60K range for what we would consider larger residential systems. This means that if you invest $30,000, for example, your net cost will really be $21,000 after the $9,000 tax credit is taken.
In order to qualify to the federal tax credit, you need to be paying federal income taxes. They will pay you back up to the amount that you paid in that year. If you have a larger tax credit than your yearly federal tax amount, the remaining tax credit amount can be used the following year. The solar tax credit is able to roll over 5 consecutive years if the total cannot be used the first year.
To incentive you to go solar, the utility companies in MD credit homeowners with solar at a 1 to 1 rate. This means that a solar system can eliminate the utility company’s bill (other than a low monthly connection fee of around $10) WITHOUT the need for battery storage. With full 1:1 credits, the system banks power all throughout the middle of the day when the system is producing more than the house and then in the evening, you do draw power from the grid, but the credits you built up in the day simply cancel out the night time bill. Most states do not have a net metering policy that credits you at the same value as what you actually are paying. Net metering will go away as solar participation increases so lock yourself in before the credit value starts to drop. Batteries start at around $10,000 and so do not want until you inevitably need to add at least $10,000 in cost to your total.
In order to incentivize more solar installations, Maryland offers SRECS over a 10 year period. Currently for every 1000kWh of production, the homeowner receives 1 SREC which is $60 through 2024 and $55 in 2025.
The idea is that large corporations need to fulfill a certain size carbon footprint. When corporations cannot achieve their sustainability goal, they have to purchase SRECS to make up the difference.
Let’s say you build a system that will produce 10,000kWh a year. This means that you would be eligible for 10 SRECS a year and 3 years of production is used. In this example, with $60 credits… $60 x 10 SRECS = $600. This is good for 10 years! Selling SRECS is considered a for profit sale and so taxes do have to be paid on SRECS sales income and the SRECs value does fluctuate based on a supply and demand market dynamic.
This is a $1000 rebate received after installation
This is an incentive that ultimately is for the installer or whomever is purchasing the equipment. But, it brings down the cost to install by several hundreds of even around $1000 for a large system.
Since solar raises the value of a property or home, in order to incentive you to install solar, MD has put into law the practice of not taking the value of the solar system as part of the property’s assessment when deterring the property tax amount.