4 incentives you can get for having solar panels in Philadelphia

Installing solar panels can help you reduce your taxes and increase your refund. It might seem like an expensive investment —with the average cost of a solar system in Philadelphia still above $16,000— but there are federal, state, and local incentives, including a tax refund and energy credits that can help you offset the cost.

With the cost of solar panels in PA being down by 53% in the last decade, now may be the time to get the ball rolling. Here are 4 programs that can give you credits for panel installation, meters, or having leftover energy.

In 2006, the federal government enacted the Solar Tax credit, one of many incentives that lower the income tax you owe on a dollar-for-dollar basis. Meaning, if you have to pay $1,000 in federal taxes, but have $700 in credits, your tax bill will be $300.

Homeowners can apply the federal tax credit to their personal income taxes, reducing their taxes. The credit is not a deduction, because it doesn’t lessen how much of your income is subject to tax. Instead, it lets you reduce a percentage of the total cost of having a solar panel system.

If you installed a panel system in 2022, your credit will be 30%. The cost of the panels, contractors, permissions, inspection fees, wiring, inverters, mounting equipment, energy storage devices, and sales taxes, all count toward the total cost of installing your system.

The solar tax credit was set to expire for residential solar panels installed after 2021 but in August, Congress extended the Solar Tax Credit as part of the Inflation Reduction Act.

Under this Act, anyone installing a solar panel system until 2032 will be able to get the 30% tax credit. But come 2033, the credit will drop to 26%and 22% in 2034— a strategy previously seen when the credit was originally created.

It depends. Since only the owner of the system can claim the credit, you wouldn’t be able to receive the benefit if your landlord is the one paying. However, if you live in a condominium or a cooperative apartment and pay a contribution for the solar panel system to be installed, you can claim the solar tax credit for the value you contributed.

If you are eligible for the residential energy credit, complete Form 5695 and attached it to your federal tax return. The two-page document asks for information on the cost of the panels to calculate your tax credit. Don’t forget to get professional tax advice if you need any help.

Traditionally, when you move into a house, the electrical panel board and meter are already there. You pick a supplier and start paying the bill. Solar panel systems, however, aren’t automatically connected to the energy supplier’s grid.

You have to apply for what’s called the Interconnection Process. It connects the panel system to the supplier, and is not an optional task. Folks need to be approved and have their energy supplier’s permission to use the panels. Your contractor should be able to help you navigate permits and certificates.

Solar panel systems require an “IN-meter” and an “Out-meter.” Besides telling how much energy your panels produce, the “IN-meter” checks the energy going from the supplier to your house, and the “OUT-meter” calculates how much of the energy your panels produced is not being used and can go to the supplier.

Residential homes typically have an electric meter, inside a panel, pre-installed. But solar panels need more than that. Your energy provider will have to replace the current meter or add a second one on a case-by-case basis.

If your panels produce less than 200 ampere (amps), one bi-directional meter will get the job done. But, if more is generated, you will need to install a Dual Metering system, which involves adding a second meter and another electrical panel to host it. The process can cost between $526 up to $2,000, according to HomeAdvisor. To help with the cost, PECO offers an “OUT-meter” Credit. If approved, it gives you up to $400 to help pay for the second panel.

If you expect your panels to generate more electricity than your house needs, using a Net meter can help you get credit for it. But, you need to apply before your panels are installed.

This type of meter sends PECO your exact net usage monthly. You won’t be able to see it displayed on the meter; but, when the bill comes, you will see the precise amount of energy you used from the grid, minus the excess energy you send to it. Meaning, If you used 1,197 kilowatts per hour (kWh) and sent back 1,286 kWh, your panel produced 89 kWh more than you used.

That month, you only pay service fees and taxes. And a credit of 89 kWh is left in your account to use the following month or keep it bank. After a year, in May, all the kWh you banked turns into cash that can be applied to your bill.

For folks who have already installed their panels and received PECO’s permission to operate, the city offers a one-time monetary incentive for going green.

Despite being around since 2019, the program is currently closed due to “budget cuts related to COVID-19,” according to the city. But you can still apply for when funds are available.

A contractor can help you calculate a projection of how much energy the panels will produce per year. The rebate will pay you $0.20 per watt estimated. Meaning, if your solar energy system is projected to make 9,303 kWh per year, your rebate will be $1,860.60. Rebates cap at $100,000.

To apply, you must be up to date with property taxes or in a payment agreement, as well as not have unresolved property-related code violations. You can apply online or by mail.

The Philadelphia Energy Authority is in charge of reviewing applications. Once approved, payments can take four to six weeks.

If approved, your panels have to be in use for at least 36 months after installation and make 80% or more of the projected energy for the first three years. If you don’t meet this, you will have to refund the rebate to the city’s Energy Authority.

❌You can’t sell electricity to your neighbors.

✔️You will still get a bill

❌If you buy solar panels, but don’t install them, you can’t get the Federal Tax Credit.

✔️People in the process of paying for their installed panel system can get Federal Tax Credit.