Going Solar in Howard County: Taxes and Incentives

If you've ever thought of using solar power, Howard County offers one of the best deals in the U.S., and tax breaks make early 2009 a great time to do it. I'm doing several posts about it.

This post is about the important tax breaks and credits available that make solar power so attractive right now. As a disclaimer, I am no expert and you should check with your vendor and tax adviser for more reliable information. But the information below is correct to the best of my knowledge, and reflects my experience so far.

There are four major incentives currently in place to encourage residential solar power in Howard County: federal, state and county incentives and Renewable Energy Credits. I'll deal with each in turn, and also look at two other factors in the payback equation: power usage offset and conservation.

• Federal Tax Credits. You can deduct 30% of the installation cost of a solar electric system from your Federal tax return. There is currently a cap of $2,000 on this incentive, but one of the sweeteners used to pass the $700B "bailout package" was extending the credit and removing the cap beginning in 2009. Since my system was installed in 2008, I'll be taking $2,000 off my 2008 federal returns.
  
  
• Maryland Solar Energy Grant. Maryland will pay you up to $2,500 per kilowatt of solar energy installed, up to a cap of $10,000. That cap was recently raised from $3,000 when my system was installed just 6 months ago. Nevertheless, I've already received a check from the state for $3,000.
  
  
• Howard County Property Tax Credit. Howard County will deduct 50% of the cost of a solar electric system from your property tax, up to a $5,000 cap. Since my system was installed in May 2008, I've received a letter from the County assuring me that $5,000 will be deducted from my 2009 property tax.
  
  
• Renewable Energy Credits. RECs are a little hard to explain because the system is convoluted and still evolving. The basic idea is that the power companies will pay homeowners in Maryland and some other states for solar energy production. But they will do so through "aggregators" that bundle 15-year credits from multiple homeowners. In my case, the state has certified that my system will produce 18 RECs; my vendor estimates each REC is worth $186 so my RECs should be worth $3,348. That transaction is still in progress, though, and I don't have my hands on the money yet...but there does seem to be progress.
  
  
• Power Usage Offset. The fact that you generate electricity from your solar panels means you buy less from BGE or whomever. My small system offsets less than 10% of our average usage, but that represents money I keep in my pocket rather than paying BGE. And as BGE rates go up, that represents more savings.
  
  
• Conservation. Since we installed our sytem we are much more conscious of our energy consumption. You can argue that we should have been more conscious before, but the fact is you do pay more attention when you have panels on your roof and a meter in the basement. And the real-world result is that our electricity usage is down 35% since we installed our system. Your results may vary, but I bet you'll be surprised. I know there are steps we could take to be more efficient, like changing our more light bulbs or getting a programmable thermostat, so perhaps we'll get even better in time.
  

The Bottom Line: This combination of credits more than paid for my entire small system, except for the optional battery backup. Now that the caps have been lifted for the federal and state incentives, you could justify an even larger system in 2009, probably 2Kw or so. Check with a solar vendor! The current package of incentives means they are giving these systems away!!


Check out these websites for more information:
Standard Solar - Available Incentives
Chesapeake Solar - Financial Incentives
Howard County Incentives

See the other posts in this series:
Going Solar in Howard County: My Experience
Going Solar in Howard County: Battery Backup