State Solar Incentives

To further foster the growth of solar energy, many states have implemented policies to incentivize its use. These state tax incentives provide extra benefits on top of existing federal credits and can be an excellent source for offsetting your costs when utilizing solar power. These state policies can include:

Renewable Portfolio Standards (RPS)

Renewable Portfolio Standards (RPS) are targets set by states for the amount of energy that must be generated from renewable sources, including solar. These standards can impact the growth and development of the solar industry in a state and affect the customer’s ability to participate in programs and incentives. An RPS is usually set statewide and applies to investor-owned utilities. Sometimes, however, cooperative and municipal utilities establish an RPS that does not apply to the rest of the state, so it is best to check with your local and state governments for accurate information.

Solar Renewable Energy Certificates (SRECs)

Solar Renewable Energy Certificates (SRECs) are credits that are earned for each unit of renewable energy generated. SRECs are specific to solar energy and can be sold or traded to utilities to help them meet their RPS requirements. Therefore, SRECs offer a financial reward for utility companies and homeowners that adopt solar energy. The worth and cost of SRECs can differ from state to state, with the highest price typically set by what is referred to as an Alternative Compliance Payment (ACP). If a utility fails to acquire enough SRECs that would meet the RPS, they will be subjected to financial penalties determined by the regulator at ACP level. Owing to this, utilities would never pay higher than ACP for an SREC – thus effectively capping off its market value.

Net Metering

Net Metering policies dictate the compensation rate for excess energy produced by a solar panel system that is fed back into the grid. Different states have different net metering policies, so it is important to check with the local utility company to understand the compensation rate. Many states require utilities to pay net metering customers the full retail rate for their electricity. Meanwhile, other jurisdictions have set up various compensation levels: some lower at the wholesale rate and others in between retail and wholesale rates. Here are a few factors that usually outline net metering policies:

  • Eligible Technologies: Identifies renewable energy sources that can be net metered.
  • System Size Caps: The maximum allowable system size that can be net metered.
  • Program Size Caps: The limit of total net metering systems that can be set up in a certain area or utility territory.
  • Customer Type: Specifies which electricity customers are eligible (e.g. residential, commercial, etc.).
  • Net Excess Generation: Determines if customers receive credits at a retail value or lower, as well as when the credit expires.
  • Ownership of RECs: Most net metering policies grant customers the right to retain ownership of their generated RECs in relation to their electrical output.

Every state has policies in place regarding the limits of individual systems and total capacity that can be net-metered on its grid. These limitations guarantee stability of the energy industry while tiered approaches make certain residential PV systems are installed without overtaking all available space for large-scale projects. Depending on specific regulations, credits earned may extend indefinitely or possibly expire at a predetermined date such as year’s end.

Third-Party Financing, including Power Purchase Agreements (PPAs) and Solar Leases

Third-Party Financing options, such as Power Purchase Agreements (PPAs) and solar leases, allow customers to go solar without having to pay for the cost of a solar panel system upfront. The terms and conditions of PPAs and leases can vary by state, so it is important to research the options available. In most cases, at the end of a PPA contract term, property owners have the option to extend the contract, purchase the system from the PPA provider, or have the system removed from their premises. Solar leases are quite comparable to PPAs in numerous aspects. The distinction is that the monthly amount covers the solar system instead of electricity’s cost. With this lease model, clients enter into a contract with a developer and consent to pay an exact rate across its lifetime, which typically lasts from 10-20 years.

Clean Energy Funds

Clean Energy Funds are programs that use funds collected from utility customers to finance renewable energy projects, including solar. These funds can provide additional incentives and support for customers who want to go solar.

Low-Interest Loans

Some states, often through their clean energy funds, offer low-interest loans to residents who want to install a solar panel system. These loans can help reduce the upfront costs and incentivize low-income borrowers to go solar.

On-Bill Financing and Repayment

On-Bill Financing and Repayment programs allow customers to repay the cost of their solar panel system through their utility bill over time. These programs can make going solar more accessible and affordable for customers. On-bill financing usually means the energy supplier is offering the finance, while on-bill repayment pertains to a third party providing it with payments being included in your utility bill. Your loan can come from either a state office, financial institution, or even your power provider. Repayments are then conveniently collected each month through your monthly utility payment statement.

On-bill financing offers two significant advantages compared to a conventional loan. Firstly, the borrowing is used for investments that result in lower electricity expenses, meaning both the cost reductions and the loan payments will appear on one bill. Ideally, your energy savings should be higher than what you are paying back for the loan itself – showing how beneficial this investment really is! Secondly, because these loans are directly linked to utility service; if customers fail to pay their repayments then utilities can suspend their services as an incentive not to default on their debts.

Interconnection Standards

Interconnection standards dictate the process for connecting a solar panel system to the grid. The standards can vary by state and it is important to understand the requirements before installation.

Zoning and Permit Requirements

Zoning and permit requirements dictate where and how a solar panel system can be installed. These requirements can vary by state and it is important to check with local authorities to understand the regulations.


Although it can be difficult, it is important to research the specific rules and regulations of the state where you reside before purchasing solar panels to ensure a successful installation and maximum benefits from the system. Our team at Affordable Solar, Roof, & Air is here to make this process easier by providing all the necessary information you need to make the most informed decision for your home. Contact Us today if you have any questions about specific laws and regulations in your state!