Values Added

Solar Panels in DC: Go For It (Probably)

If you have access to a roof in DC, you should probably make sure it is covered in solar panels. Why? 

You probably already know that installing solar panels is one of the most positive changes we can make personally to help the environment and slow climate change. Solar panels are also usually quite profitable for most DC residents.

Good for the environment and your finances–that’s a terrific combination! 

Why DC? We have the Best Solar Incentives in the Country

DC doesn’t get much more sun than Maryland or Virginia, but solar panels give a much stronger financial return here because DC has more solar-friendly policies. We have much more favorable financial incentives (more on the details below) to encourage people to install panels on homes, apartment buildings, and more. My panels were fully paid back in roughly four years and now generate thousands of dollars of income. The panels also mean that most months of the year I produce more electricity than I use. Now my overall electric costs are about 85% lower than before I had panels.  

The Financial Pros of Switching to Solar Panels in D.C.

Let’s dive further into the pros of switching to solar panels in the DC area.

Everyone’s specific situation is unique, but for example, I installed my system in 2014 and have since reduced carbon dioxide production by 56.3 tons (per Enphase/EPA). We get an annual investment return of about 35%. If I installed my array today, the numbers would be even better because the technology has advanced a lot in the past ten years, resulting in more productive, cost-effective panels. Read on for an example using today’s numbers (spoiler alert: the annual return is similar at just over 32%). 

DC Financial Benefits

DC has very attractive incentives for people who use solar panels. 

  • DC Solar Renewable Energy Credits (SRECs): DC operates a program that allows solar system owners (like people with panels on their roofs) to earn SRECs for the electricity their systems produce. These credits can be sold on the open market, providing an additional income source for the installation owner.

For example, my system covers my rowhouse roof and my bike shed, and it generates 12.5 SRECs per year. We use the “production estimate” system so we get the same number of SRECs regardless of whether it is a sunnier or shadier year. Those SREC payments generate approximately $5,375 (minus commissions which range from $5 or 3% to 10%) at today’s prices

DC’s SREC prices are the highest in the country. 

The above chart uses data provided by SREC Trade on February 14, 2024. Updated information is available on their website.

SREC prices are typically somewhat below the prices utilities have to pay as a penalty if they don’t generate enough of their power from renewable sources. Per the DC code, during 2024, the penalty is $480. In 2025 it drops by $20 to $460, and so on until 2033, when it hits $300 and stays level there until 2041. We can geek out on the details of future profits but regardless of how those prices change, panels bought today will likely be paid in the next few years.

Cost Savings–Lower your electric bill

Because solar panels generate electricity for you, they offset the need for individuals and households to purchase electricity “from the grid.” The DC electric grid uses a process called “net metering.” With net metering, if you generate more electricity than you use, it returns to the grid, and you receive credits in exchange. Often, systems generate surplus in the spring and summer, and these carryover to offset winter months when a household’s usage is more likely to exceed its solar production.

Your solar power will reduce your electricity bills and sometimes even eliminate them completely. The amount of savings depends on your solar installation’s size and your overall energy consumption. For instance, my household generates more energy than we use most months of the year, and overall, we get about 85% of our energy from our solar panels. As a result, our bills are much lower than they used to be.

In my case, before solar, we used to spend about $2,000 per year on electricity, and now we spend only roughly $300 per year, just 15% of what we used to. 

Federal Tax Benefits  

The federal government also offers a tax incentive known as the Residential Clean Energy Credit, which can help reduce the cost of installing solar panels. You get 30% of your installation costs back as a Tax credit. For example, if you pay $33,333 to install a system on your roof, then you will have $10,000 subtracted from that year’s taxes, assuming you properly report it. Remember, credits are much more valuable than deductions–it’s similar to just receiving $10,000 directly from the government.

Increased Home Value

Installing solar panels increases your home’s value. Exactly how much will vary, but the biggest-ever study by the Department of Energy’s Lawrence Berkeley Lab shows that:

Home buyers consistently have been willing to pay more for homes with host-owned solar photovoltaic (PV) energy systems —averaging about $4 per watt of PV installed.

Their data shows that the average system installed in DC (4 kW) would increase the home’s value by about $16,000 on average-sized.

Also, DC exempts any appreciation to your home from your adding panels to your home from property taxes. So for a system the size I installed, their research suggests that my home value rose about $40k, and there was no related increase in my property taxes. 

Adding it all up

According to Solar United Neighbors, a non-profit supporting green energy, the average DC solar system installation is 4kW which costs roughly $12,000. According to their numbers, that system leads to a one-time $3,600 tax credit, saving approximately $644 on energy bills each year and about $2,064 in SREC payments annually. Using those numbers, the payback period is just over three years (3.1 based on the above assumptions).

Said differently:

  • Net cost: $8,400
    • The sticker price of $12,000 minus tax credit of $3,600
  • Annual return: $2,708 (energy savings+SRECs-SREC commissions @ $5/trade)
  • Annual return: 32.24%
  • Payback period: 3.1 years (excluding any tax costs and home appreciation benefits)

Currently, a 3-year US Treasury bond is yielding 4.47%. The return of the solar array is approximately 7.5x more than the government bond covering the same payback period. Of course, you’d get your money back with the bond at the end of the three years. Still, with solar panels, you’d get 15-20 years of additional electricity production and valuable SRECs, not to mention the satisfaction of knowing you’ve helped increase the supply of green energy. The SREC payments will likely diminish over time. Still, the benefit of energy savings may increase if energy prices continue to increase (DC energy prices are up approximately 26% over the past ten years).

The above illustrative numbers don’t include the increase in property value (an extra $16k, according to DOE) from the addition of the panels. If you do include that, the payback period would be immediate. However, since everyone’s tax situation is different, we also didn’t include the potential tax costs of SRECs. 

Environmental Benefits

Switching to solar energy in a densely populated city like DC can significantly impact air quality and the environment. There are, of course, alternative options – like wind energy. However, these alternatives often work to purify the air near coal plants or where energy is made – and have notably less impact on the DC area. They also tend to impact areas beyond the DC area, like Pennsylvania and West Virginia. For these reasons, solar energy may be the best bet for DC residents looking to have a local and tangible impact.

Here are a few ways solar energy contributes to a cleaner and more sustainable urban environment:

  • Reduced Greenhouse Gas Emissions: Solar energy is a clean and renewable energy source that produces electricity without emitting greenhouse gasses or air pollutants. By utilizing solar panels, cities can significantly reduce their carbon footprint and contribute to mitigating climate change.
  • Improved Air Quality: Solar energy offsets the need for fossil fuels (like coal or natural gas) for electricity generation. Fossil fuels are a significant source of air pollution, so solar energy can improve air quality by decreasing our need for fossil fuels.
  • Noise Reduction: Solar panels generate electricity without noise pollution, unlike conventional power generation methods. This is particularly beneficial in densely populated urban areas.
  • Conservation of Natural Resources: Solar energy conserves these resources by reducing the demand for finite and environmentally damaging resources (like coal and gas).
  • Protection of Ecosystems: Solar installations can be designed to have minimal impact on local ecosystems. Due to their installation flexibility (rooftops, parking lots, unoccupied sites, etc.), they can minimize habitat disruption and land use conflicts common in other forms of development.

Solar energy adoption is critical to creating cleaner and healthier urban environments. These advantages align with the global imperative to address climate change and promote sustainability.

The Cons of Switching to Solar Panels in D.C.

When I’ve helped friends and clients evaluate whether they should get solar panels, the answer is usually yes, but not always. There are some potential cons. 

High Initial Cost

A full-roof-scale solar installation can cost tens of thousands of dollars. Many people don’t have that money on hand. 

Ways to mitigate this problem

There are several options to pay panels even if you don’t have enough cash or would prefer not to use your cash:

  • You can borrow the money
    • Since the panels provide good collateral, the interest rate for a solar panel loan is often not much higher than a mortgage rate. Currently, you can borrow at about 9%. The payback period would be longer, roughly an extra 2 years but you’d still be predicted to come out ahead financially and do good environmentally. 
  • You can sell the right to your SRECs
    • Generally, installers will trade the rights to your SRECs to significantly reduce the cost of your installation. They offer you less for the SRECs than the price you’d likely get if you held them, but help you afford the initial cost and they also accept the risk that prices will go way down.
  • If you are in DC and meet the criteria, you could get a system for free via the Solar for All program
    • You’d get a significant reduction in energy costs at no cost! But you wouldn’t get the SRECs. 
  • You can also enter a Power Purchase Agreement where a company puts panels on your roof, and you agree to buy the power. 
    • You may lower your energy costs, but since you won’t own the panels, you wouldn’t get the very attractive financial benefits. This tends to make more sense in places other than DC that offer less valuable SRECs.

When we have reviewed the various options for clients and friends, we have generally found that it works out best financially for people to buy their systems outright, even if they have to borrow funds or delay other forms of saving to do it. In my experience, the prices that installers have offered for SRECs are lower than people have received when they have sold their own via a broker, so it’s usually more financially advantageous to borrow the money and keep SRECs. 

Of course, if you keep your SREC rights and sell them as they become available, you are accepting the risk of fluctuation in market prices. If SREC prices go down a bit (as we predict based on the current law), you’d still come out ahead, but if SREC prices collapse, then you’d have a problem. I think a collapse is rather unlikely but no one can know for certain precisely how likely that outcome is. Some people strongly prefer avoiding risk and selling the right to your SRECs upfront might be just right if that’s your preference. 

Site Challenges

Some homes don’t have any place to put solar panels, and the places they do have are shaded by buildings or big beautiful trees. If that’s your situation, but you still want solar, sometimes a ground-mounted system can work, or even a car-port system. You can also consider community solar, an approach where you can purchase or lease a “share” in a community solar project or create a project. Every month, you receive a credit on your electricity bill for the energy produced by your share. DC Solar United Neighbors has a helpful overview of community solar.

Regulatory and Permitting Challenges

Like many other locations, solar panel installations in the DC area can face regulatory and permitting challenges. These often arise from local regulations, zoning requirements, and building codes. It can take a while to get everything connected properly, get approval from Pepco, and for SREC payments to begin. 

Next Steps (Actions and Resources)

If you decide to move forward or want to explore more, I suggest beginning by discussing your situation with DC Solar United Neighbors (DC SUN). They obtain superior prices by negotiating on behalf of a group. I participated in one of their group purchases and generally see that people who do obtain a good deal and also don’t need to do as much learning about the specifics as they would need to in order to negotiate well. 

If you’d like to do your own comparison shopping and  research, I suggest checking out the coverage of this topic in Consumer Checkbook,a non-profit that spun off of Consumer Reports. I really like their work on a variety of topics. I’d start with: Thinking About Going Solar? They also have DC, MD, VA Solar Energy Installers Ratings and a discussion of Rebates, Tax Credits, and Other Incentives for Installing Solar Energy Systems.

DC SUN’s listserv is also a fantastic resource for people interested in exploring solar energy. SUN also provides a national helpdesk, where they provide consulting and phone consultations at no cost to existing and prospective solar clients.

In Conclusion

It’s easy to become overwhelmed if you’re considering the switch to solar energy. Whatever you do, don’t get stuck in analysis paralysis. While we all want an A+, a B+ process that results in moving forward with a quality job will usually be much better than doing nothing at all.

Perhaps I could have optimized the angle of our array slightly differently or made other small tweaks, but even as a satisficer who didn’t learn all the nuances of the different technology, our outcome has been very good. My family’s panels have dramatically reduced how much (dirty) energy we use from the grid, has increased green energy production in our community, and generated a significantly positive financial return. Plus, I love the feeling that we are doing the right thing.

I hope this overview has been helpful to you, and if you have any questions, reach out any time.