Solar power has grown exponentially in the US during the last two decades. There were only around 100 MW of solar installations in the year 2000, but the cumulative capacity had surpassed 1,000 MW by 2011. The Solar Energy Industries Association (SEIA) reported over 85,000 MW by mid-2020, and the 100,000-MW mark will likely be reached early in 2021.
Several factors have contributed to the success of solar power in the US. The technology becomes more affordable each year, while electricity prices continue to increase in many parts of the world. This means the upfront cost per kilowatt is constantly reduced, while the savings per solar panel increase. Depending on where a project is located, it may receive incentives from governments or utility companies.
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In the US, the Investment Tax Credit (ITC) has greatly contributed to solar power growth, and it is available for homes and businesses. Until the end of 2019, the incentive consisted of a federal tax credit equivalent to 30% of the cost of solar installations. However, the benefit was reduced to 26% in 2020 and will be further reduced to 22% in 2021. The ITC will be only 10% from 2022 onwards, and only businesses will be eligible.
This article will provide an overview of the 5 best states for solar power on the East Coast, considering aspects like incentive programs and electricity costs.
1) New York
STRONG POINTS FOR SOLAR POWER:
- Renewable Portfolio Standard: 100% renewable energy target for 2050, with a 6,000 MW solar power target for 2025
- High electricity prices.
- The NY-Sun rebate program, which includes incentives for low-income housing
- 25% state tax credit up to $5000, added to the federal ITC
- Solar power is exempt from property and sales taxes
- Solar panels or green roofs are mandatory for many properties
New York is not a very sunny state, but solid incentives and expensive electricity improve the business case for solar power. When adding the federal tax credit, the state tax credit, and the NY-Sun rebate, many solar installations become around 50% cheaper.
For a given solar capacity, the number of kilowatt-hours will probably be less than in a sunny state like California or Colorado. However, since electricity is expensive in NY state, the dollar value of solar generation is high. For example, a home solar system generating 600 kWh/month will save $120 if the tariff is 20 cents/kWh. If that same system produces 800 kWh/month in a sunnier location, but the tariff is only 13 cents/kWh, the savings are reduced to $104.
2) New Jersey
STRONG POINTS FOR SOLAR POWER:
- Renewable Portfolio Standard: 50% renewable energy target for 2030, with a 5.1% solar power target for 2021
- Above-average electricity prices
- You earn a Solar Renewable Energy Credit (SREC) for every 1,000 kWh
- NJ Clean Energy Program rebates for new homes.
- Favorable net metering laws: Solar generation is credited at the full retail price, and balances in your favor are credited at the wholesale price.
- Solar power is exempt from property and sales taxes
Similar to New York, the state of New Jersey has a combination of favorable policies and state incentives for solar power. Electricity is less expensive than in NY but still above the national average, and this creates an excellent savings opportunity.
Owners of solar power systems can also make additional income by selling the accumulated SRECs. As of 2020, each SREC is selling for around $230, which is equivalent to 23 cents/kWh. Since NJ electricity prices are currently around 16 cents/kWh, SREC sales will be higher than power bill savings!
Electricity consumers who are buying a new home can take advantage of the NJ Clean Energy program if they meet ENERGY STAR requirements. The incentive can help cover the upfront cost of a solar power system.
3) Massachusetts
STRONG POINTS FOR SOLAR POWER:
- Renewable Portfolio Standard: 50% renewable energy target for 2045, with a 3,200 MW target for solar power
- High electricity prices
- The SMART incentive program pays over 10 cents/kWh as of 2020
- Rebate programs available from several municipal utilities
- Favorable net metering laws
- 15% state tax credit up to $1000, added to the federal ITC
- Solar power is exempt from property and sales taxes
Massachusetts is arguably the best state for solar power as of 2020. Electricity prices are above 20 cents/kWh, and you get a SMART incentive of around 10 cents/kWh. This means that each kilowatt-hour from solar panels has a value of over 30 cents, and you save $300 for every 1,000 generated.
The SMART program is only available for customers of the three investor-owned utilities in the state: National Grid, Eversource, and Unitil. However, several municipal power companies run incentive programs, which provide upfront rebates for going solar.
4) Rhode Island
STRONG POINTS FOR SOLAR POWER:
- Renewable Portfolio Standard: 38.5% renewable energy target for 2035
- High electricity prices
- Rhode Island Renewable Energy Fund: Rebate of $0.85/watt in residential projects, and up to $0.70/watt in commercial projects.
- Favorable net metering laws
- Solar power is exempt from property and sales taxes
The combination of expensive electricity and a solid rebate program improves the business case for solar panels in Rhode Island. Also, the residential program offers a rebate of up to $7,000 per project, while the commercial program offers up to $75,000 per project. To get the maximum incentive available, the solar capacity required is 8.235 kW (8,235 W) in a residential system and 175 kW in a commercial system.
5) Maryland
STRONG POINTS FOR SOLAR POWER:
- Renewable Portfolio Standard: 50% renewable energy target for 2030, with a 14.5% solar power target for 2028.
- The Residential Clean Energy Rebate Program offers $1,000 for solar arrays up to 20 kW
- You earn a Solar Renewable Energy Credit (SREC) for every 1,000 kWh
- Large installations can qualify for a Production Tax Credit of $8.5 for every 1,000 kWh
- Favorable net metering laws
- Solar power is exempt from property and sales taxes
Maryland is another state that offers a combination of incentives for solar power, which reduces its payback period while increasing the return on investment. When electricity is generated with solar panels in Maryland, there are three cash flows in your favor: electricity savings, SREC sales, and the production tax credit in the case of large systems.
Maryland has electricity prices around 13 cents/kWh, while each SREC sells for around $80, equivalent to 8 cents/kWh. For every 1,000 kWh produced by your solar panels, you get around $210 in savings and SREC sales.
Conclusion
There is a common misconception that solar power is only viable in sunny places. However, you can also get an attractive return on investment in places with moderate sunshine and expensive electricity. Consider that your power bill savings are the result of multiplying kilowatt-hours produced and local electricity prices. Favorable government policies and incentive programs for solar power also improve the return per dollar invested, and this is the case for several East Coast states, including New York.
