Pennsylvania is known for its abundant fossil fuel production, but it has been making strides to expand its clean energy use. In 2004, the state established an Alternative Energy Portfolio Standard (AEPS) to commit 18% of its retail electricity generation to renewable energy. It has since introduced several statewide solar programs that offer payouts for generating solar energy.
According to Eco Watch, the average Pennsylvania solar system costs more than $21,000, so it’s important to take advantage of these opportunities to save on your investment. This guide includes the top federal and state solar incentives in Pennsylvania. You can also check out our list of the Keystone State’s best solar companies.
Pennsylvania Solar Tax Credits and Rebates
Although solar power has been slow to grow throughout Pennsylvania, the state government continues to incentivize its residents to make the switch. Many of its programs focus on long-term solar payments, but the state lacks programs to reduce initial investment costs.
Pennsylvania doesn’t have sales or property tax exemptions for solar systems. This adds more tax burden on residents, but other federal and state incentives can still make going solar more affordable. We’ll explore Pennsyvania’s solar incentives below.
Solar Renewable Energy Certificates (SRECs)
Pennsylvania is one of the few states that offers solar renewable energy credits (SRECs). Also known as alternative energy credits, these programs reward residents for using clean energy sources by providing credits for energy generated by your solar system. You receive one energy credit (or certificate) for every 1,000 kilowatt-hours (kWh) your panels generate. Homeowners then sell these credits for cash payments. Since you’re receiving payment for the sale, SREC payouts are taxable.
Pennsylvania’s Public Utilities Commission (PUC) offers the program to all solar residents in the state. Residents must apply to the PUC’s Alternate Energy Credit Administration to qualify. Although availability is statewide, the payout amount varies by area. According to SREC Trade, Pennsylvania SRECs pricing has risen to more than $40 on average. For example, a 6 kWh home solar system could earn around $240 annually. A homeowner could earn up to $4,800 over a 20-year period.
More resources: Pennsylvania residents should review program details on the PUC website.
Philadelphia Solar Rebate Program
The Philadelphia Solar Rebate Program is an incentive program that qualifies homeowners for a one-time rebate of 20 cents per watt. Your system is eligible after being approved for Permission to Operate by PECO Energy Company (formerly Philadelphia Electric Company). This means your system has passed the final inspection, and the electric company has approved the activation.
You must meet additional requirements to keep the payout. Your system must remain operational for 36 months after installation and produce at least 80% of its projected energy production for the next three years. The city may request a refund if either requirement is not met.
More resources: Philadelphia residents should check the City of Philadelphia government website for complete details.
The most efficient solar panels generate more energy than your home needs. Many homeowners install solar batteries to store excess energy for later use. Pennsylvania residents can also get paid for their excess energy through net-metering. This program allows homeowners to sell extra power back to the grid for electric bill credits. The PUC mandates that all investor-owned utilities (IOUs) must offer net-metering to their customers.
While the policy enforces a 1:1 match for energy sold to credits issued, there is no requirement for full retail payment. This means the amount paid for your credits could be lower than the energy company’s standard sales rate. Despite the lower payback rate, this program can still reduce your energy bills.
More resources: Check the Database of State Incentives for Renewables and Efficiency (DSIRE) for complete details on Pennsylvania’s net-metering program. Also, check with your local utility company to sign up for its program.
Federal Solar Tax Credit
The federal government offers a federal tax credit to all qualifying solar customers. Homeowners receive credit for 30% of their solar panel installation costs. Unlike a solar rebate program where you receive a cash payment, this credit is applied to your federal tax liability. Your earned credit would reduce or eliminate your owed federal income tax. Any remaining credit would roll over to the next tax period.
You must legally own your solar energy system to be eligible for this credit. This means you must purchase the solar system in cash or opt for a solar loan. Other payment options, such as a solar lease or power purchase agreement (PPA), allow the solar company to retain full ownership. Cash payments and loans are the best ways to maximize your potential solar system savings.
Pennsylvania offers several payback programs to help homeowners offset solar panel costs and improve their return on investment. The federal solar tax credit also helps reduce initial investment costs. Remember that you must pay for your system up-front or take out a loan to qualify for some solar incentives.
We recommend requesting free quotes from at least three reputable solar companies in Pennsylvania before hiring one. Compare solar panel options, financing details, and warranty coverage. Here are our top choices for solar companies in the Keystone State:
- Momentum Solar: Provides a user-friendly experience by handling all solar installation steps in-house, eliminating the need for third-party installers.
- Palmetto Solar: Offers supplemental home services, such as panel cleaning, maintenance, and troubleshooting.
- Sunrun: Includes four diverse financing options that make going solar more affordable.
FAQ About Solar Tax Incentives in Pennsylvania
Our Rating Methodology
The This Old House Reviews Team is committed to providing comprehensive and unbiased reviews to our readers. After over a thousand hours of research on solar companies, interviews with experts, and common customer needs, we’ve created a detailed rating system for solar providers based on six factors:
- Solar equipment, installation, and services (25%)
- Warranty and performance guarantees (25%)
- Brand reputation and certifications (15%)
- Financing options (15%)
- Experience (10%)
- Availability (10%)
Total scores are divided by 20 for a final 5-point rating scale.
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