Why Your State Matters When Going Solar

If you had to guess which states are best for solar panels, you'd say the sunniest ones, right?

Well, not quite. The likes of Georgia and Florida might have the most sunshine, but they don't always have the best solar policies: things like economic incentives or net metering. In fact, some of the states with the most friendly solar policies -- making solar cheaper and more accessible for homeowners -- are in the Northeast.

"The solar industry has done amazing things to bring down the cost of solar and deliver it to more people," said Kevin Jones, director of the Institute for Energy and the Environment at Vermont Law and Graduate School. But when it comes to state-level policies, consumers are still riding the "solar roller coaster," as he put it, of shifting programs and rebates.

Here's what you need to know about why your state matters when you're going solar and how it could impact whether solar panels are worth it for you.

Why states have different solar policies

You might be wondering why solar policies vary so much from state to state in the first place. 

"The No. 1 thing that's the problem for the solar industry and the solar customers is really the power of the utility in the states," Jones said.

That's because utilities have a lot of influence over policies (and policymakers) and often a vested interest in reducing the amount of rooftop solar. The way utilities often see it, solar panels make customers less reliant on the electrical grid, which means utilities end up losing rate revenue that they need to maintain power plants and power lines. 

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Jones said this can lead utilities to lobby public utility commissions and state legislatures to reduce or eliminate programs that make it easier and cheaper for homeowners to install solar. "The utilities have controlled this debate and essentially convinced a lot of commissions that rooftop solar is bad," he said.

Krystal Persaud, co-founder of customer education platform Wildgrid, said state solar policy often breaks along party lines, as many public utilities commissioners are appointed by elected officials or are themselves elected. "If you have a public commissioner who's super right-wing, they're just going to let utilities do whatever they want," she said. 

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Common solar-friendly state policies

So what exactly do states and utilities have control over, anyway? Here are some of the most common solar-friendly policies that states can implement:

Net metering

This is what most people think about when they visualize the economic benefits of solar: Producing so much extra energy that your electric meter spins backward and you get a check in the mail from your utility.

These types of policies -- where you get paid for the power you generate -- are known as net metering. Some states will also allow you to stash extra net metering credits in the summer, and then use them to cover bills in the winter.

"Just having a good net metering policy itself has been really sufficient to drive a lot of solar," Jones said.

Unfortunately, net metering is often lacking in some of the sunniest states. "You'd think that in the Southeast, it's really prime real estate for solar, but without net metering, that chance of getting paid back by your utility is gone," Persaud said.

Tax credits

The solar tax credit that likely will have the biggest impact on your home energy budget is at the federal level: It can cover 30% of the cost of your solar array.

But some states have additional rebates you can stack on top. There are different types depending on where you live: Some allow you to reduce your tax bill at the end of the year, and others reduce the taxable value of your home. 

Common solar-unfriendly state policies

Just as your state can encourage you to go solar, it can also discourage it. This can happen in a few different ways.

Low or no net metering rates

Because net metering is the most common way homeowners get a return on their solar investment, a lack of these policies is a big roadblock to installing solar in some states.

If your utility doesn't offer net metering, you'll have to rely more heavily on tax incentives to offset the cost of your solar panels -- or put off the project altogether.

Even some states that do have net metering are starting to curtail the rates, Jones said. Some no longer allow customers to receive the full retail rate, and others exempt certain "fixed charges" on the bill from being paid for with net metering credits.

HOA restrictions

If you live in a home that's subject to a homeowners association, your state could also influence the HOA's rules when it comes to solar, Persaud said.

"HOAs have a history of shutting down people going solar," Persaud said.

In some states, new laws now ban HOAs from stopping solar installations, but in others, HOAs are still free to restrict them.

Limits on solar array size

Typically, a rooftop solar system is sized to meet the energy needs of the home where it's being installed.

But Jones said some states are also now limiting solar array size in an effort to reduce the amount of excess electricity homeowners are generating (and that the utility would pay them for under a net metering program).

Why solar policies matter in your solar decisions

The reason all of this matters when you're on your way to going solar is mostly financial.

Solar installations aren't cheap, usually running into the $20,000 range. Some homeowners may have that much disposable income sitting around, but most don't. State solar policies often fill the financial gap that allows homeowners to install, and make a return on, solar panels. 

If you live in a solar-friendly state, you might have access to multiple solar rebates that reduce the upfront cost of solar, plus a net metering policy that generates income for you on a monthly basis.

By contrast, a solar-unfriendly state could leave you out in the cold with a much higher installation cost and a much longer payback period -- and that's if you get paid back at all.

All of this is why Persaud encourages homeowners to stay engaged politically and keep an eye on developments in state solar policy.

"If you vote for that more climate-leaning commissioner, then you might get more policies with the utility done that are going to benefit you and save you money. It's like a chain reaction of awareness that needs to happen," she said.

More on solar panels

• Save on Your Next Home Energy Upgrade with These Incentives
• Why the Cost of Solar Panels Will Likely Keep Falling
• Are Solar Panels Exempt From Property Taxes and Sales Taxes in Your State?
• How the Federal Solar Tax Credit Works