Solar Programs in Washington and What They Mean for Rental Owners

Washington has garnered a reputation as a leader in clean energy over the past decade, designing innovative programs for decentralized energy sources and protecting the rights of homeowners to choose solar. For rental-owners, state and federal initiatives have created a unique value proposition, making solar a great investment that can be cash-flow positive from day one. The state has established ambitious goals to use clean energy for 100% of its needs by 2045. As of 2020, the state has installed over 225 mW of paneling over nearly 22,000 installations. Solar now accounts for 0.24% of the state’s energy production, a fact that indicates that the industry will continue to grow in the coming years.

While the Puget Sound’s reputation for brooding weather sometimes clouds the prospect of sun-sourced energy, the long summers days provided by our northern latitude, coupled with cooler temperatures that allow arrays to function efficiently, means that solar is a sustainable proposition for many Washington homeowners. For arrays less than 100kW—the average residential array is 1/10th that size—, the state has mandated Net Metering for its utilities. Net metering requires the over-production of an arrays in summer to be banked by the utility and credited back to the customer during times of lower production. This arrangement means that an array can provide electricity year-round without a costly energy-storage system. Furthermore, the recently-passed Solar Fairness Act exempts sub-100kW arrays from sales tax and prohibits tax liabilities from being assessed on the value that a solar array adds to a property’s value. The law also prohibits Homeowners’ Associations from barring solar installations.

These programs present a unique investment opportunity for rental owners in Washington. The state’s efforts to minimize costs and ensure fair treatment from utilities, HOAs, and tax assessors have brought solar energy into an affordable price point. The cost of an array can now be financed for around the same price as traditional grid electricity. Renters who pay for their utilities are often happy to trade their electricity bill, now covered by the array, for a comparable increase in rent. This also insulates long-term renters from the 3-5% annual increases in electricity rates from the utility.

For rental owners, their costs are offset by a 26% federal tax credit and the ability to use Modified Accelerated Cost Recovery System (MACRS). These programs allow owners to minimize liabilities and maximize returns without affecting their costs. The 26% credit offsets liabilities or comes back as a refund; MACRS provides an additional credit for business owners adjusted for their tax bracket, usually amounting to around 17.8% of the project. This means that up to 43.8% of the project cost comes back in the first year following installation while much of the cost has been passed through. Adding in the increased property value, solar becomes a very attractive investment in a challenging market. Rental owners looking to maximize these programs should move quickly as the 26% credit is going down to 22% in 2021 and ending in 2022.

Rohan Jolly is a Residential Consultant for CapStone Solar, Inc.  He can be reached at (206) 580-3448 or at rohan.jolly@capstonesolar.com. CapStone is Washington’s largest solar installer, with more than a decade of experience in the industry. As a RHAWA vendor, CapStone offers discounted pricing for RHAWA members as well as cash rebates and 0% down financing.