What is happening with solar fees in Washington DC?

Washington, DC, like many areas in the U.S., has some great incentives if you're looking to go solar. Recently, however, some residents have received an unpleasant surprise after their installer submitted the permit application for their system: additional fees, which are noted to be necessary to update the grid in order for it to support solar in their area. In this article, we'll break down these fees, reference some first-hand information from local DC installers, and share what you can ask and do if you learn of additional potential fees when looking to go solar in the DC area.

Pepco (Potomac Electric Power Company) currently provides electricity to 894,000 customers throughout the District of Columbia (DC) and Maryland. DC is often cited as a leader in laws and policies that address both the impacts of climate change as well as energy unaffordability and inequity. Specifically, DC has mandated a 100 percent Renewable Portfolio Standard (RPS) by 2032, and the Mayor has announced a policy to become carbon neutral by 2050. Solar is a necessary and essential component to meeting these climate and clean energy objectives, and the DC Council has gone as far as mandating that 10 percent of the renewable energy portfolio must be met from solar facilities located within DC by 2041.

Pepco and DC, in general, promote some very favorable conditions for going solar due to a few main factors:

Net metering

In DC, if you produce more electricity than you use in a month, your next month's electricity bill will be credited with your excess energy through net metering. If your solar system is under 100 kW, you'll be credited at the full retail rate. If you're a business owner and your system is over 100 kW, you'll be credited at the generation rate. These credits never expire, and they may be used in winter months when you're producing less energy. You do have to apply for net metering through Pepco, which your installer will help you with.

SRECs

Solar renewable energy certificates (SRECs) are a performance-based solar incentive that allows you to earn additional income from solar electricity generation. In DC, as a homeowner, you can earn one SREC for every megawatt-hour (MWh), or 1,000-kilowatt hours (kWh), of electricity your solar system generates.

Pepco doesn't manage SRECs in DC; rather, they're administered by the D.C. Public Service Commission administers. DC has some favorable SRECs, trading at $382.50 as of March 2022. If you have a 10 kW solar panel system, it will produce about 10 to 13 MWh of electricity per year on average, which will earn you 10 to 13 SRECs annually. So, at the current SREC rate, you'd earn $3,825 (or more) annually. If you live in DC, you can visit the Public Service Commission website to see detailed information on SRECs or apply for them.

The fees residents are getting charged by Pepco vary depending on the specific area they’re located in: there’s no set fee showing up in these instances and some people aren’t getting charged any fees at all. However, according to a survey in the DC area by The Chesapeake Solar & Storage Association’s (CHESSA) that was sent to installers, the average upgrade cost was $9,560, which is obviously a substantial amount added to the average overall cost of going solar, which usually ranges between $25,000 and $30,000 prior to any incentives and rebates.

CHESSA surveyed installers and found that 94 projects were reported to have received requirements for solar system downsizing, distribution system upgrades, or both, beginning in April 2021. Detailed data showed that projects averaged a 5 kW downsizing requirement per project and/or a $9,560 upgrade cost per project. (A project refers to an individual home’s solar panel installation, though some of these projects may be commercial or industrial solar projects).

A 6.8 kW solar system would usually power the average American household, though your needs will vary depending on various factors, such as the size of your home and your energy usage. In CHESSA's survey, the average system included was 7.7 kW – and of the 907 systems included, approximately half were asked to downsize. At an average downsize request of 5 kW per system, that implies a 500 kW total potential reduction in annual residential capacity throughout the DC area.

CleanGrid Advisors, who ran the survey for CHESSA, analyzed these downsizing and upgrade cost requirements to the District's total annual volume of residential interconnections and determined that approximately 200 solar projects each year could be affected in DC. This represents 500 kW annually in potentially lost system capacity (people having to reduce the size of their solar system) and/or over $1,600,000 in required system upgrade costs.

One of the best things you can do is touch base with your solar installer immediately. They have likely dealt with these circumstances before and may be able to help you by either absorbing some of the fees or providing suggestions based on their recent communications with Pepco. You may be able to dispute the upgrade fee, which your installer can also guide you through.

Another issue you may encounter if you're a  DC resident trying to go solar is that this process can delay your solar project timeline because of the time needed for your installer to review the information, work with Pepco, and, in some cases, wait for the grid infrastructure upgrades to be made. Fortunately, many DC-area solar installers are helping their customers navigate the process and are in regular conversations with Pepco. They're also requesting final cost letters from Pepco because, in some instances, there have been updates provided that an upgrade isn't needed after all – meaning you wouldn't have to pay fees!

Because of the potential negative impact on the DC solar industry, several organizations are working to help DC residents and businesses address this issue. A couple of public filings have recently been submitted, including one from CHESSA on February 17, 2022. Given the significant percentage of solar system installations impacted, the reports that these types of requirements are new, and the substantial downsizing and upgrade costs, CHESSA is requesting in their public filing that Pepco explain the changes, identify the root causes, and collaborate with the industry to minimize capacity losses and costs. Specifically, they want Pepco to take the following two actions:

1. Provide stakeholders with a comprehensive explanation of the change in requirements that occurred in April 2021. The explanation should include any changes to policies, practices, evaluation methods, and other circumstances that have led to these new requirements being imposed.

2. After providing information on the root causes of the changes, Pepco should work with stakeholders to develop approaches to limiting system downsizing and upgrade requirements.

Only time will tell what the result will be from these filings, but hopefully, some more details will become available, and more solutions will arise to help DC customers cover electrical grid upgrade costs and go solar.

While additional fees should warrant a reasonable explanation, there are still a lot of great benefits if you're looking to go solar in DC! So, the reality is that even with fees, you can likely make your money back on your solar investment within a few years (the average solar payback period is 8.7 years on EnergySage). You can determine your individual payback period with the help of your installer and/or lender (if you're financing solar) by accounting for any fees, installation costs, and financing costs in your calculations.

Whether you live in DC or another area, powering your home with solar will help you save money and rely less on the electrical grid. Get peace of mind and save on electricity costs by signing up for a free account on EnergySage and checking out solar or solar-plus-storage options in your area. (Be sure to take a look at what incentives you'll be eligible for in DC or wherever you live to make going solar even more affordable!)