Congress Extends Solar Investment Tax Credit for Five Years

Great news for businesses looking to go solar! On the heels of the landmark global climateagreement in Paris, the U.S. Congress today voted to extend the Investment Tax Credit (ITC) for solar energy investments by five years. The bill now goes to President Obama who plans to sign the bill today. This decision will help thousands of businesses across America achieve savings and sustainability with advanced solar technology.

Great news for businesses looking to go solar! On the heels of the landmark global climate agreement in Paris, the U.S. Congress today voted to extend the Investment Tax Credit (ITC) for solar energy investments by five years. The bill now goes to President Obama who plans to sign the bill today. This decision will help thousands of businesses across America achieve savings and sustainability with advanced solar technology.

The federal government currently provides businesses that install solar panels a tax credit equal to 30% of the total solar installation price. Just last week, that credit was set to drop down to 10% for solar projects unfinished by the end of 2016.

Now, thanks to a massive national outpouring of support for solar energy, the full 30% tax credit for commercial solar installations has been extended through 2019. Then, it will ramp down to 26% in 2020, 22% in 2021, and to 10% in 2022 for commercial solar installations. The bill also includes an important “commence construction clause” that extends the credit to solar projects that have started development before the deadlines listed above, as long as they are completed by the end of 2023. In other words, new solar projects need not accelerate dramatically to finish construction in order to qualify for these tax credits.

This vote of confidence in the American solar industry is testament to the incredible progress we’ve made since the tax credit was created in the Energy Policy Act of 2005. Solar installations in America have grown by an average 76% annually as our industry has achieved maturity and economies of scale. Looking forward, a five-year extension of the ITC will allow for an additional 25 gigawatts of solar installations across the country, a 54% increase compared to projections without the ITC extension, according to GTM Research.

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The extension of the investment tax credit provides more flexibility for businesses looking to go solar in 2016, and it will help to alleviate the anticipated operational bottleneck for commercial solar providers. With this news, we can now focus all of our energy on providing our commercial energy customers with the most financially beneficial and environmentally responsible energy solutions, without having to accommodate policy-driven market volatility.

If your business is looking for ways to reduce operating expenses next year, now is the perfect time to consider an advanced solar energy installation. The extension of the solar ITC, coupled with flexible financing solutions, will help to ensure strong IRRs and ROIs for new commercial solar projects. With the possibility of slowly rising interest rates and changes coming to California’s net metering policy, now is a prudent time to finance a commercial solar project and start saving on your energy bills.

Our team of solar experts is ready to examine your energy bills and to provide a no-obligation commercial solar evaluation. Let us show you how solar technology could help your company’s bottom line and our planet.

 

Now’s the Time for Businesses to Go Solar & Realize the Full 30% ITC

Unless Congress acts to extend it, the 30% Federal Investment Tax Credit (ITC) for commercial solar energy projects will step down to 10% on December 31, 2016. The ITC has been a major factor in America’s solar industry growth, helping solar installations increase by an average 48% annually since implemented in 2006.

Unless Congress acts to extend it, the 30% Federal Investment Tax Credit (ITC) for commercial solar energy projects will step down to 10% on December 31, 2016. The ITC has been a major factor in America’s solar industry growth, helping solar installations increase by an average 48% annually since implemented in 2006.

UPDATE 12/2015: The Solar Investment Tax Credit has been extended! Learn more about how changes to the ITC will benefit commercial solar.

A decline in the solar ITC would make it more challenging for businesses and large organizations to tackle their electric bills, achieve sustainability goals, and modernize their operations. We hope to see it extended. However, given the uncertainty on the horizon, now is the time to act to ensure that your business takes full advantage of the solar ITC and maximizes ROI on your solar project.

The following example illustrates the difference between a commercial solar project in California incorporating the current 30% ITC and one using the 10% credit. In this example, the calculations are based on a one megawatt (MW) solar photovoltaic (PV) system installed for a major retailer, paid for in cash and sited in the Pacific Gas & Electric (PG&E) utility service area.

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The example assumes a $2 million initial investment and a 6% discount rate, as well as performance degradation modeled at 0.5% annually over the 30-year lifetime of the system. Here are the potential financial differences between a 30% and 10% solar ITC:

  • With the 30% tax credit in place, the post-tax initial investment eases to $1.4 million. The project’s internal rate of return (IRR) would be 17.4% and the net present value (NPV) would be about $2,083,000.
  • In the 10% ITC scenario for the same solar installation, the post-tax initial investment increases $400,000 to $1.8 million. The project’s IRR falls to 14.3% and the NPV drops to about $1,765,000.

 

Specific customer quotes will vary based on several factors including utility rates, location, facilities, energy usage, and the type of financing selected. But the general idea is the same: although the payback on a solar PV system using a 10% tax credit is still decent, the return on one benefiting from a 30% ITC is substantially better. That’s why the time to act is now!

A step-down in the ITC could also lead to more subtle changes in commercial solar project design, and indeed the entire market. For example, more complex and expensive solar installations, such as solar carports, would become financially challenging relative to larger, straightforward installations.  At the same time, smaller systems with a lower price per watt could have a relative advantage over systems with high marginal capacity costs. In other words, in a 10% ITC world, it may be less compelling to offset your entire electric bill if certain parts of the solar installation are substantially more expensive than others.

We’re here to help. Our experienced team will work with you to design, plan and construct the most financially beneficial and environmentally responsible commercial solar system. REC Solar manages every step of the commercial solar process, and we provide a variety of financing options to fit your business’ needs.

For most businesses seeking to take advantage of the 30% tax credit on their solar project, the construction start date should take place before May 2016.  Therefore, initial project evaluation and analysis should begin as soon as possible. The 30% solar ITC may yet be extended by Congress, but it’s impossible to predict the future.

No matter what happens with the solar ITC, one thing is clear: there’s no time like the present to go solar!

 

What Does Hawaii’s Net Metering Closure Mean for Commercial Solar?

The Hawaii Public Utilities Commission issued a ruling on October 13th that brings a halt to new net metering (NEM) applications on the Hawaiian Islands. Hawaii’s net metering program was highly successful, and instrumental in fostering the development of our robust solar industry, which leads the country in per capita installed solar capacity. Today, there is roughly one solar panel (312W) installed per resident in Hawaii, which isseven times higher than the national average, according to a recent report by Environment America.

The Hawaii Public Utilities Commission issued a ruling on October 13th that brings a halt to new net metering (NEM) applications on the Hawaiian Islands. Hawaii’s net metering program was highly successful, and instrumental in fostering the development of our robust solar industry, which leads the country in per capita installed solar capacity. Today, there is roughly one solar panel (312W) installed per resident in Hawaii, which is seven times higher than the national average, according to a recent report by Environment America.

While The Alliance for Solar Choice has filed a lawsuit seeking an injunction on the NEM decision, here are a few important things you should know about this development as it currently stands:

  1. The ruling does not impact existing net metering customers. HECO will still review net metering applications submitted before October 13th. So for any business that has already tapped into Hawaii’s solar resources, you can stop reading and hit the beach!
     
  2. Although the end of net metering in Hawaii will have a negative impact on the ROI and NPV of future projects, the sun is still shining: a commercial solar system remains an attractive investment for many Hawaiian businesses. In fact, with the expiration of the solar investment tax credit (ITC) looming, now is the time to act!

In the absence of net metering, the HPUC has ordered two new interconnection options for solar power producers: “customer self-supply” and “customer grid-supply” tariffs. Here’s what they look like:

Self-Supply Tariffs

This is all about batteries, which are becoming increasingly attractive as global economies of scale continue to drive down equipment prices. HECO’s new self-supply options provides commercial customers who install batteries with an expedited review and approval process. Here’s the catch: approved customers will only be allowed (Page 118) “a limited amount of inadvertent export to the grid with zero compensation.” For customers interested in meeting their usage with solar, this could be worth consideration; however, most companies should take a closer look at the next option…

Grid-Supply Tariff

Under the grid-supply tariff option, companies that install solar will be compensated for reverse power flow at rates between 15.07 and 27.88 cents per kWh for the next two years, depending on the island. Those credits are limited to a company’s monthly consumption, and will not carry over to the following month. Here’s the breakdown of credit rates by island:

  • Oahu: 15.07 cents
  • Hawaii: 15.14 cents
  • Maui: 17.16 cents
  • Molokai: 24.07 cents
  • Lanai: 27.88 cents

This new program is intended as only a short-term bridge for distributed energy generators, and we should expect that it will eventually be reviewed and amended. The grid supply tariff program will be capped at 25MWs for the Oahu (HECO) service territory and 5MWs for both Maui (MECO) and the Big Island (HELCO) grids.

Standard Interconnection Agreement

For companies that want to install more than 100 kW AC on their facility with only one meter, there is a Standard Interconnection Agreement (SIA) available that has no size limit.  The only limiting factor is your on-site load.  The SIA is ideal for large energy consumers who are looking to reduce their price per kWh.

Community Solar

Good news on the horizon: community solar is also coming to Hawaii in the near future.  This will allow consumers to participate in a solar purchase without being physically connected to the system.  We are seeing universal support for community solar across government, industry groups, the public and local utilities (HECO, MECO, HELCO and KIUC).

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Smart Commercial Solar Design

The shift from net metering to the lower, flat rate grid-supply tariff creates an important new imperative for commercial solar providers: in order to maximize ROI, solar systems should be designed to closely follow the load profile of the building. You could think of solar in this context as a form of energy efficiency or demand response.

For example, let’s say your grocery store uses a large amount of energy for refrigeration in the afternoon. A southwest-facing solar system will increase energy generation between 1pm and 3pm, helping to offset peak afternoon loads and therefore maximizing system ROI. Although this design would decrease total system production, it would increase production coincident with demand, making it more valuable energy.

Achieving this goal, however, requires interval data. Unfortunately, most utility meters in Hawaii do not record interval data. It’s important to know how much and when businesses consume energy in order to design a solar system that matches production to facility load and maximizes the offset. If your business already has interval data, then we’re ready start working on the most efficient solar system design immediately. If you don’t have interval data, let’s work together to install the right logging equipment to understand your organization’s energy profile and then we’ll determine the best solution to reduce your electric bills.

Let’s Get Started

The closure of net metering in Hawaii adds new complexity and considerations for local businesses seeking to go solar. We’re here to help. As Hawaii’s commercial solar leader, REC Solar can manage every aspect of your project, from the initial load and rate analysis, system design, proposal, permitting and engineering, procurement, construction, operations and maintenance. Even with the change in the NEM program, commercial photovoltaic systems can still help your business save money and show a strong environmental commitment to the community.

The Perfect Storm: Why Now is the Time to Seize the 30% Credit on Commercial and Industrial Solar

Although the 30% business investment tax credit (ITC) for installing solar expires at the end of 2016, the window for taking advantage of the ITC is actually much sooner. Unless Congress extends the ITC—which is an open question at this time—business owners should begin planning now for solar projects to be completed by the end of 2016. Combined with lower costs than ever before, businesses are seeing a perfect storm of conditions that make now an ideal time to go solar.

Although the 30% business investment tax credit (ITC) for installing solar expires at the end of 2016, the window for taking advantage of the ITC is actually much sooner. Unless Congress extends the ITC—which is an open question at this time—business owners should begin planning now for solar projects to be completed by the end of 2016. Combined with lower costs than ever before, businesses are seeing a perfect storm of conditions that make now an ideal time to go solar.

You might think that 2 years is a long time to pull the trigger on going solar, but like any large commercial or industrial upgrade, solar projects can take 1 to 2 years to complete and go online. Here’s why:

1) Commercial solar evaluations and decisions take months.

While some business owners can make a snap decision to go solar, we’ve found that most businesses typically need 1-3 months to complete the process. That includes learning about all the options and assessing solar’s value to the business, while waiting on several solar providers to prepare and revise comprehensive quotes. Regardless of whom you choose as your commercial solar partner, they will need to analyze utility charges and rates, the times that your business uses the most energy, roof integrity or existing site condition, and utility connection infrastructure.

The location and type of business also matters. Solar installed on a plot of land for an agricultural facility and solar installed at a hotel or shopping center with a solar carport each have specific considerations that a solar provider will have to evaluate for an optimal proposal and design.

Similarly, if you own multiple retail locations, or have multiple buildings on a single industrial campus, each potential site will need to be assessed for generating the most solar electricity at the lowest cost.

As a result, the solar evaluation process alone can take several months, and that inches everyone closer to the 2016 completion deadline to qualify for the 30% ITC.

2) Solar financing takes months.

Unless you intend to pay for your solar installation with cash, there are many financing options to consider when installing solar. Loans, solar power purchase agreements, solar leasing agreements, and commercial solar PACE loans may all be viable financing options, so your provider needs time to prepare and present these options so that you can choose the best financing option for your business. At REC Solar, we’ve found that this process typically ranges from 1-3 months.

Once you choose the best option to finance your solar installation, the financing partner will need time to go over the proposal and qualify your company. That can also take several months, depending on the size and cost of your commercial or industrial solar installation.

3) The solar permitting process varies wildly.

The solar permitting process is notoriously variable. Consequently, depending on your city and type of installation, the plans may need to be inspected and approved by several local authorities, potentially including the building department, the utility, the fire department, as well as environmental agencies.

After submitting plans, changes to solar designs are sometimes required by each agency, and subsequently, installers must resubmit plans. Even when plans are perfect the first time, the municipal engineering departments that approve solar designs for permitting are frequently overwhelmed and understaffed. Fortunately some cities are developing streamlined best practices for solar permitting, though today those are few and far between.

This unpredictable solar permitting process can range from 10 minutes in San Francisco to 6 months in Denver. This uncertainty can further extend the project development phase, before breaking ground on the project, bringing the 2016 deadline to qualify for the solar ITC even closer.

4) Solar installations take up to six months.

Once you’ve been through evaluation, design, engineering, procurement of equipment, and permitting, you’re finally to the second to last step: The actual installation.

A good solar installer needs to plan and schedule a time that is most convenient for you and your operations, avoiding any decrease in productivity or interrupting normal business.

Aside from the scheduling, the larger and more complex the installation, the more time it will take to complete. Yet even a relatively small 100-250 kW solar installation can take 1 to 3 months to construct. As we noted before, each site is unique and may require upgrades to infrastructure, trenching and concrete, roofing adjustments, or utility interconnection upgrades.

A large 1 MW and above solar installation can take 2 to 6 months to complete construction, which includes the last step: final inspections and approvals from the utility and other local permitting authorities.

5) Add it all up, and the solar process can take up to two years

While some installations can take just a few months, larger and more complex installations can run up to two years. The solar industry is innovating new systems to streamline this process in the future. But today, businesses stand to benefit by planning ahead and seizing the ITC today.

Will the Solar ITC be extended by Congress?

We hope so! Solar advocates in Washington DC are doing their best to convince Congress to extend the solar ITC by another year or more. However, many believe that this extension is unlikely, especially given the fact that the wind industry lost their own subsidy extension fight.

If nothing is done, the 30% ITC will sunset into a 10% credit. That’s better than nothing, but it’s certainly not better than the full 30%.

The window to take advantage of the 30% ITC for solar is quickly coming to a close – especially for larger installations. If your business is sincerely interested in going solar, now’s the time to start the discussion.

UPDATE 12/2015: The Solar Investment Tax Credit has been extended! Learn more about how changes to the ITC will benefit commercial solar in 2016 and beyond.

 

 

Three Key Commercial Solar Tax Incentives Fighting to be Extended in 2014

You can never truly predict what legislation will actually pass through Congress and get signed by the President. Nevertheless, there are several expiring solar tax benefits in the EXPIRE Act of 2014 that we hope will get extended and continue to benefit commercial solar installations.

You can never truly predict what legislation will actually pass through Congress and get signed by the President. Nevertheless, there are several expiring solar tax benefits in the EXPIRE Act of 2014 that we hope will get extended and continue to benefit commercial solar installations.

The Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act is a U.S. Senate bill that is meant to extend a slew of tax incentives for one last time, hence the purposeful “EXPIRE” acronym.

In terms of solar, there are three key pieces of expiring legislation that may or may not make it to the President’s desk:

30% Federal Investment Tax Credit Extension…or not

First, the bad news: As currently written, EXPIRE does not include extending the 30% solar investment tax credit (solar ITC). This very popular incentive allows tax paying solar owners to receive a federal tax credit that can be used to offset a commercial solar system’s cost by as much as 30%.

While the solar ITC extension did not make it into EXPIRE, it may be included in future omnibus bills. As of right now, only solar projects completed by the end of 2016 will qualify for the 30% ITC. Senate supporters have been attempting to change the wording so that any solar project that is started by the end of 2016 will qualify for the 30% ITC credit. If successful, this “commence construction” wording could allow solar owners and developers to qualify for the 30% tax credit for complex projects that may not finish completion before the end of 2016.

On the other hand, if the ITC law isn’t amended before 2016, the ITC will be reduced to 10% for solar projects that complete or start installation after December 31, 2016. Consequently, it’s important for large solar projects to begin construction as soon as possible to ensure beating the current 2016 deadline.

Section 179 Deduction Expense

The EXPIRE Act does include several provisions that improve the Section 179 deduction. From 2009-2013, the Section 179 deduction allowed eligible businesses to deduct up to $500,000 of a solar equipment purchase price of up to $2 million, from the taxpayers’ gross income in the first year. This additional tax deduction is on top of the 5 year accelerated depreciation schedule, allowing taxpayers to write off a significant portion their investment in the first year. Some industry observers have referred to this provision as “super-secret 100% depreciation.”

If EXPIRE doesn’t get signed into law, for taxable years beginning in 2014 and thereafter, a taxpayer may only expense up to $25,000 of the cost of the solar property, up to a maximum $200,000 of the solar equipment’s price tag. These limitations, currently in place, significantly impact the benefit of this tax deduction.

However, if the EXPIRE Act is ultimately signed into law (as currently written by the Senate), it will do several things: First, through 2015, it will restore the maximum annual deduction amount and equipment cost phase-out threshold to $500,000 and $2 million, respectively.

Second, EXPIRE will allow tribal governments and non-profits to allocate the value of the 179 deduction to “the person primarily responsible for designing the property in the same manner as is allowed for public property.” In other words, a tribal government or non-profit can’t typically benefit form tax deductions, but under this provision, a non profit going solar will be able to transfer the equivalent 179 deduction value to a solar installer, who can deduct that value from the total cost.

That being said, non-profits may be more inclined to finance their solar installations with solar PPA financing and other new innovative financing methods. (Contact REC Solar for comparing the best options for non-profits.)

Bonus Depreciation

If EXPIRE is signed into law, one provision will also extend the 50% Bonus Depreciation provision for solar property purchased, installed, and connected to the grid by the end of 2015.

Under Bonus Depreciation, the taxpayer is able to deduct an additional 50% in the first year of the installation. There are no eligibility or project limits under this provision, opening this tax benefit up to all tax payers. So if a business is too large to qualify for section 179, they can still take the bonus depreciation and 5 year accelerated depreciation schedule creating a healthy reduction of their tax burden.

When the tax credit is used with a solar project, , the owner must reduce the project’s depreciable basis by one-half the value of the ITC. So, this means the owner is able to deduct 85% of the tax basis with the ITC (30% ITC x ½ = 15% reduction in eligible basis).

As a very simple example, if EXPIRE passes and a solar installation’s tax depreciation cost basis after applying the ITC is $650,000, an eligible taxpayer could deduct up to $500,000 in the first year under section 179.

The remaining cost, $150,000, would be subject to the 50% Bonus Depreciation. Thus, the taxpayer would receive an additional $75,000 bonus tax deduction in the first year, resulting in significant tax savings, a reduction in the payback period, and a nice boost to the Return On Investment for a solar project…if EXPIRE makes it to the President’s desk.

The above notwithstanding, the U.S. tax code is very complicated and this is not official tax advice. For the sake of brevity, we’ve simplified explaining these potential solar incentive extensions, so please contact REC Solar for more details about how these proposed solar incentives and other financing options might apply to your solar project.

 

How to Calculate the 30% Federal Investment Tax Credit for Solar

If you’re buying a solar energy system today, one of the most generous solar incentives that you’re entitled to is the 30% federal Investment Tax Credit (ITC). But not everyone who goes solar is eligible to receive it, and for those who do, there are different ways to calculate it. Below is a FAQ layman’s guide to the solar federal ITC, but please confirm all of this information with your tax advisor.

If you’re buying a solar energy system today, one of the most generous solar incentives that you’re entitled to is the 30% federal Investment Tax Credit (ITC). But not everyone who goes solar is eligible to receive it, and for those who do, there are different ways to calculate it. Below is a FAQ layman’s guide to the solar federal ITC, but please confirm all of this information with your tax advisor.

What’s a Tax Credit?                                                             

A tax credit is not a tax deduction. With a tax deduction, you deduct some amount off your gross income to determine your taxable base income. A tax credit is much better. It can be used to pay off your owed federal taxes. So, it’s sort of like receiving an IRS gift card.

Who is Eligible to Receive the ITC?

Any U.S. tax payer who purchases a solar or other renewable energy system is eligible to receive the 30%

How Do You Calculate the 30% Solar ITC? solar ITC. However, if you installed your solar system with a solar lease or a solar PPA, then you’re not eligible, since the leasing company owns your solar system, so they will receive the ITC. But most leasing companies take the value of the 30% ITC into consideration when calculating your lease rate, so you do benefit indirectly.

Calculating the 30% ITC differs for homeowners and commercial businesses. Homeowners calculate the 30% on the net installed cost; i.e., after you’ve deducted the value of any state or utility rebates.For example, say the total cost for your solar installation was $15,000 and you received a utility or state rebate of $3,000, your total upfront expense is now $12,000. Consequently, to calculate the 30% ITC:

30% x $12,000 = $3600 tax credit that you can use to pay your taxes to the IRS.

For businesses installing commercial solar projects, the rebate is calculated on the gross installed cost of the solar system; i.e., before deducting for any local or utility rebates. So, using the same example:

30% x $15,000 = $4,500 tax credit that your business can use toward Federal businesses income taxes.

You might think that businesses get a higher ITC formula. However, the IRS considers the $3000 utility rebate as earned income, and therefore the business has to pay tax on that $3000. For residential homeowners, the IRS considers the $3000 as a “reduction in value,” sort of like a sale discount, and therefore it is not taxable.

Is the Value of the 30% ITC Refundable?

What if you’re eligible to receive the ITC, but you don’t owe any taxes this year? Will the IRS send you a refund check for $3000, using the above example? Unfortunately, the 30% ITC is not a refundable credit. However, you can use its value for up to 5 years after installing your solar system, so you’ll be able to use it partially or fully for the following year’s tax bill, or for subsequent years.

Once again, we’re not tax attorneys, so please be sure to verify all of the above ITC information with your tax representative.

In summary, the solar ITC is a very valuable solar incentive if you’re going to purchase a solar system with either cash or a home equity loan. For homeowners that finance their solar systems with a solar lease or a solar PPA, it’s indirectly included in your monthly payments.

UPDATE 12/2015: The Solar Investment Tax Credit has been extended! Learn more about how changes to the ITC will benefit commercial solar in 2016 and beyond.

More Top States for Commercial and Large Scale Solar

In Part 1 of Top U.S. States for Commercial and Large Scale Solar, we showed how sun potential and progressive solar policies in California, Colorado, and Hawaii made for an excellent environment for commercial solar today. In Part 2, we’ll look at policies in Georgia, New York, and the Mid-Atlantic states.

Georgia, New York, and the Mid-Atlantic States, Plus Emerging Markets

In Part 1 of Top U.S. States for Commercial and Large Scale Solar, we showed how sun potential and progressive solar policies in California, Colorado, and Hawaii made for an excellent environment for commercial solar today. In Part 2, we’ll look at policies in Georgia, New York, and the Mid-Atlantic states.

GEORGIA

It’s no surprise that Georgia has excellent insolation, and a brand new Feed in Tariff. If you own a building or available land in the Peach state, you now have an excellent opportunity to turn that real estate into a solar income property.

You can either build and own a system, and receive a check from Georgia Power, or you can simply rent out your sunny location and receive a check for hosting a clean enegy generator.

There has been a lot of pent up demand in Georgia Power, so interested parties will need to act quickly because the program will sell out quickly.

NEW YORK

New York has lagged behind other solar markets, but looks to leapfrog several states, as there is set funding for a complex but lucrative performance-based incentive through the end of 2015. That makes it one of the most stable incentive programs in the U.S. today. This incentive, along with the Federal 30% Investment Tax Credit (ITC), allows for a great environment for financing commercial solar systems, including solar PPAs.

And if you’re in Long Island Power Authority territory, the utility is offering one of the largest FiT incentives available in the United States.

Contact REC Solar about the details of these programs and how you can significantly reduce your electric costs, or even generate income through the LIPA FiT.

PENNSYLVANIA, NEW JERSEY, MARYLAND, DELAWARE, WASHINGTON DC, AND OHIO (PJM)

Many New England and Mid-Atlantic states utilize Solar Renewable Energy Credits (SRECs) as the primary solar incentive. While New Jersey remains the largest market in the region, other rapidly-growing solar markets include Massachusetts, North Carolina, Rhode Island, and Washington DC.

In many of these states, renewable energy policies require electric distribution companies to procure a minimum amount of renewable energy every year. If they don’t procure enough renewable energy, they either have to pay a substantial penalty for the shortfall…or they can purchase credits (SRECs) that show that solar is being generated by private solar installations in the state.

As a result of this program, the more large solar systems are installed, the more the price of the SREC is reduced. However, solar system production can vary by the season, and other SREC market factors can also drive prices higher.

For example, new long term SREC procurement programs are being created, which will eventually create a supply shortfall and drive SREC prices up. When SREC prices go up, that will encourage more commercial solar to be developed, creating solar jobs, as well as income for the owners of commercial solar systems.

SREC market pricing is complicated, but REC Solar’s experience working with utilities and developers can help sort out whether now is the right time to take advantage of SREC incentives in your particular state. We believe that there are many opportunities right now, especially for large commercial systems and solar PPA financed projects.

COMMERCIAL SOLAR MARKETS THAT ARE GETTING HOTTER: ILLINOIS, AND NEVADA, UTAH, AND PUERTO RICO

In Illinois, the legislature recently passed an aggressive RPS with an SREC component, plus there’s a rebate of up to $10,000. Since there are very few solar installations in the state, demand for SRECs will be high and supply will be low, making large commercial projects attractive. That being said, there some legislative adjustments needed to make commercial solar a terrific opportunity. If you’re interested in learning more, contact REC Solar to see whether the numbers work for you.

Utah’s Rocky Mountain Power has a well-funded rebate program that can give your business up to $800,000 towards the cost of your solar development. That’s certainly an opportunity not to miss while it lasts, especially when combined with the Federal 30% ITC. Additionally, there are other state corporate tax credits available, so for those businesses that would rather benefit from solar energy savings than pay taxes, now is certainly a great time to install commercial solar in Utah.

Nevada has more solar energy potential than most of the United States, and recent changes in its incentive program makes it a great time take advantage of all of that sun. Similar to states with SRECs, Nevada has created a Portfolio Energy Credit (PEC) program, and solar systems credits are more than twice as valuable than any other renewable energy source, such as wind. Of course, the value of PECs will fluctuate depending on supply and demand, but as this program is new, demand is high. Therefore, now is the time to install solar and benefit from the higher PEC price.

Like Hawaii, Puerto Rico has a lot of sunlight and not a lot of traditional fossil fuel to power the island. Consequently, the electricity cost is high, making free energy from solar power very attractive for businesses and residents. On top of that, systems over 100 kW can receive a 50% rebate towards the cost of their solar system.

As we’ve seen in this two part series, there are some very attractive areas to be installing commercial solar right now. If you need more information or help deciding whether now’s the time to go solar, contact REC Solar. No matter what area you’re in, we’ll help you to work out the cost and potential IRR for your commercial, municipal, or industrial solar project.

 

Golden State Solar More Affordable and Accessible than Ever

Bolstering our case that commercial solar continues to expand even as direct subsides fade into the sunset, last week the California Public Utilities Commission released its annual progress report on the California Solar Initiative (CSI), showing huge growth across the state. Key findings:

Bolstering our case that commercial solar continues to expand even as direct subsides fade into the sunset, last week the California Public Utilities Commission released its annual progress report on the California Solar Initiative (CSI), showing huge growth across the state. Key findings:

  • At the end of Q1 2013, California had roughly 1,629 megawatts of residential and commercial solar at an incredible 167,878 customer sites in investor-owned utility territories.
  • The CSI program has installed 66% of its total program goal, with another 19% reserved in pending projects.
  • Solar uptake has increased despite waning subsidies, as significant reductions in the cost of solar and new affordable financing options have made for compelling customer economics. A record 391 megawatts were installed statewide in 2012, growing 26% from 2011.
  • Net metering and the federal Income Tax Credit (ITC) are playing a larger role in individual system economics as the CSI program winds down. All but 92 megawatts, or 6% of California’s small-scale solar, is signed up for net metering.
  • As of March 2013, PG&E and SDG&E have 24 projects with a combined 916 kilowatts capacity enrolled in the relatively new “virtual” net metering program, which allows electric load at multiple meters to be offset by solar generation at a single meter elsewhere, so long as all meters are behind the same utility service delivery point.

For details or more information on saving money with solar on your business today, please contact REC Solar.

 

What About the Subsidy?

“My house is solar powered. I tell Republicans, you can hate the subsidies – I hate the subsidies too – but you can’t hate solar panels. These are rocks that make electricity, so they are incapable of receiving your hate.”
– Rep. Thomas Massie (R-Kentucky)

“My house is solar powered. I tell Republicans, you can hate the subsidies – I hate the subsidies too – but you can’t hate solar panels. These are rocks that make electricity, so they are incapable of receiving your hate.”
– Rep. Thomas Massie (R-Kentucky)

With over 150,000 commercial and residential solar power systems now online, California leads the nation’s clean energy economy. As a result of this growth more than $10 billion in private-sector investment has flowed into the clean energy sector, and solar today employs more than 25,000 professionals in the state. Millions of Californians enjoy the benefits of low-priced solar energy delivered by systems installed on homes, businesses, schools and public facilities.

Yet, one important element of this success is often overlooked – California’s solar industry is rapidly weaning itself from state subsidies and now operating subsidy-free in many portions of the state, well ahead of schedule.

This success story is largely due to the structure of the California Solar Initiative (CSI), the most successful small-scale solar program in U.S. history. The CSI – a product of former Governor Schwarzenegger’s ‘Million Solar Roofs’ vision and authorized by the passage of Senate Bill 1 in 2006 – was envisioned as a 10-year program to enable installation of nearly 2,000 megawatts of commercial and residential solar in California’s investor-owned utility territories. Inherent to the design of CSI were financial incentives which gradually declined to zero as more solar was installed – sending a clear signal to solar companies that costs must continually decline.

Through economies of scale and innovation, the installed costs of solar have fallen dramatically, even as incentives have been reduced from $2.50 per installed watt in 2007 to just $.25 per installed watt (or less) today. Indeed, as of mid-2013 CSI program goals have been reached in three areas – for PG&E residential, PG&E non-residential, and SDG&E residential solar systems – and despite operating sans incentive, solar remains economically attractive for businesses and homeowners in these regions.

California’s solar success story is the epitome of what public-private partnerships should strive to achieve. Government provides initial support and certainty, stimulating private-sector investment and growth which enables companies to achieve scale, innovate and reduce costs, leaving behind a subsidy-free growth industry. While other industries have taken decades to wean themselves off government support, solar has done so in California in just a few years.

It’s a telling indicator of success, in fact, that the discussion regarding solar in Sacramento has quietly shifted from how much (or how little) direct support is provided to small-scale solar, to the indirect support provided via what’s known as net metering. Just as solar crosses the incentive finish-line, we now face intense scrutiny as to whether some cost is borne by other utility customers when a homeowner or business uses solar to substantially reduce electricity bills.

This matter deserves further examination, and as noted around the web, policymakers are actively considering means to support commercial solar’s continued growth while balancing utility concerns. Consider it a growing pain in solar’s rapid development as a mainstream energy source.

A version of this post originally was originally published by AOL Energy.

 

SOLAR AND THE FEDERAL INVESTMENT TAX CREDIT

It’s tax time. Time to meet with your tax preparer and tally up with the man. A good time also to review one of the key benefits of residential and commercial solar – the federal solar Investment Tax Credit (ITC) – which allows solar owners to take a credit against their federal tax liability equal to 30% of the qualifying costs of the solar electric system.

It’s tax time. Time to meet with your tax preparer and tally up with the man. A good time also to review one of the key benefits of residential and commercial solar – the federal solar Investment Tax Credit (ITC) – which allows solar owners to take a credit against their federal tax liability equal to 30% of the qualifying costs of the solar electric system.

A few important points:

The ITC must be taken in the tax year in which the solar system was placed in service. If your solar electric system was placed in service anytime between January 1st to December 31st, 2012, you should take the tax credit in the 2012 tax year. If you signed a purchase contract in 2012 but the system wasn’t built until March 2013, you should take the tax credit in the 2013 tax year.

The ITC is not refundable. If your 30% tax credit equals $6,000.00, yet your federal tax liability for the year is $5,000.00 – you won’t receive $1,000.00 from Uncle Sam. Instead, you’ll apply this remainder of the credit to next year’s taxes.

The ITC is only provided to solar system owners. If you’re financing or leasing your solar system you aren’t eligible to take the ITC. In these cases, the third-party system owner utilizes the ITC and incorporates the benefit into your solar system leasing or financing arrangement.

In most cases (but not all) any state or utility incentives should be subtracted from the system cost before calculating the tax credit. While commercial solar owners and homeowners in certain states may not be compelled to subtract state or utility incentives from the system cost, there’s no free lunch. In such cases, incentives are generally treated as income and taxed accordingly. The calculation of the tax credit vis-à-vis other financial incentives is an issue which we always recommend solar owners speak to their tax advisor about.

For commercial solar owners, there may be additional federal tax benefits. Specifically, commercial solar owners can benefit from 50% ‘bonus’ depreciation, which allows for the deduction of 50% of the depreciable basis of a solar electric system in the first year of operation (rather than over a typical five-year MACRS schedule). This benefit is available for commercial solar electric systems placed in service on or before December 31, 2013.

While REC Solar certifies that our solar electric systems meet the definition of qualifying solar property, we can’t guarantee a particular tax result or outcome. The information provided above is for informational purposes only, and we strongly encourage current or prospective solar owners to consult their tax advisor to determine how the ITC or other tax allowances may benefit you, given the specific facts and circumstances.