Solving The Puzzle of Solar Incentives
Solving The Puzzle of Solar Incentives
Just like any capital investment, developing a photovoltaic (PV) solar project requires an in depth understanding of the project cash flows in order to make a confident investment decision. Depending upon the location, scale and complexity of your project, the investment analysis will likely include cost line items such as development, engineering, permitting, environmental impact, major equipment, materials and supplies, labor, inspection, commissioning, operating & maintenance, depreciation, etc. The revenue side of the equation might include energy savings or sales of electricity, capacity, and renewable energy credits. Your investment analysis should also include the relevant incentives made available by government
agencies and utilities to help foster investment in PV solar projects.
Federal, state and local governments and local utilities offer numerous incentives with various motivations including fostering the growth of clean energy, energy independence, reducing demand on critical infrastructure, encouraging local employment, etc. Incentives come in the form of tax credits, tax deductions, accelerated accounting treatment, grants, rebates, and net metering credits, all helping to offset the cost of initial investment. Solving the puzzle of solar incentives for your specific project is key to optimizing your return on investment.
While our focus of this writing is on commercial, industrial, and agricultural systems, many of these concepts apply to residential systems as well. The process of identifying and understanding the application and value of the multitude of potential incentives can be a daunting challenge. As an example, the following table identifies the potential incentives available to a commercial, industrial or agricultural participant investing in a PV solar system in the County of Maricopa, State of Arizona as of this writing.
| Incentive Name | Authority | Incentive Type | Created Date |
|---|---|---|---|
| Business Energy Investment Tax Credit (ITC) | US | Corporate Tax Credit | 3/15/2002 |
| Modified Accelerated Cost-Recovery System (MACRS) | US | Corporate Depreciation | 3/15/2002 |
| USDA - Rural Energy for America Program (REAP) Grants | US | Grant Program | 4/9/2003 |
| USDA - Rural Energy for America Program (REAP) Loan Guarantees | US | Loan Program | 4/9/2003 |
| U.S. Department of Energy - Loan Guarantee Program | US | Loan Program | 9/12/2008 |
| USDA - High Energy Cost Grant Program | US | Grant Program | 9/27/2010 |
| Solar and Wind Equipment Sales Tax Exemption | AZ | Sales Tax Incentive | 1/1/2000 |
| Non-Residential Solar & Wind Tax Credit (Corporate) | AZ | Corporate Tax Credit | 6/26/2006 |
| Energy Equipment Property Tax Exemption | AZ | Property Tax Incentive | 6/26/2006 |
| Renewable Energy Business Tax Incentives | AZ | Industry Recruitment/Support | 8/4/2009 |
| Renewable Energy Tax Credit for International Operations Centers (Corporate) | AZ | Corporate Tax Credit | 6/18/2014 |
| Source: DSIRE, http://www.dsireusa.org/ | |||
The source for the above table is DSIRE®, a database of policies and incentives by state, funded by the US Department of Energy and maintained by the NC Clean Energy Technology Center. It’s an excellent resource to identify potential incentives based on location and technology. It’s a good idea to verify your portfolio of prospective incentives by cross checking with other well maintained databases including SEIA®, ENERGY STAR, and ENERGY.GOV. The following table provides additional information.
| Organization | Website | Description |
|---|---|---|
 | http://www.dsireusa.org/ | DSIRE is the most comprehensive source of information on incentives and policies that support renewables and energy efficiency in the United States. Established in 1995, DSIRE is operated by the N.C. Clean Energy Technology Center at N.C. State University and is funded by the U.S. Department of Energy. |
| Solar Energy Industries Association (SEIA®) | http://www.seia.org/ | The Solar Energy Industries Association (SEIA®) is the driving force behind solar energy and is building a strong solar industry to power America through advocacy and education. As the national trade association in the U.S., we represent all organizations that promote, manufacture, install and support the development of solar energy. |
 | https://www.energystar.gov/ | ENERGY STAR is a U.S. Environmental Protection Agency (EPA) voluntary program that helps businesses and individuals save money and protect our climate through superior energy efficiency. |
 | https://www.energy.gov/savings | The mission of the Energy Department is to ensure America’s security and prosperity by addressing its energy, environmental and nuclear challenges through transformative science and technology solutions. |
Also check the appropriate state and local government agencies respective to the location of your PV solar system. Local agencies are nearly always excited to assist when the prospect for local economic growth and prosperity exists. Good luck on your search!
HSBEnergy assists customers in the research, project optimization, and financial analysis of renewable energy policies and incentives for proposed projects. Clients that engage in this effort early in the project development process usually reap the benefits through improved ROI and earlier return of capital.
Contact HSBEnergy, we can help.
