Installing a Solar PV System – Credits/Incentives

Obviously using renewable energy sources, such as solar, is a worthy sustainable practice.  Although, installing solar panels may be worth it from a financial standpoint now.  Really.  If you have the up front money to cover the installation for your industrial, commercial, non-profit or residential use, you look to save a good deal of money over the next couple of years – generally an installation will “pay” for itself over a seven year timespan.

Regardless of where you are located, the sun shines there. Even in frigid New York there is sun, and its power can be harnessed.  In certain spots, the reflection of the suns rays off of the snow increases the energy harnesed by solar panels.   In fact, Germany, never known for being a land of endless summer, is one of the leaders at this point.

Through a number of federal, state and potentially local tax credits/deductions or other incentives, combined with the energy savings a property owner would save, there are sound financial reasons to seriously consider solar.   In certain areas you may even be able to obtain credits from the local power company for energy you feed back into the grid.   A solar PV system can be potent when combined with other green and sustainable building practices especially when seeking LEED building certification – which in and of itself can lead to other incentives.

The biggest thing holding most property owners back is the up-front costs of installing a serious solar photovaltaic system.  There is little financing that can be obtained specifically for such a system – so the up front costs usually fall directly on the property owner when the system is purchased.  However, there is help to offset some of this cost.

Federal Government

The federal government offers the Federal Business Energy Investment Credit, commonly called the “ITC”.   You can read it at 26 USC section 48.   This is credit granted for installation of renewable energy systems including solar PV, solar thermal, solar water heat, smaller wind turbines, fuel cells, geo-thermal, microturbines, biomass, etc.  The most popular has been the solar PV installations.   The credit is for 30% of solar installation costs with no upper limit.

Therefore, under the ITC if you installed a $20,000 solar PV system on your commercial building, you’d be eligible to receive a credit of $6,000.

New York

The New York State Energy Research and Development Authority (NYSERDA) is sitting on a large pile of cash from all of the fees the State levies on power bills – $132 million last I checked.  If you pay an electrical bill in New York you will see a myriad of fees, one of which feeds into NYSERDA’s fund.  Through this funding NYSERDA runs various programs which have the goal of lowering energy consumption and increasing energy efficiency throughout the State, aimed at industrial, commercial and residential uses.  One of the programs is the Solar Electric Incentive Program.  If you install one of the following it will deem you eligible for the incentives offered in the program: a new grid-connected solar electric or PV system, that is 7kW or less for residential use, 25kW or less for not-for-profit use, or 50kW of less for commercial sites.

The incentive is obtained by the owner not directly from NYSERDA but from the solar PV installer.  Installation companies approved by NYSERDA, which install a PV system, have to bill the customer and give that customer the full incentive amount, which the installer thereafter receives directly from NYSERDA.  The amount of the incentive can vary, but is roughly about 20% of the total installation cost.  So if you have a PV system installed which costs $20,000, you would only pay the installer $16,000, and you would also receive the ITC credit for the full amount of the PV system’s cost on the back end – so here the $6,000 credit from the example above.  So the New York incentive combined with the federal credit offsets roughly half of the installation cost.  (there is some speculation about whether the federal credit should be based on the total cost of the installation or the cost the customer paid – although, hopefully, it looks like it will be the total cost – at least it should be).

Commerical users need to use an energy benchmarking tool, to produce an energy use index (EUI), and if applicable an Energy Star score. Residential users need to submit to an energy efficiency audit.  Your electric bill after installing a solar PV system will be even more complex.

NYSERDA has a number of other programs, and will help fund any energy efficiency study a business owner wants to undertake, as well as the initial consultation and paperwork for a building to obtain LEED certification.  Few people know of the totality of benefits available.  The thing needed is increase in energy efficiency.

So all in all, if you want to install a PV system in New York you would effectively only have to pay half of the system’s cost (although you’d have to wait to get the credit).  And you would recieve lower electricity bills going forward.

Now if you want to enter the big leagues and install a large scale PV array and enter into a Solar Power Purchase Agreement with the local power company then give me a call and we can talk.

photo courtesy of via creative commons license