Tax credits, depreciation, rebates, purchase options make sun viable alternative
Business use of solar energy continued to grow during 2010. A business that owns a building can update for solar by installing solar panels at or near the building and connecting them to the local utility. The building would then receive electricity from both the solar panels and the utility. Several financial incentives are available for businesses that want to go solar. This article summarizes these incentives and describes the time frame for some of the incentives to expire or decrease. This article also provides information on ownership and financing options.
Federal tax credit or grant. The owner of a solar facility can claim a credit against its federal tax liability generally equal to 30 percent of the equipment and installation cost. The tax credit is available for systems placed in service through 2016. As a result of the 2009 federal stimulus, the owner of a commercial system has the option to receive, instead of the tax credit, a cash grant in the same amount. The grant is not included in the owner’s gross income for federal or state income tax purposes. The Treasury Department is to pay the grant to taxpayers who have submitted a grant application within 60 days of the installation date.
In order to elect the grant, the owner must install the equipment or begin construction of the commercial solar facility no later than 2010. Unless Congress enacts legislation to continue the grant program, the grant option will not be available after 2010.
Depreciation. Commercial solar equipment and installation cost also qualifies for federal depreciation deductions over a five-and-a-half-year period. If the owner claims the full 30 percent tax credit or grant, then approximately 85 percent of the equipment and installation cost is eligible for the deduction. California depreciation deductions over a longer period are also available. As an alternative, the taxpayer may elect to deduct the eligible cost as an expense, subject to the specific cost limitation for the taxable year during which the equipment is placed in service.
State rebate. The owner of a solar facility in PG&E’s territory can apply for a rebate through the California Solar Initiative. The amount of the rebate is calculated based on a formula that varies by system size, type of customer, payment level and payment method.
The payment level is determined when the customer submits a reservation for the rebate (system reservations in general can occur when an installation contract is signed).
Payment method is a function of system size. Customers with solar facilities of less than 30kw receive a single rebate payment soon after installation based on the expected system performance. Customers with solar facilities greater than 30kw receive the rebate as a monthly payment during a five-year period based on the actual energy produced by the solar facility. Performance-based monthly rebate payments to a PG&E commercial customer that is not a government or nonprofit entity and that submits a reservation at this time are currently $0.09 per kilowatt-hour.
Payment levels for customers that submit reservations in the future will decline in stages. The next decrease could occur at any time, depending on the number of reservations submitted and accepted.