Most solar literature is geared towards the residential market, with installers eagerly pointing out all the potential incentives homeowners qualify for.
This process helps to “close” the sale since rebates and subsidies can make going solar more affordable.
Less talked about are solar incentives designed for commercial photovoltaic (PV) installations and on-site storage. This is somewhat surprising since – as a business owner – you actually qualify for even more lucrative subsidies, credits and tax exemptions than residential solar customers do.
Standard Legal Disclaimer: At Aeterna Energy, we are licensed solar and energy storage installers and not certified public accountants. Although we can help you apply for the programs below, it’s best to confirm with a financial planner to discuss any potential tax implications for your business.
Under the Federal Solar Investment Tax Credit (ITC), qualifying PV installations and on-site battery storage solutions are eligible for a 30% tax credit for 2019 from the IRS that covers the complete installation process including both parts and labor.
Just keep in mind that 2019 is the last year in which the Solar ITC will be at 30%. Beginning in 2020, it drops to 26% before going through subsequent downgrades the following years.
According to the Internal Revenue Code, Section 179, and the IRS’s bonus depreciation regulation, companies are allowed to deduct the cost of projects that improve their businesses.
Although technically not a typical solar “incentive,” these deductions can help shorten the payback period of your clean investment. Whereas a standard commercial solar installation might take 7 years to pay for itself, adding in these deductions means you can typically break even in under 5 years.
The Self-Generation Incentive Program is a state-level subsidy that you can use to cover up to 12% of your total clean power investment. The program was originally launched in 2001. But Governor Brown extended this incentive through 2025, with an additional $800 million in funding.
California’s Self-Generation Incentive Program can be used for both solar power projects with clean energy storage.
Under California’s net energy metering program, you’re allowed to sell unused solar power to your utility provider in exchange for credits that you can apply to your building’s future bills. This incentive doesn’t necessarily reduce the upfront cost of going solar. But net energy metering can help speed up the payback period of your investment. That’s because you’re able to save even more money by “monetizing” any excess solar electricity from your installation.
Solar batteries are not included in net energy metering programs. But, with your own on-site power storage, you can better time when you buy electricity from the grid – allowing you to avoid peak demand charges and still save more money.
Under California tax law, businesses are allowed to depreciate certain equipment purchases – including both solar PV installations and on-site battery storage.
Using the 10-year straight-line method, the equipment depreciation is deductible and allows for recovery of the business expense total cost over a 10 year period for the business renewable energy investment purchase.
Similar to the above, but under the Internal Revenue Code (IRC), Section 168(k), businesses can also apply a 5-year MACRS method when buying renewable energy equipment – solar PV and on-site storage included.
However, the greatest deduction for business arrived with the implementation of the 2017 Tax Reform Bill. This included a bonus depreciation clause allowing you to deduct up to 100% of the allowable tax basis of your clean power investment in the very first year – provided that your PV system goes into operation before this tax law benefit expires.
The beauty of the above subsidies is that they are not mutually exclusive, meaning you don’t have to choose between them. As a business owner, you can use all of these solar incentives to ensure that you receive the highest possible savings.
Each additional tax credit, rebate or exemption that you qualify for helps to make your solar investment more affordable, and the IRR and ROI better.
But keep in mind that green incentives exist to stimulate new industries and encourage environmentally responsible behavior. And by design, all of the above programs will diminish and/or expire over the next few years.
This has already happened with several programs over the years.
California’s net energy metering incentive, for example, is currently on Version 2.0. And joining now means that you won’t enjoy the same wholesale rates that solar customers received when net energy metering Version 1.0 was still active a few years ago.
Fortunately, there is still time to enroll in this solar incentive – provided that you act quickly.
Not so with California’s now defunct Solar Rebate program. This initiative was extremely successful, helping to jumpstart the state’s clean energy boom. But it quickly ran out of money, and enrollment is now no longer open to the public.
This trend even exists at the federal level, with the Solar Investment Tax Credit scheduled for subsequent downgrades starting after 2019.
All of this highlights the importance of acting now. The longer you wait, the less free money will be available to help you finance your commercial solar PV installation and on-site battery storage investment.
As you can see, there are lots of programs available – each with its own:
And navigating this landscape can be overwhelming if you’ve never applied for clean energy subsidies before.
That’s where Aeterna Energy comes in.
After scheduling a property inspection and commercial energy analysis, we can walk you through all the administrative details for every incentive on this list. Better still, we can also help you file the requisite paperwork to ensure you qualify for every program to which you are entitled.
If your goal is to go solar affordably and see a return on investment faster, schedule a Commercial Energy Analysis with us today.
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