Though not exactly the great equalizer putting everyone on equal footing, taxes can still feel a little like sitting in traffic; it’s something nearly everyone has to deal with. Tax day for individual filers happens to fall on April 17, 2018 two days later than normal due to April 15th being a Sunday and the celebration of Emancipation Day in D.C. on April 16th. But to lessen the blow of one of America’s more sobering national activities, look no further than the promise of renewable solar energy.
Tax payers who’ve made investments in solar in 2017 and those considering it for this year are eligible for several robust tax credits and incentives. Current federal tax credits allow individuals to deduct 30% of their solar power system off their federal taxes through an investment tax credit (ITC). This applies to both residential and commercial systems.
In New York, the tax bonanza continues to the tune of a state rebate, an income tax credit, and a property tax abatement for solar. The income tax credit for homeowners who install solar at their primary residence, is equal to 25% of the total system cost (after rebate) with a maximum credit of $5,000. What role are incentives playing in driving the solar transformation in New York and elsewhere?
“Homeowners in NYC seem to be motivated at first by an ideological impulse. They want to move away from fossil fuels and they want to take control of their energy needs while doing something positive for the planet,” says Steve Nelson, Senior Solar Consultant at New York’s own Brooklyn SolarWorks. “They, of course, want to save money as well. Once they learn about the tax incentives, solar becomes very compelling. From an investment perspective it pencils out very well.” Nelson has been at the forefront of the revolution and is grateful for being in a role where he can educate customers about the financial and environmental benefits of solar. “The 30% federal tax credit will begin to phase out at the end of 2019 – so there is a sense of urgency to get in now.”
Brooklyn SolarWorks believes their product offering and installation approach is all part and parcel of the decision to go solar. The company’s modular canopy installation system is a key differentiator, allowing for considerably more solar to be installed on a flat city rooftop.
“The canopy allows customers to maximize the solar potential of their roof and activate the roof space. Flat city rooftops have, for the most part, been left to pigeons and raccoons. When you add a solar canopy to your roof, the space opens ups and becomes functional. You could build a deck, add lighting and a garden, all under a solar canopy that powers your house. We’re looking to really transform the cityscape with this product,” remarks Nelson. The canopy system complies fully with NYC fire department codes by placing panels at least 9 feet above rooftops giving the company an edge over competitors. The system has been successful enough to become productized for other installers for use in their own installations.
The typical up-front investment in a residential New York City solar project is around $25,000 with an ROI on the system of 6 – 8 years. Tax incentives in conjunction with a unique product offering are helping drive the business forward for nimble system integrators like Brooklyn SolarWorks.
To keep recent customers well-informed on how to claim their tax credits when the time comes, Nelson and his team send out large email blasts each January with newly released federal and state tax forms that include a breakdown of how to fill them out. “The tax incentives are definitely a motivating thing for nearly all our customers. If you go solar, you’ll want to utilize the credits,” he says.
If tax credits and rebates aren’t enough incentive to get into the solar game, then the net metering opportunities across several states offer another compelling reason to believe in the cause. Net metering is the practice whereby surplus solar or other renewable energy that’s not consumed by an end-user is transferred onto the grid. This assists customers in offsetting the cost of power from the utility in the form of a credit on their utility bill. Thirty-eight states, Washington, D.C., and four U.S. territories offer some type of net metering.
Determining how to price the credits end-users are awarded for surplus energy has been a work in progress and something that’s changed over time. The state of New York has gone through a recent regulatory modification where the compensation for net metering through the traditional distributed energy resource approach is being phased out by a new “Value of Distributed Energy Resources” (VDER) approach for any distributed energy project interconnected after March 9th 2017. The first phase of VDER focuses on commercial applications, leaving residential solar net metering unchanged at this time. VDER seeks to establish a more accurate evaluation and compensation of distributed energy resources by including the price of energy, the avoided carbon emissions, the cost savings to customers and utilities, and other savings from avoiding expensive capital investments.
With average electricity prices in the Big Apple hovering around 27 cents per kWh, a figure nearly doubling the national average, solar net metering combined with available tax credits looks like a winning approach.
“Net metering is crucial — every customer has a net meter installed. They’re not selling the energy back but getting credits — a 1:1 credit for the retail cost of the energy,” says Nelson. “Many of our customers are overproducing during peak production months (spring/summer/fall). In the winter, when the days are shorter and darker, they’re using up stored credits. The net metering credit system is currently the best way for a homeowner to make the most of their solar system. Battery storage could change that to some degree.”
The increasingly common suburban scenario of battery storage combined with solar is something that has not yet been approved by the New York City Fire Department. In addition, battery storage units must continue to slim down in order to better integrate into the tight confines of city living.
With all the opportunities in solar, it’s more than acceptable to feel victorious at tax time. With key federal tax credit having been preserved in the Republican tax plan, passed at the end of 2017, renewables are becoming more of a team effort that transcend conventional boundaries.