Up to their usual helpful tricks, the folks at the National Renewable Energy Laboratory (NREL) have once again teamed up with the Lawrence Berkeley National Lab to offer some much-needed guidance through the wealth of renewable energy incentive choices now available for commercial installations. They've just released a report that walks you through the differences among the feds' new incentives: the production tax credit, investment tax credit, and cash grant options. Since you can choose one but you can't choose them all, it helps to understand the real differences behind each option in determining which can be of most use to your business. Solar is not eligible for the production tax credit, but pretty much everything else is (geothermal, wind, biomass, hydroelectric, tidal...you get the picture).
With all the buzz surrounding President Obama's stimulus package--energy efficiency tax credits, a cap-and-trade pollution credit system, tax hikes to the very wealthy, all very chat-worthy stuff--one imporant provision may have escaped your notice. Commercial solar panel installations received a boost when, in the fall of 2008, the federal investment tax credit (ITC) equal to 30% of a solar system's costs was extended for another eight years. In a move designed to encourage movement in an economy where investors are hesitant even about something as attractive as large-scale solar, the stimulus package offers a sweet deal: for commercial solar installations during the next two years, owners can choose between the standard ITC and an actual cash grant of the same value. The grant offer is good for a range of technologies, as is the ITC itself: wind, geothermal, microturbines, CHP, biomass, and more.
As you may know, residents (and businesses) can take a 30-percent federal tax credit when purchasing solar PV systems. You also may know, however, that reading about tax rules is about as much fun as watching silicon degrade, molecule by molecule. Luckily, the freshly amended investment tax credit (ITC) is fairly straight forward. It provides a tax credit worth up to 30 percent of total system costs, with no dollar amount cap. But what, exactly, is a tax credit? And how is it different from a tax deduction?
With this week's inaugural festivities, there's been a lot of buzz in the news about who was at what party. One of the most buzz-worthy parties was the Green Inaugural Ball whose guest of honor drew dreamy-eyed admirers by the hundreds. While Wyclef Jean was there, I'm not talking about him--I'm talking about Al Gore. Host Gore, and a couple of the most influential renewable energy figures in the country--Denise Bode, CEO of the American Wind Energy Association, and Rhone Resch, president & CEO of SEIA--hung out and talked shop on the green carpet for a while. The party itself was full of chatter about climate change legislation, what the economic downturn means for solar, and all sorts of other really fun things that you talk about at parties.
With the new year comes revised tax rules for individuals who purchase PV solar systems. In short, the residential investment tax credit (ITC) is no longer constrained by a $2,000 cap. This means that buyers can take a credit worth the full 30 percent of final project costs, which includes the PV modules, mounts, wiring, the inverter and labor. In effect through the end of 2016, the new rules bring some certainty to the solar market -- and make it easier for buyers to finance the purchase of a PV system.
After being voted down no fewer than seven times by the House of Representatives (and ten in the Senate), the bill to extend renewable energy tax credits past 2008 has finally passed. President Bush has said he will sign the bill, so the future looks--well, sunny.
The bill maintains the 30% tax credit for commercial installations of eligible renewable energy technologies, like solar and wind, and does something of momentous importance to the average citizen: it continues to extend that 30% credit to residential customers while removing the cap of $2,000 the previous legislation had imposed. Up until now, if you wanted to install solar in your home and spent $40k on a system, you could only claim a $2k tax credit federally; now, you'll be able to claim the full $12k. It's a huge stride forward in encouraging residential adoption of renewables.
And it's amazing news for utilities, which under the 2005 legislation were not able to benefit from this credit but now can. This will hopefully lead to utility-scale renewables finally finding purchase in states where the finances simply were not appealing when compared to tax breaks the utilities could get for developing coal, oil and gas. The news isn't quite as good for wind, whose ITC's were only extended for one year, as opposed to solar's remarkable eight.
What changed the fate of this legislation, whose future looked so bleak not even a week ago? It got bundled into the emergency bailout legislation intended to alleviate our current financial crisis. It seems that the urgency of the bailout plan, along with its expectation that the parties would be doing everything in their power to find common ground, gave it just the push it needed to finally move forward. Divided along party lines as recently as Monday, Congress decided to go through with the $700 billion bailout due to the prevailing sense that the economy had no other effective route to recovery. On Monday, the vote was 228-205; today, it was 263-171. The Senate, after rewriting the bill to include the renewable energy legislation, passed it on Wednesday night by a wider margin of 74-25.
Visit the Solar Energy Industries Association (SEIA) to learn more about what this means for the solar industry in America. What we've been handed is the ability to maintain our competitive edge in the global solar market, and to pursue strategies of energy independence here at home.