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Commercial Solar Incentives, Federal Tax Credit and Grants

If you own a commercial business, there are multiple benefits for yourself that you can obtain by going solar. The motivation for the government to promote the development of renewable energies in the US has allowed the creation of multiple incentives and rebates that you can take advantage of now that they are still active. Let’s see some of them

Net Metering

One of the most traditional solar incentives in the US is the net metering which is applicable for both residential and commercial sectors.

The Net Metering (NEM) scheme consists basically of receiving credits in your energy bill for every kWh that your solar power system injects into the power grid across the month.

This is based on the principle that a solar power system constantly generates energy across the day. If the electric loads that you have active during the day are already covered by the PV system and there is still excess solar energy, then this extra solar power goes back to the grid passing through a bidirectional meter.

There are over 38 states that have state-developed mandatory rules for NEM. There are other 7 states that do not offer NEM and there is also Idaho and Texas which do not offer statewide mandatory rules but allow voluntary utility policies.

In other words, the utility company establishes the rate or adjustment credit that you will receive for every kWh of solar energy.

As an example of this, we can take Austin Energy as the municipal utility of Austin. This electricity company offers a NEM scheme for commercial, industrial and non-profit organization buildings that have decided to install solar energy to power their electrical loads.

According to Austin Energy, the incentive amount that you will receive varies depending on the size of the commercial system according to the following chart.

Commercial Size

Incentive Amount

Small  (up to 75kW)

$0.05 – $0.08/kWh

Medium  (75-400kW)

$0.03 – $0.06/kWh

Large (400-1000kW)

$0.02 – $0.04/kWh

El Paso Electric Company also offers a Net Metering scheme for commercial systems up to 50kW based on an avoided cost rate

Rebates

There is also the option to apply directly for a commercial solar rebate provided by local utility companies as well.

For instance, the Guadalupe Valley Electric Cooperative (GVEC) offers an incentive of $0.75 per watt installed without cap limit. The commercial PV installation needs to comply with the National Electric Code (NEC) and the GVEC connection rules to be eligible.

There is also the rebate related to CPS Energy. For commercial PV systems, there is the option to apply for a $0.60 per watt rebate plus a $0.10/watt addition for locally produced modules with a maximum incentive rebate of $80,000 for commercial systems

CoServe also offers $3,100 for every commercial PV system installed in its region.

You can find other rebates available in your area by going to DSIRE

Tax Exemptions

Another particular solar incentive from Texas is that your property value will increase as a result of installing a PV system as we mentioned before.

The state of Texas wants to promote the development of solar PV generation and to do so, policymakers implemented a property tax exemption for all residential and commercial businesses that choose to install a PV system.

This policy prevents taxes from rising for solar panel investments.

Business Energy Investment Tax Credit (ITC)

The Business Energy Investment Tax Credit (ITC) is the equivalent Renewable Energy Federal Tax Credit applied to the commercial sector.

Basically, as a commercial PV system owner, you are currently entitled to receive a 30% solar tax credit if you install the solar system before the end of 2019.

This is applicable at Federal level but will be reduced at 26% for 2020, 22% for 2021 and up to 10% from 2022 on (if you install a grid-tied system)

Depreciation Acceleration

Finally, we reach the last but not least important solar financial incentive which is accelerated depreciation of your solar power system investment for tax purposes. This incentive is only applicable for commercial solar systems

This mechanism is based in the MACRS depreciation economic tool which is applied to recover part of the capital costs associated with solar energy.

This allows your business to reduce tax liability over 5 years accelerating the rate of return of the solar investment. For equipment on which an Investment Tax Credit (ITC) is available, the solar system owner must reduce the appreciable basis of the PV system by one-half the value of the 30% ITC. In other words, as a commercial PV system owner, you will be able to deduct up to 85% of your tax basis.

Depreciation values change across the 5-years according to the following chart

Year

Depreciation Rate

1

20%

2

32%

3

19.20%

4

11.52%

5

11.52%

6

5.76%