Businesses and property owners can use solar systems to reduce their annual energy costs and even generate income. The cost of installing these systems is significant. However, there are a number of incentives from the federal and state governments that reduce the upfront costs of solar system installation and generate money for many years after the initial repayment period.
For upfront costs, the Federal Investment Tax Credit (FITC) provides a 30% tax credit for solar energy systems, so that you can take 30% of the cost of the solar system as a credit against taxes you would otherwise have to pay. The tax credit was recently extended for eight years. Front loaded depreciation is another significant tax incentive. In northern New Jersey, PSE&G’s solar loan program may provide financing for 40-60% of the cost of installing a solar system which can be repaid in cash or with credits for energy produced.
Government incentives also make the use of solar systems more profitable. New Jersey is transitioning from a system of rebates to encourage solar system installations to a system of “solar renewable energy certificates” (“SRECs”) based on the amount of energy produced by the system, which can be sold, traded and, in some cases, used to repay loans for installation. “Net metering” also creates economic benefit because it allows a solar system owner to earn money for any excess power the system generates and returns to the electrical grid and of course having solar power reduces operating costs by reducing or eliminating the need to buy electricity from the utility.
Businesses can take advantage of these incentives directly or they can lease the solar system from a third party under a power purchase agreement. In that arrangement, the business avoids upfront costs, agrees to buy power at a discounted rate and passes the incentives to the third party. It is advisable for businesses to consult with legal professionals when entering into contracts with installers and power purchase agreements.
*This article originally ran in the February 17, 2009 issue of NorthJersey.com