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The Inflation Reduction Act Good news for Nonprofits Going Solar

Posted on 12/21/202303/10/2024 by D.Smith

The Inflation Reduction Act, was recently passed. One of the major points in this legislations is that it will make it easier for nonprofit organizations to go solar. This legislation allows nonprofit organizations to take advantage of the same solar tax credits that are available to businesses, making it more financially viable for them to switch to clean, renewable energy.

One of the main barriers that has prevented many nonprofits from going solar in the past is the upfront cost of installation. Solar panel systems can be expensive to install, and many nonprofit organizations simply don’t have the budget for it. The Solar for Nonprofits Act addresses this issue by allowing nonprofits to claim the solar investment tax credit (ITC), which can significantly reduce the cost of going solar.

The ITC allows organizations to claim a credit worth up to 26% of the cost of their solar panel system. This can make a significant difference in the affordability of going solar, and it’s a game changer for many nonprofit organizations that may have previously been unable to afford the upfront cost.

In addition to the ITC, the Inflation Reduction Act also includes other provisions that will help make it easier for nonprofits to go solar. For example, it allows organizations to claim the credit even if they don’t have a tax liability, which is a common issue for nonprofit organizations. This means that they can still claim the credit and use it to offset the cost of their solar panel system, even if they don’t owe any taxes.

Renewable energy is becoming a key priority for many lenders. To support the UN’s Sustainable Development Goals of affordable and clean energy, sustainable cities and communities, climate action and partnerships, many banks are developing specialized commercial loan products designed to encourage the use of solar energy. These loan products include loans for rooftop solar systems, loans for energy efficiency improvements, sustainably certified commercial real estate financing, and sustainably certified construction loans.

Banks focused on accelerating the transition to clean energy are best positioned to help nonprofits secure advantageous funding for their solar installations. There are specialist lenders that have the institutional knowledge and technical know-how to develop innovative funding structures with favorable rates and terms designed to help nonprofits finance these installations.

There is no doubt that the IRA coupled with financing tools that provide funding support for clean energy projects will catalyze nonprofit organizations to deploy solar energy and speed their transition to a net-zero emissions future. Going solar will offer these organizations long-term cost savings while providing the benefits of combatting climate change, creating jobs and bringing new investment into their communities.

Summing up the bottom-line benefits of the IRA, a blog post by Candace Vahlsing, associate director for climate, energy, environment, and science with the White Houses’ Office of Management and Budget, said “the Inflation Reduction Act will help ease the burden that climate change imposes on the American public, strengthen our economy, and reduce future financial risks to the Federal Government and to taxpayers.”

Overall, the Inflation Reduction Act is a major win for nonprofit organizations that are looking to switch to clean, renewable energy. It removes many of the financial barriers that have previously made it difficult for these organizations to go solar, and it makes it more financially viable for them to make the switch. As a result, we can expect to see more and more nonprofit organizations going solar in the coming years, which is great news for the environment and for the future of renewable energy.

‘Water batteries’ could store solar and wind power for when it’s needed

Posted on 10/20/202303/10/2024 by D.Smith

The San Vicente reservoir in San Diego County stores water from as far away as the Colorado River. Pumping water into a smaller
reservoir in the surrounding mountains could store excess solar power until it’s needed, when the sun sets.
Dan Charles for NPR

The San Diego County Water Authority has an unusual plan to use the city’s scenic San Vicente Reservoir to store solar power so it’s available after sunset. The project, and others like it, could help unlock America’s clean energy future.

Perhaps a decade from now, if all goes smoothly, large underground pipes will connect this lake to a new reservoir, a much smaller one, built in a nearby canyon about 1100 feet higher in elevation. When the sun is high in the sky, California’s abundant solar power will pump water into that upper reservoir.

It’s a way to store the electricity. When the sun goes down and solar power disappears, operators would open a valve and the force of 8 million tons of water, falling back downhill through those same pipes, would drive turbines capable of generating 500 megawatts of electricity for up to eight hours. That’s enough to power 130,000 typical homes.

“It’s a water battery!” says Neena Kuzmich, Deputy Director of Engineering for the water authority. She says energy storage facilities like these will be increasingly vital as California starts to rely more on energy from wind and solar, which produce electricity on their own schedules, unbothered by the demands of consumers.

Californians learned this during a heat wave this past summer. “Everybody in the state of California, I believe, got a text message at 5:30 in the evening to turn off their appliances,” Kuzmich says. The sun was going down, solar generation was disappearing, and the remaining power plants, many of them burning gas, couldn’t keep up with demand. The alert worked; People stopped using so much power, and the grid survived.

Yet earlier on that same day, there was so much solar power available that the grid couldn’t take it all. Grid operators “curtailed,” or turned away, more than 2000 megawatt hours of electricity that solar generators could have delivered, enough to power a small city. That electricity was wasted, and there was no way to store it for later, when grid operators desperately needed it.

“We have a problem if we’re going to have these continuous heat waves,” Kuzmich says. “We need a facility to store energy so that we don’t need to turn off our appliances.”

Pumped hydro has a history

The technology that San Diego is proposing, called pumped hydro energy storage, is already operating at more than 40 sites in the United States. Some of the largest ones, which can generate more than 1000 MW for up to eight hours, were built during the 1970s and 1980s to store electricity that nuclear power plants generated during the night. But few new plants have been built over the past 30 years in the U.S. China has continued to build such plants.

Now, the need to store power from renewable sources is reviving interest in this old technology in the U.S.

“Just in the past several years, 92 new projects have come into the development pipeline,” says Malcolm Woolf, president and CEO of the National Hydropower Association. Most of the projects, however, are in the planning stages and still need regulatory approval and financing.

Thanks to the climate bill that President Biden signed in August, these projects now qualify for the same 30 percent tax credit that solar and wind projects enjoy. “That is an absolute game-changer,” Woolf says. “A number of these projects that have been in the pipeline for a number of years now suddenly are a whole lot more bankable.”

Water batteries have a lot of competitors, when it comes to storing energy. Some companies, including the car company GM, are exploring ways for the electric grid to draw emergency power from the batteries in millions of privately owned electric cars. Others are working on ways to store electricity by compressing air or making hydrogen. Still others are focused on ways to manage the demand for electricity, rather than the supply. Electric water heaters, for instance, could be remotely controlled to run when electricity is plentiful and shut down when it’s scarce.

Pumping water, however, has some advantages. It’s a proven way to store massive amounts of power. The San Vicente project would store roughly as much electricity as the batteries in 50,000 of Tesla’s long range Model 3 cars. Water batteries also don’t require hard-to-find battery materials like cobalt and lithium, and the plants can keep working for more than a century.

The biggest problem with them, at least according to some, is that it’s hard to find places to build them. They need large amounts of water, topography that allows the construction of a lower and higher reservoir, and regulatory permission to disturb the landscape.

Woolf, however, says the perception of pumped hydro’s limited prospects “is a myth that I am working hard to disabuse folks of.” Pumped hydro facilities, he says, don’t have to be as massive as those of the past century, and they don’t need to disturb free-flowing streams and rivers. Many proposals are for “closed-loop” systems that use the same water over and over, moving it back and forth between two big ponds, one higher than the other, like sand in an hourglass.

Three of the proposed projects in the U.S. that appear closest to breaking ground, in Montana, Oregon, and southern California, all would operate as closed loops.

Kelly Catlett, director of hydropower reform at American Rivers, an environmental advocacy organization that has highlighted the environmental harm caused by dams, says that “there are good pumped storage projects, and there are not-so-good pumped storage projects.”

Her group won’t support projects that build new dams on streams and rivers, disrupting sensitive aquatic ecosystems. But San Diego’s plan, she says, “looks like something that we could potentially support” because it uses an existing reservoir and doesn’t disturb any flowing streams. Also, she says, “I’m unaware of any opposition by indigenous nations, which is another really important factor, as they have borne a lot of the impacts of hydropower development over the decades.”

The board of the San Diego County Water Authority, and San Diego’s city council, are expected to vote soon on whether to move ahead with a detailed engineering design of pumped hydro storage at the San Vicente reservoir. The state of California is chipping in $18 million. The design work, followed by regulatory approvals, financing, and actual construction, is likely to take a decade or more.

FAQ’s about Solar

Posted on 09/09/202303/15/2024 by D.Smith

HOW IS SOLAR ENERGY HARNESSED? There are three primary ways to use the light and heat of the sun. First, photovoltaics (PV) directly converts energy from sunlight into electricity. Second, concentrating solar power (CSP) plants use mirrors to concentrate heat from the sun to drive utility scale, electric turbines. And third, heating and cooling systems collect thermal energy from the sun and use the heat to provide hot water and air conditioning.
HOW MUCH SOLAR EXISTS TODAY? There are more than 8,300 utility scale solar projects in the United States capable of generating over 67 gigawatts of solar electricity. That’s enough to power 12.7 million homes and offset 76 million metric tons of CO2 emissions.
CAN SOLAR SAVE ME MONEY? Yes! Nationwide, large utility companies are turning to solar in order to shift away from carbon resources and make renewable energy more accessible to customers. Solar relieves stress and strain on the electric grid and reduces costs for utilities. Those savings are then passed down to customers.
DO SOLAR PROJECTS CREATE SOUND? No, solar farms do not create sound that’s audible outside the project. Additionally, solar projects use minimal water and do not generate any type of air, water or ground pollution. In 2018, a new solar project was installed every 100 seconds.
SOLAR ENERGY INDUSTRIES ASSOCIATION DO SOLAR PANELS CREATE GLARE? No, solar panels are designed to absorb sunlight and not reflect it.
HOW ARE SOLAR PROJECT SITES IDENTIFIED? A number of factors are considered to identify a suitable solar project location. These include close proximity to the grid transmission network (power lines), ease of constructability, transportation access, low environmental impacts, and flat land.
CAN SOLAR PROJECTS BE LOCATED OUT OF SIGHT OF HOMES AND BUSINESSES? Developers take great care in locating and designing projects to minimize impacts to residences, and there are several factors that are important to siting a solar farm effectively. If designed correctly, solar farms will not change the look or feel of a community and there are many projects that coexist with residential areas. At only 8-12 feet high, solar arrays have a low profile and landscaping is often used to shield the project from view.
DOES THE SOLAR INDUSTRY CREATE JOBS? As of 2018, over 200,000 solarrelated jobs were created in North America. That’s nearly a quarter of a million families who help support the growth of clean energy nationwide. Additionally, construction and operations jobs in local communities generate increased business for local services like hotels and restaurants. 12.7 million homes could be powered by the current installed solar capacity in the
U.S. SOLAR ENERGY INDUSTRIES ASSOCIATION CAN SOLAR PROJECTS HELP SAVE WATER? Yes, in areas of the country where water resources are scarce, solar helps reduce the amount of water utilities need to generate electricity.
WHY BUILD A SOLAR PROJECT ON FARM LANDS, WON’T THAT BE LAND OUT OF PRODUCTION? Solar projects complement agriculture by helping farmers manage commodity price shifts, make money, and protect their way of life. Solar lease agreements include a binding commitment that project owners will return land to its prior use once a project has completed its useful life. Additionally, native grasses or wildflowers are typically planted that improve soil and water quality.
ARE THERE ANY COMMUNITY BENEFITS TO HOSTING A SOLAR PROJECT? Yes, solar projects lower electricity bills, provide economic growth and increase energy independence for communities. A typical solar project will generate 30 years of new steady tax revenue to fund schools and other community services while helping keep taxes low for homeowners.

thanks to Solar Energy Industries Association: www.seia.org for the information

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A Comprehensive Guide to Net Metering for Commercial Solar Systems

Posted on 07/23/202303/15/2024 by D.Smith

Net metering is a valuable tool for businesses looking to reduce energy costs and embrace sustainable practices. By allowing commercial solar system owners to receive credits for surplus electricity they generate, net metering enables them to offset energy consumption and even spin the utility meter backward. In addition to reducing costs, net metering promotes sustainable energy practices.

In this article, we will explore the workings of net metering, highlight its benefits, and provide insights on how businesses can maximize its advantages. Whether you’re new to the concept or seeking ways to optimize your commercial solar system, this comprehensive guide will give you the knowledge you need to navigate the world of net metering successfully.

Understanding Net Metering
Net metering is a regulatory policy and incentive program that allows commercial solar system owners to receive credits for excess electricity they generate and feed back into the grid. These credits offset their energy consumption and effectively spin the utility meter backward. This encourages companies to invest in renewable energy sources like solar power and generate their own energy.

How Does Net Metering Work?
When a solar system generates more energy than the building requires, the excess electricity flows back into the grid. A bi-directional meter measures the net difference between energy consumed and energy generated. The facility is then credited for any surplus energy generated, which are called solar credits.

Companies can still pull electricity from the grid when needed, such as at night when solar systems generate less energy. The credits from the net amount consumed are subtracted, and the facility is billed only for its net energy consumption.

How is Net Metering Different from Gross Metering?
It’s important to understand the difference between net metering and gross metering. Gross metering is an arrangement where commercial solar system owners are billed separately for their total energy consumption and compensated for their total energy generation based on a predetermined feed-in tariff rate.

Net metering provides credits and allows for a simplified, single bill. Gross metering, on the other hand, requires separate billing and compensation systems.

Benefits of Net Metering for Commercial Solar Systems
Net metering offers numerous benefits for commercial solar systems, including:

Reduced Energy Bills: Net metering can significantly reduce energy bills, depending on the facility’s energy consumption and the solar system’s size and output.

Environmental Sustainability: By promoting the adoption of renewable energy sources, net metering encourages companies to reduce their reliance on fossil fuels and decrease greenhouse gas emissions.

Energy Independence: Commercial solar system owners can achieve energy independence by generating their own energy and being less affected by energy price fluctuations, outages, and grid failures.

Revenue Stream: Net metering can create a revenue stream for companies with excess energy production. Credits for surplus energy can offset initial investment costs, contribute to ongoing expenses, and generate additional income.

Maximizing the Benefits of Net Metering
To maximize the benefits of net metering for your commercial solar system, consider the following strategies:

Proper Sizing and Design of Solar Systems: Before investing in a solar system, conduct an energy audit to understand your facility’s energy needs. Consider factors such as available space, shading issues, and local climate conditions. Plan for future growth to avoid costly upgrades or additions.

Optimizing Solar System Performance: Choose high-quality solar panels and equipment from reputable brands. Regularly maintain and clean the panels, inspect electrical connections, and ensure that all equipment functions properly. Install solar panels at the optimal tilt and azimuth angle to receive maximum sunlight.

Understanding Utility Policies and Regulations: Research net metering policies in your area, as they vary by state, region, and utility company. Familiarize yourself with interconnection requirements and agreements that outline the technical and contractual aspects of connecting your solar power system to the grid.

Efficient Energy Management and Consumption: Implement energy-saving measures and technologies such as energy-efficient lighting and HVAC systems. Analyze your energy usage to align energy use with peak solar production times.

Explore Additional Incentives and Financing Options: Take advantage of federal and state incentives, rebates, and tax credits to offset installation costs. Consider alternative options like a Solar Purchase Power Agreement (PPA) or leasing agreements if managing a solar system is not feasible.

Interested in net metering for solar? Caldus Energy can assist you in designing, building, and financing commercial solar panels tailored to your needs. Specializing in energy projects for commercial and industrial entities, we offer expertise in complex installations and comprehensive project financing. Partner with our experts for every stage of your energy project.

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Texas power prices jump 100% as record heat wave sends demand soaring across the State

Posted on 06/27/202303/10/2024 by D.Smith

Texas power prices soared 100% on Tuesday amid a massive heat wave that broke some records.
The price shot up to about $5,000 per megawatt-hour from $2,500 earlier in the day.
Temperatures topped 110 degrees in parts of Texas on Tuesday.

Texas power prices doubled on Tuesday as record high temperatures in parts of the state sent demand for cooling soaring.

By the evening, power cost about $5,000 per megawatt-hour, up from $2,500 earlier in the day, according to state grid operator the Electric Reliability Council of Texas (ERCOT).

On Tuesday, San Angelo in western Texas set a new record high temperature of 114 degrees, topping its prior record of 111 degrees.

And in the Rio Grande Valley, Del Rio hit a new high of 113 degrees. Meanwhile, Dallas and San Antonio also set new records.

Adding to the demand on Texas power supplies and prices is the tropical-level humidity in the state that worsens the heat effect, making it feel like 120 degrees or more.

The heat wave is expected to last longer than a week, meaning the power grid will be under extended strain.

In fact, ERCOT has predicted that Wednesday will see a new record high for power use, which should rise to 80,458 megawatts from 79,203 MW on Tuesday. That would exceed the current all-time high of 80,148 MW that was set in July 2022.

The heat wave is expected to continue toppling records next week, when ERCOT sees demand reaching 82,080 MW on Monday and 83,555 MW on June 28

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America installs 100 gigawatts of solar power

Posted on 12/22/202203/15/2024 by D.Smith

Sometime in the month of January, the United States installed its 100th gigawatt of solar panels. While it took roughly 20 years for the US to built the first 100 GW, it will take only a little over 3 years to build the next 100 GW.

Per Wood MacKenzie Power & Renewables, the US had installed 97.7 GW by the end of 2020. In the month of January, per the US Department of Energy’s Energy Information Administration, the country installed 0.334 GWac of solar inverters – which is at least 0.400 GWdc of modules (FERC suggested greater than 700 MWac of solar was installed or upgraded in January).

The fourth quarter of 2020 also set a quarter capacity record of 8 GW installed – more solar than was installed in 2015.

Combined with 21 GW of wind power, which also broke 100 GW of capacity installed in the USA recently, we saw over 40 GW of clean generating capacity come online last year.

Future Growth – Bigger, Faster

Going forward, expect volumes to grow significantly – especially if Biden’s 100% clean electricity by 2035 (800 GW of solar power) comes to fruition.

The FERC infrastructure folks see over 153 GWac/~199 GWdc of solar in the pipelines in the next three years, 38 GWac/~49 GWdc of which is categorized as ‘high probability of completion’. Greater than 480 GW of solar is in the queues around the nation. Texas alone is nearing 100 GW.

IHS Markit recently projected 2021 US capacity installations at 27 GW in total. That combined with slightly higher installation capacity projections expected in 2022 and 2023, and we should expect our second 100 GW to be installed before the end of H1’2024.

All future Net New generation capacity is (mostly) clean

Since 2006, all net new electricity generation capacity installed in the United States has been CO2 free. Per the article, as of the end of 2019, the USA had built 182 GW of gas capacity, while retiring 188 GW since 2006. In 2020, 16 GW+ of fossils retired, while 7.4 GW of fossils were added.

In 2021, he EIA sees 6.9 GW of new fossil additions versus just over 6.0 GW of fossil retirements.

Skipping ahead three years, in the above FERC report section of high probability additions, we see 25 GW of new gas capacity, and zero new coal suggested. The retirement column suggests 25 GW of coal, 10 GW of gas, and 4.0 GW of oil – totalling 39 GW of fossils closing. That’s a net negative value of 14 GW through early 2024.

Expect that net negative spread to get larger with energy storage now aggressively scaling.

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Solar peaks at 5.3% of US electricity in May, up 26% for the year

Posted on 12/20/202203/12/2024 by D.Smith

The US Department of Energy’s Energy Information Administration (EIA) released its most recent Electric Power Monthly, which provides data through the end of May 2021. The report notes that for the month, solar photovoltaic generation (solar) grew 25% over May 2020. Solar accounted for just over 5.3% of total US electricity generated for the month versus 4.41% last year.

Total US electricity use for the month increased by 4.5% versus May of last year. For the year through the end of May, total U.S. electricity usage is up 3.49% versus last year.

Solar produced 26.4% more in the first five months of the year than it did in the same period of 2020, covering 3.7% of all U.S. electricity demand.

Solar Photovoltaic as a % of US Electricity

The solar generation this May appears to have set a record for highest percentage of all US electricity -beating out last month’s number, and highest overall volume generated at just over 17 GWhrs in any one month (beating last month’s 15 GWhrs).

We here at Caldus Energy were hoping to see solar electricity hit 6% of all electricity for the first time, which did not occur. May remains the highest producing month as a percentage of total solar electricity in the United States. May through the end of August is expected to produce similar total generation – with July making up the highest quantity by volume.

Electricity by source, USA, May 2021

One reason U.S. solar production missed our 6% target was the increase in electricity use this summer, which also precluded the other milestone we were hoping for: 50% emission-free electricity. In fact, this year’s clean electricity peak probably already occurred in March, because generation as a percentage of US electricity has declined ever since.

There is encouraging news for combined renewable energy sources, with annual wind generation up 14% over 2020. When we factor in solars’ 26.4% increase we see a combined generation increase of 17.3%.

And as a percentage of 2021’s electrical demand, solar and wind managed to cover a little over 14.1%. The peak month for wind and solar generation in the last two years occured in April, with nearly 17% of generation met – while 15.3% was covered in May.

Wind and Solar as a % of all Electricity, USA

For the year, new utility scale solar power tracked by the EIA totaled 3.8 GWac of capacity across 163 unique projects. In the last month we saw 27 unique facilities come online, totalling 638 MWac/~798 MWdc.

Among the facilities to come online in May were a series of 2 MWac projects coming from the Illinois community solar program. There was a batch of facilities from Florida as well, all sized at 74.5 MWac.

New Solar Facilities, 2021

The EIA-860 chart contains “generator-level specific information about existing and planned generators and associated environmental equipment at electric power plants with 1 megawatt or greater of combined nameplate capacity”. Data is available starting from 2001. During those years, 4,749 operating solar power plants have been entered into the data. They total 50,447 MWac of capacity.

The largest project listed is the 300 MWac Prospero Solar plant in Texas that came online last summer. The smallest listed are a series of thirty two ~100 kWac projects, mostly from the early 2000s.

Solar Energy Pros and Cons

Posted on 12/15/202203/15/2024 by D.Smith

Should I install solar panels?

You should install solar panels if you’re looking for a way to save on energy expenses and control your operating expenses with a set monthly expense. Installing solar panels on your business is financially and environmentally responsible. Using solar power will lower your electricity bills and earn you tax incentives. Solar panels are also great investments because they add value to your business and are exempt from property taxes.

Solar energy advantages and disadvantages

Benefits of solar panels

There are many advantages of solar energy to consider when you’re deciding whether or not to install solar panels, such as:

Reduced electricity bills Using solar energy instead of traditional energy sources can result in financial savings. Over a 20-year period, you could save anywhere from $10,000 to several million dollars, depending on your state, building size and electricity usage. Unlike paying utility bills, paying off a solar panel system gets a return on investment.
Financial support from the government Federal and state tax benefits are available when you install solar panels on your business. Now with the Direct Pay option for non profits along with taxpayers there is the potential to claim 30 percent of installation costs, with benefits varying by state. In some instances it may be possible to get a solar installation with no out-of-pocket costs.
Energy independence The sun is an infinite source of energy, unlike coal and natural gas, and solar panels can be installed practically anywhere. The electrical energy output of the panels depends on exposure to direct sunlight; anything that gets in the way of this reduces the output. Using solar panels allows you to reduce dependence on foreign oil and fossil fuels, leading to a more stable and predictable energy bill, especially during times when the demand for energy is high.
Reduced carbon footprint Solar energy is able to generate power without giving off any dangerous emissions. While there is some carbon footprint from producing and distributing solar panel infrastructure, the energy produced from solar panels is clean and free of pollutants, and it emits no greenhouse gases.
Longevity and little maintenance Most systems last for 20 or more years. During that time, solar panels and equipment require little maintenance. Solar energy technology is always improving, so the same size solar panels from last year are even better today.

Disadvantages of solar panels

Some disadvantages associated with solar energy systems include:

High initial cost While a reduced electric bill is an advantage, initial costs for the equipment, panels and installation could be more quite high. If you have direct-current devices operating from alternating-current sources, they’ll need a transformer. These transformers aren’t 100% efficient, though, so the operating cost is higher with an AC source than with a DC solar panel.
Weather dependence The most important element for solar panels is the sun. If you live in an area prone to cloudy days for an extended period, this will negatively impact how the system runs. Your system will likely be less productive in winter months than summer months.
Inconvenience in inner cities and other areas with limited space A solar system requires a decent amount of space to install the equipment and have everything run smoothly, and so solar panels might be inconvenient in inner cities and other areas with limited space. About 100 square feet of roof space is required for every 1 kW of conventional solar panels. If you have limited space or a small roof, you might not have the space for all the solar panels needed to power your business.

Thanks to consumeraffairs.com for the information provided in this article

How does the MACRS Incentive for Commercial Solar Power Work?

Posted on 12/09/202203/10/2024 by D.Smith

In this article we will discuss how the MACRS works for commercial solar power systems in the US. We are not tax experts, and this is not intended as professional tax advice. If you plan to depreciate a business-owned solar array according to the MACRS, the best recommendation we can give is contacting a Certified Public Accountant (CPA).

Business-owned solar power systems are eligible for two nationwide incentives in the US: the Investment Tax Credit (ITC) and the Modified Accelerated Cost Recovery System (MACRS).

Thanks to the MACRS, you can write off the asset value of a solar PV system in only five years. This depreciation counts as a tax deductible expense, and the cash flow of your solar investment improves.

You can combine the ITC and MACRS, but you must subtract half of the ITC from the solar asset value. For example, if your solar installation gets the 26% tax credit available in 2022, you can depreciate 87% of its value over five years (after subtracting 13%).

The Tax Cuts and Jobs Act of 2017 (TCJA) provides a 100% depreciation bonus for solar power systems placed in service before 2023. Businesses have a major incentive to go solar before the end of 2022, since the federal tax credit also drops from 26% to 22%.

If you’re considering solar power for a commercial or industrial building, you have most likely heard about the Investment Tax Credit (ITC). Thanks to the ITC, you can claim 26% of your solar PV system costs as a federal tax credit on your next declaration. Being a federal incentive, the ITC is available for solar panel systems everywhere in the US.

The ITC can be claimed for residential and commercial solar power systems, but there is an additional incentive for companies: the Modified Accelerated Cost Recovery System (MACRS). Businesses can write off (depreciate) their solar power investments in only five years under the MACRS, even when solar panels and other system components have a much longer service life. This accelerated depreciation is a tax-deductible expense, which improves cash flow during the first five years after going solar.

Which Solar Power Systems Qualify for the MACRS?

The Modified Accelerated Cost Recovery System is a business incentive, which means it doesn’t apply for residential solar systems. The MACRS is available for the commercial, industrial and agricultural sectors, and several energy sources and technologies qualify for the benefit:

Solar Photovoltaic
Solar Water Heat
Solar Space Heat
Geothermal Electric
Solar Thermal Electric
Solar Thermal Process Heat
Wind Power
Biomass
Geothermal Heat Pumps
Municipal Solid Waste
Combined Heat & Power
Fuel Cells using Non-Renewable Fuels
Landfill Gas
Tidal Power
Wave Power
Ocean Thermal
Geothermal Direct-Use
Anaerobic Digestion
Fuel Cells using Renewable Fuels
Microturbines

Solar panel systems and some other renewable technologies are classified as five-year properties under the MACRS, which means their cost can be written off within that time frame. This improves the cash flow projection for renewable energy systems, since accelerated depreciation counts as tax-deductible expense.

Eligible systems placed in service before January 1, 2023, get an even greater benefit: 100% bonus depreciation under the Tax Cuts and Jobs Act of 2018. Solar panels can be installed relatively quickly, compared with other types of renewable generation equipment. If you’re considering solar panels for a commercial or industrial building, you can claim this benefit by acting fast and completing the project before the end of 2022. Your solar installation will also benefit from the federal tax credit before it drops from 26% to 22%.

Can a Company Combine the Solar Federal Tax Credit and MACRS?

The 26% federal tax credit is a nationwide incentive for solar power systems in all market segments. On the other hand, the MACRS is exclusively for projects in the commercial, industrial and agricultural sectors. A commercial solar installation can benefit from both incentives, but there are certain rules you must follow.

Since you get 26% of your solar investment back within a year, the IRS has decided to limit the maximum asset value you can depreciate under the MACRS. In the case of solar power, the asset value you can write off (depreciable basis) is equivalent to its total value minus 50% of the federal tax credit. The ITC will be gradually reduced in 2023 and 2024, which means the depreciable basis under the MACRS will actually increase. The following table summarizes how this works:

Considering a commercial solar system with a project cost of $1,000,000, these percentages would result in the following dollar values:

The MACRS has been available since 1986, and it has been a key incentive for renewable energy investments along with the federal tax credit. Depending on the type of asset, the depreciation period under the MACRS ranges from three to 50 years. Renewable energy systems normally qualify for five-year or seven-year depreciation, depending on the specific technology used in the project.

Green Facts for your Business

Posted on 12/06/202203/15/2024 by D.Smith

A growing number of businesses are choosing to go green. Taking steps to make their workplaces environmentally friendly by introducing materials and operational methods that are less harmful to the environment than traditional methods and materials.

Some of the reasons for the switch:

Costs

Going green for businesses used to be costly in the initial stages. Installing new equipment that produces less waste or buying new appliances that cut down on energy use can be expensive. However, with new tax incentives, accelerated depreciation and savings over time on the monthly energy bill all add up to significant savings.

Reducing & Recycling Materials

Strategies — like utilizing email instead of using paper to fax, purchasing reusable ink cartridges and recycling plastic and glass in the workplace — significantly lower waste. Printing on both sides of a sheet of paper before throwing it away reduces paper use by up to 50 percent. For businesses spanning a large office space, consolidating networks and setting up wireless networks save on power and cabling requirements.

Priorities

Some priorities of manufacturers in going green are sustainable packaging, water and environment stewardship, and climate and energy protection. Some large companies have been continuously involved in sustainability-focused agendas, while others have answered computer waste disposal issues by setting up large recycling plants.

Customer Relations

Going green can draw more customers to your business. Businesses that promote environmentalism as part of their mission statement can gain loyal customers and protect the environment.

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Author: D.Smith

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