Solar energy systems were once far too expensive for nearly anyone to take advantage of.
The panels used required pricey materials, installation could only be performed by skilled professionals which were rare in the business, and methods for efficiently storing the harvested energy were unbeknownst to many in the industry.
However, innovation in the solar energy field is at an all-time high, resulting in a significant reduction of solar panel cost on both the utility scale as well as the personal level.
Beyond that, there are also a number of federal, state-level, and company-specific incentives that contribute to making this renewable energy source even more financially viable than it’s already become on its own.
Let’s take a look at why solar has gotten so cheap as well as how providers and consumers can take advantage of the many incentives already in place.
Large-Scale Solar Power Plant Financing
Utility-scale solar installations are backed up and financed by a number of federal and state-level incentives used to convince investors to put their considerable resources into solar power. These incentives often come in the form of tax benefits, clean energy grants, and loans with exceptional rates.
Utility-Scale Solar Tax Benefits
The investment tax credit (ITC) is one of the main contributors to solar becoming such a viable utility-scale energy source today. The Energy Policy Act of 2005 actually increased the ITC for solar from 10% to 30%, thereby reducing the tax liability for investors in the solar market.
This essentially incentivizes investing in solar power, giving utility companies access to funds that may have otherwise been inaccessible.
Additional programs like the Modified Accelerated Cost Recovery System (MCARS) provide unique depreciation schedules for solar energy equipment to help reduce overall taxes paid by solar utilities even further.
Clean Energy Grants
While the terms of individual of grants vary, most large grants are awarded based on innovation in the field that contributes to replicable and utility-scale solar practices.
The Solar Utility Networks: Replicable Innovations in Solar Energy (SUNRISE) program, for example, awards $8 million to “help utilities develop adaptable and replicable practices, long-term strategic plans, and technical solutions to sustain reliable operations with large proportions of solar power on the grid.”
Grant programs like these can help contribute to a more cost-effective strategy that helps to further the knowledge and technological abilities of the industry as a whole.
The Department of Energy offers a loan guarantee program for utility-scale solar facilities. This program provides access to financing that is usually much lower cost and larger quantity than if financing was secured through traditional methods.
These programs help reduce the risk involved in setting up a large-scale solar plant by contributing federal credit subsidies to act as insurance should the projects fail.
The success of this program has been quite high. During 2015 alone, the program helped demonstrate the viability of solar technology and resulted in a ten-fold increase in utility-scale solar PV projects larger than 100 megawatts.
Financing for Small-Scale Solar Providers
Incentivized financing isn’t restricted to the utility-scale level either. In fact, there are a number of residential incentives to help keep money in the savings account of the everyday homeowner. These include federal, state, and company-level benefits.
The Federal Tax Credit
By far one of the most notable incentives for installing a home solar system, the Residential Renewable Energy Tax Credit offered by the U.S. government provides a tax credit for 30% of the total costs of a home solar system, provided it meets a few qualifications.
First, a qualifying system must have been placed in service after 2006. Systems installed prior to this year do not qualify. What’s more, the tax credit drops from 30% to 26% on systems installed after 2019. After 2020, it drops even further to 22% and expires completely after 2022.
Qualifying costs include:
- Labor costs
- Assembly of system
- Any additional piping or wiring required to connect the system
What’s more, there also isn’t any maximum credit for qualifying systems installed after 2008.
Individual State Incentives
In addition to federal tax credits, there are also a number of individual state incentives that consumers and businesses may qualify for. Some may be directly connected to the government of that state in particular. They may include:
- Corporate tax credits
- Personal tax credits
- Loan programs
- Corporate tax deductions
- Gran programs
- Interconnection benefits
- And more
State-level incentives may also be offered by individual utility companies. These may include rebate programs and energy buyback initiatives like net metering, giving consumers the ability to sell unused solar power back to the grid.
The best place to discover state-level incentives for your state is the Database of State Incentive for Renewables & Efficiency (DSIRE).
Financing for Solar Has Never Been Easier
While solar power use to be cost prohibitive on the level of both industrial utilities and individuals, the wide variety of governmental and private financing options for the solar inclined has made this renewable energy source more viable than ever.
With so many different kinds of financial incentives to choose from, it’s no wonder solar is expanding at a breakneck pace.