The state of Connecticut has recently created a new incentive program to assist business owners design and install solar panels on their buildings. Ross Solar Group is working with the state of CT to offer creative financing solution on a state wide basis.
Danbury, CT June 25, 2013
Connecticut has recently opened the gates on Commercial-Scale Solar PV. In the past, however, it has been about smaller systems and complicated grant programs with no way of knowing for sure how much assistance you would get. A gamble. Commercial Solar PV development in CT has been almost non-existent as a result. With support for the Governor and legislators in Hartford the opportunity for commercial business owners has chnaged for the better and time to act is now.
These days, with the availability of property assessed financing and utility-based REC programs, going solar in Connecticut is calculable, low-risk and immediately rewarding.
The Incentives. Federal.
The Federal incentives are purely based on tax-credits. Non-Profits and Municipal entities will have a hard time justifying an investment in Solar PV without a benefactor or a 3rd-party vendor to monetize the tax benefits. However, profitable entities with a tax bill to offset should strongly consider PV (solar energy).
The federal tax credit is 30%. That's a credit, not a deduction. 30% of the gross cost of the project can be returned to the system owner via a tax credit once the project is completed and interconnected to the grid.
Second is the Modified Accelerated Cost Recovery System (MACRS) benefit. Solar PV has been eligible for this benefit for quite some time. Essentially, a business can depreciate the value of the equipment over a term of 5-6 years… much shorter than the true usable life of the equipment (30+ years). For a company with a 30% tax bracket, this equates to roughly 25% of the gross cost of the project over the term of depreciation.
All told, a PV system owner would have recouped around 55% of the project cost over 5 years with tax benefits alone.
Net metering: Universally speaking, a Solar PV system will offset the kilowatt-hour (kWh) charges on the system owner's electric bill 1:1 with its production. A common commercial rate for electricity in CT is about 13 cents. This represents an average business's supply and transmission charges; Solar PV offsets both. So, for every kWh a PV system creates, the owner of the system will not have to purchase the same kWH from the utility. In addition, the owner of the PV system will have fixed costs per kWh for the twenty five year lifetime of the system.
The Incentives. Connecticut.
Connecticut has two major programs in effect to shorten the payback and/or ease the commitment level of going solar.
First is the ZREC/LREC Program (Zero/Low Emissions Renewable Energy Certificates) managed by the utilities (United Illuminating and CT Light and Power). The state has a renewable portfolio to maintain. The state of Connecticut is obligated to generate and consume certain percentages of the total energy needs from renewable sources. "RECs" track the creation of different power sources for this purpose.
A facility generating solar power or other renewable energy (like wind) earns ZRECs or LRECs corresponding with production. A PV system owner can sell the REC's to the utility (CL&P or UI) and the utility will enter into a 15-year contract and guarantee a fixed price to be paid for each REC delivered. This is a calculable, reliable, bankable number. Unlike REC programs in other states where the rate changes from month-to-month, this ZREC price remains fixed for 15 years. The system owner gets paid quarterly for RECs produced.
Connecticut now has ways to get around the commitment of going solar. Many towns in CT are signing on to allow Solar PV to be paid for via a line-item assessment on a PV owner's property tax bill; like a sewer tax. This is referred to as the "C-PACE" (Commercial Property Assessed Clean Energy) program, and The Clean Energy Finance and Investment Authority (CEFIA) administers it.
Essentially, a PV system owner can elect to have the PV installed for no down payment. Instead, CEFIA secures the funding and pays for the project. The local tax assessor's office adds a line item to the system owner's property tax bill to collect and use to repay CEFIA for the equipment. A requirement of the C-PACE program stipulates that the Net Metering benefit combined with the ZREC benefit must outweigh the tax payment; therefore, if the site is value-engineered and properly installed, it will bring in more revenue than it costs from day 1. If the building owner moves the company to another building, the obligations and benefits of the PV system remain with the original building and the new owner.
The major benefit of the CPACE program is that the the federal tax credits and depreciation are still available for the business owner to monetize. The system is repaying its own tax bill and the system owner keeps the tax credits.
Here is an example of a PV system in Connecticut: A building owner installs a $500,000 PV system through C-PACE. The larger tax bill is recouped via the owner's electrical savings and ZREC income. In addition, the system owner just found $275,000 in Federal tax savings over 5-6 years.