Commercial Solar Presumptions & FAQ’s:
Below are brief responses to commonly ask questions and presumptions about how solar can benefit businesses. They are not exhaustive so feel free to seek further clarification from your solar consultant. Not always, but in general if you have good solar exposure commercial solar is a great opportunity to significantly lower your electrical costs. We encounter hundreds of past contacts that regretted not having made the move earlier due to their previous presumptions about solar and solar benefits. In almost every situation there is a satisfactory answer to each of these questions, but it may take further interaction to adequately respond to your specific situation.
We don’t have the capital expenditure available to install a system this year.
For many this is almost always the case, but the 30% Federal Tax Credit is lowering at the end of this year so if the project is installed later this year with a solar loan you will be taking advantage of the best incentives available. You can always cash out the loan next year or whenever you have the capital to spend.
With capital expenditure financing your future electricity can often be about 28% of utility cost over for 25 years. With a loan (in which you are using all the solar benefits to immediately pay it down) it would be about 40% of utility cost. Which is great. Therefore, you might consider installing a system later this year using a loan that you can cash out the next year. Using a short-term loan like this only raises the percentage to 29% of utility cost. So, it is beneficial to take advantage of this year’s higher federal tax credit rate by using a ‘temporary’ loan.
We would never have that kind of capital expenditure available for a photovoltaic (PV) system.
As stated above, even with a loan (in which you use all your solar benefits and earnings to paydown the loan) you will still be paying only 40% of what you would be paying the utility for that electricity over the manufacturer backed warranted lifetime of the system (25 yrs). This is still an incredible deal considering you won’t even pull a dollar-out-of-pocket!
What if I sell my business or property? Do I lose my investment?
Absolutely not! Even if you decide to sell your property, you will recover all of what was invested plus a portion of the future profits from the system. All future electricity from the system is added into the equity of the property. So, your investment is safe even if the property is sold. We can show you examples of our former solar customers who made good profit on their solar investment after selling their properties.
According to the Uniform Standard of Professional Appraisal Practice (USPAP), a cost appraisal for your property takes into consideration all present and future assets of the property and its improvements. In consideration of photovoltaic systems, the value of the property includes the value of the electricity and any unused tax benefits the system will earn over the next 30 years, which is significantly more than your original investment. (It is easier if the business or property is not sold in the first 6 years.)
A 100 kW system will only produce a small portion of the electricity we use (approx. 100,000 kWh/yr). Not sure it is worth it.
Given the rules limiting Net Metering to systems below 100 kW (explained below), you still need to ask yourself whether saving $100,000 - $200,000 over the life of the system is worth it. Why not do something advantageous for the environment and make money doing it. If you have multiple business properties (e.g. multiple mini-storage facilities throughout Washington), then you might consider whether five to ten times that profit is worth the venture. You are allowed a 100 kW system on each separate property even if they are all owned by the same company. With multiple sites economy-of-scale will lower the cost even more.
Can I get the commercial solar benefits if I install a PV system on my residential rental property?
Surprisingly, yes. In most cases, based on your specific situation and tenant lease this is possible. If your rental has great solar exposure, installing solar can be another great source of income from the property. It is best discussing the details of how this is possible with your solar consultant or someone in our office.
How does the 30% Solar Tax Credit work?
You are entitled to a 30% tax credit to apply against your taxes for the year in which the system was installed. This is not a deduction or depreciation, it is a tax credit and acts like your federal tax withholding. It is applied against your taxes due for that year. If you have a $9000 solar tax credit, then you will not have to pay the next $9000 of federal taxes. If you don’t have $9000 of tax liability that year, the remainder can either be applied to the previous year’s taxes or rolled over to next year’s taxes, etc. for 20 years.
Do I have to wait until I get my tax return next year to receive the benefit of my Solar Federal Tax Credit?
Not necessarily. One of the owners of Forecast Solar received his federal tax credit benefit the moment the system was installed. Depending on your tax situation and tax preparer you can begin to receive your financial tax benefit immediately. Many, however, are satisfied to get the tax refund the next year.
How does the Solar Accelerated Depreciation (MACRS) work?
The details of how this works are in our Solar Commercial Benefits document that you can request. We also recommend that you pass that document on to your tax preparer who might not be familiar with solar tax rules and benefits. In order to promote solar, the federal tax code allows you to completely depreciate your solar project in 5-6 years. If you elect to use the bonus depreciation schedule you can depreciate as much as 37.4% of the project cost in the first year alone. Either way, using regular or bonus MACRS you can recover your tax bracket percentage of the entire project cost (times .85) in tax savings.
What happens to the electricity that my system produces? What is Net Metering?
Any electricity that your system produces, which is unable to be used at that time, will flow back into the grid. Each unit of electricity that flows out into the grid is credited to your account to be used at a time when you draw from the grid, for example at night. It is our job to design the system so that it will not produce more per year than what you have used in past years.
What about Northwest whether, will we get enough sun to make it worthwhile?
Yes. Remember Germany has the most solar per capita than any other country on earth and they are at a higher latitude than Washington! We factor each region’s specific weather data from the last 30 years into your solar assessment. These readings, for example, take into consideration four levels of UV exposure throughout each day. Then we factor in your property’s specific shade readings together with the weather factors from your local micro-climate. We do this through a government program (NREL) designed specifically for this purpose. So, all these factors give us an accurate prediction of what your project will produce on your specific site. Looking back over seven years and hundreds of installations our site assessments and calculations have been very accurate.
Are there equipment warranties that ensure my system will work through its expected 25-year lifetime?
Yes. There are two primary parts to a solar array, the solar modules that produce energy and inverters that join that power to the electrical system. All modules are warranted to produce a high percentage of their original power for 25 years, some of them 30 years. Inverters come with an extended warranty for 20-25 years, which has been factored into the original quote. The modules will probably continue to produce long after that. The inverters, however, will likely need to be replaced after 25 years. Forecast Solar provides a 10-year workmanship warranty and will facilitate any equipment warranty issues for the life of the system. Note: Having installed tens of thousands of modules (most Itek & Silfab) we have only had one module failure to date. Also, in today’s PV systems there are NO moving parts, basically no maintenance other than to wash them every few years if you have trees that are close (pollen).
How do I know that my system is still operating efficiently throughout its life?
Unless otherwise stated, all our systems come with a monitoring system that monitors each specific module and the inverters throughout the lifetime of the system. You can monitor the system on your computer or cell phone. Many of the system manufacturers will notify you when a module or inverters fails. In this way, your system is protected against financial loss do equipment failure.
All the tax information in this document is generalized for describing the basic opportunities that currently exist for commercial solar. Consult your own tax preparer to learn how these solar benefits might affect your specific financial situation and future business plans.