Everything You Need to Know About Solar Energy Finance Solutions

Energy-efficient solutions benefit our environment and help to secure our country’s energy independence. Because this growth is vital to our nation’s success and its future, several financial incentives are available to encourage companies to embrace and invest in more efficient energy solutions.

Business owners who opt for greener energy choices receive tax breaks or credits, rebates, grants, preferential loans, and several other financial incentives. These incentives help to minimize the often prohibitive upfront costs of these projects. Depending on your location, federal, state, and local governments, along with local utilities, may offer varying forms of incentives.

Consider the incentives that pertain to your business to see if the numbers to upgrade to more efficient technology are justifiable. The incentives will often allow projects to begin yielding returns in as little as a few years, thanks to these generous programs that promote energy efficiency. Here, we’ll look at the types of offers that are widely available, as well as the key financing options available to make upgrading your facilities viable.

Solar Tax Credits

The Investment tax credit (ITC) is also called the federal solar tax credit. This provision allows you to deduct up to 26% (in 2020) of the cost to install a solar energy system (less any cash rebates) from your federal taxes as energy tax credits. The ITC applies to both residential and commercial projects and offers hefty savings. After installation, you will receive the tax credit when you file for the subsequent year. There is no cap on the value of the ITC. You can even claim the credit over multiple years if you don’t have sufficient tax liabilities.

The Energy Policy Act of 2005 established the ITC. Thanks to its success in facilitating America’s transition to renewable energy sources, it has been continually extended. In 2021, the tax credit goes down to 22%, and from 2022 on, the ITC falls to 10% of the cost of the system and will only benefit commercial entities.

State solar tax credits are also available. You can deduct a portion of the cost of your solar system from your state tax bill. These amounts vary widely by state.

Lighting Rebates

Upgrading to energy-efficient LED lighting is often practical thanks to a myriad of rebates offered by states, utilities, and manufacturers. Unfortunately, these programs are declining, with a decrease of 15% in available rebates in 2018 over the previous year. Lighting rebates are straightforward, change constantly, and are often available on a first-come, first-served basis. Retrofitting or converting to LED lights can reduce your energy usage significantly. The most common lighting rebates are as follows:

• Prescriptive Rebates: These rebates are paid out according to given constraints relating to the item sold. For example, your utility company could offer you a $15 incentive for each DLC-listed light fixture that you install. After paying the initial costs upfront, your utility company may inspect and then process your rebate.

• Instant Rebates: Utility companies sometimes offer immediate incentives at the time of purchase on qualifying material. For example, the utility can subsidize the cost of lighting fixtures to immediately reduce out-of-pocket expenses.
• Custom Rebates: These rebates are tailored to the individual business, and offered for projects that don’t qualify for instant or prescriptive rebates. For example, a utility provides a company with a $0.15 per kWh incentive to reduce annual energy consumption. This incentive is not as straightforward but can add up to a significant rebate depending on your usage.

Solar Energy Rebates And Incentives

Aside from the ITC, there are several other programs available with incentives for solar energy systems. All told, these incentives may cover anywhere from 26% to 50% of your purchase and installation costs. It’s important to note that the tax benefits go to the owner of the solar system, so make sure to purchase it directly or finance it with a solar loan to take advantage of the following opportunities.

Solar Renewable Energy Credits (SRECs) and Performance-Based Incentives: Some states require their utilities to generate a certain amount of their electricity using solar power. Illinois, for example, is committed to producing 25% of its electricity from renewable sources. As you operate your solar array, you earn one SREC for generating one MWh of electricity. Utilities then buy your SRECs so that they can apply them toward their annual quota and fulfill their requirements. You can earn SRECs for as long as you own and operate your solar system.

State and Utility Rebates: States and utilities can offer a per kW incentive for installing solar. The state of Illinois will pay $250 per kW of installed solar power for systems with no more than 2,000 kW. State and utility rebates don’t have to be sold. They are automatic, and the rates are determined before installation.

State, Local, And Utility Incentives

Individual states, cities, and utilities offer various incentives to encourage investment in energy-efficient projects. In Illinois, there are nearly 90 current programs in place to promote efficient energy investments.

Property Tax Break: In Illinois, The Special Assessment for Solar Energy Systems means that your property tax rates are unaffected by installing solar panels. You’ll be taxed as if they weren’t there, even though you’ve added significant value to your property. Some states that offer this incentive require you to purchase solar equipment from a local manufacturer.

Sales Tax Break: In some states, you may even be exempt from paying sales tax on your entire solar project purchase as well.

Accelerated Depreciation: The Modified Accelerated Cost Recovery System (MACRS) reduces a business’s tax burden to return solar investments quickly. Certain solar equipment is eligible for a five-year cost recovery period. Accelerated Depreciation can reduce the net cost of the system by another 30%.

Solar Savings

There are so many advantages to solar energy solutions, not just for the environment, but also for your bank balance! Your savings are set to improve dramatically if you seek out solar energy solutions for your commercial property or home. Of course, your overall solar savings will depend on where you live, your current electricity bills, and the financing options available to you, but in general, there are many benefits to start exploring. In less than ten years, you could have paid back the money you put into your solar energy solutions and you will continue to save for the next couple of decades! If you are wondering how you could save money by turning to solar, here are a few more pieces of information you should know.

Steering clear of ever-increasing electricity costs is one of the main advantages of switching to solar. If you are living in an area with high electricity rates, your solar savings will be considerably higher! Similarly, your savings could also be improved if you seek out one of the many renewable energy finance solutions available to you. Financing options make solar energy solutions simple and affordable, from loans to leases. With financial incentives such as cash rebates and tax credits, your local government might even reward you for going solar!

To fully understand how much you can save by opting for solar solutions in your home or at your business property, you should contact a reputable energy consultant. You will soon discover your renewable energy finance solutions so that you are fully aware of your options.

State, Local, And Utility Incentives

Individual states, cities, and utilities offer various incentives to encourage investment in energy-efficient projects. In Illinois, there are nearly 90 current programs in place to promote efficient energy investments.

Property Tax Break: In Illinois, The Special Assessment for Solar Energy Systems means that your property tax rates are unaffected by installing solar panels. You’ll be taxed as if they weren’t there, even though you’ve added significant value to your property. Some states that offer this incentive require you to purchase solar equipment from a local manufacturer.

Sales Tax Break: In some states, you may even be exempt from paying sales tax on your entire solar project purchase as well.

Accelerated Depreciation: The Modified Accelerated Cost Recovery System (MACRS) reduces a business’s tax burden to return solar investments quickly. Certain solar equipment is eligible for a five-year cost recovery period. Accelerated Depreciation can reduce the net cost of the system by another 30%.

Solar Energy Financing Solutions

Though costs for solar panels and related equipment continue to decrease as more firms adopt them, they are still costly. To fund your solar project, you have three main choices:

• Pay Cash: You’ll own the investment outright and can begin to recoup your initial investment through the incentives that we discussed above.

• Solar Lease: If you can’t afford to fund your solar project on your own, consider leasing your solar equipment from a provider. During a solar lease, you will pay a monthly fee to the service provider (sometimes the solar panel manufacturers, for example) over the contract period of between 15-25 years.

• Solar Loan: Financing a solar project at a low, preferential rate is also an option. Some cities and towns offer Property Assessed Clean Energy (PACE) solar energy financing solutions. Manufacturers, private lenders, and credit unions also provide solar energy financing.

LED Financing Solutions

As LED usage continues to rise and production methods have improved, the cost for these fixtures continues to decrease. Still, retrofitting or converting is an expense. Apart from the rebates discussed above, consider these innovative funding solutions as you evaluate your lighting project financing options:

• In-Electric Rate Funding: Complete your lighting project without any capital expenditures. In this scenario, your rate per kWh includes your project costs. You continue to save money by reducing your energy consumption.

• Performance Contracting: Congress authorized Energy Savings Performance Contracts to offer alternative financing for energy efficiency projects. To encourage investment in energy-saving projects, performance contracting eliminates upfront costs. ESPCs allow public entities to upgrade their facilities with future energy savings.

• Financing: Finance your project with low, preferential rates. It may even be possible to service the debt with energy savings so that the project is self-funding. Solar project financing may require you to re-distribute your current energy expenses and requires no capital outlay.

How to Pay for A Solar Array for Business

There are three main options when it comes to paying for a solar system for your business. You can pay by cash, explore a solar lease (PPA) or take on financing through a solar loan. Here is a little more detail about each option:

Cash

Paying for your solar power by cash might not be feasible for many people, however, it is a simple and straightforward transaction. Once you have paid the cost of your solar panel system and installation, you will then be the owner of the energy system and responsible for its maintenance. Although the upfront costs will be quite considerable, you will be able to start making money back on your investment right away.

Solar Lease

If you choose to go with a solar lease for your commercial building or home, you will be looking at a contract in which a solar company agrees to fund the installation of panels on your roof. They will then charge you a monthly fee for you to use these panels for the duration of the contract. A solar lease normally runs between fifteen to twenty-five years and the solar company will maintain and own the panels during this period. This could also be called a third-party lease because the panels will not be owned by you during the term of the lease. You will be able to compare the returns and savings from a solar lease by considering your current monthly power bills and comparing them to your potential lease agreement.

Solar Loan

If you want to maximize the financial payoffs for your solar energy system, a solar panel loan could be the ideal answer for you. There are several solar loan options available and you could save up to 70% over the lifetime of your solar panels. Although there are different options, most solar loans have the same simple regulations as other home improvement loans might have. When you borrow money from your chosen lender, you agree to pay this back with interest on top. Your installments will usually be monthly and you can start making immediate returns right away. A solar loan allows you to own an asset that creates a substantial amount of financial value for your home; solar power is much more beneficial than any other home improvement project.

Hopefully, these solar system finance solutions give you a greater insight into what you could achieve by going solar. Whether you’re looking at a lease or a loan, there are so many ways to benefit from solar energy solutions.

Should I Buy or Lease My Solar Panel System?

Often your energy consultant or those installing your solar system for your business can help you with your financial arrangements. If you do not have the cash to pay for the solar power system, you should consider one of the other options outlined above. The amount you are willing to pay each month will affect the interest rate and the length of your loan too, so make sure you consider how much your monthly payments will be overall.

Who Provides Solar Loans or Solar Financing?

There are a number of institutions that can offer solar energy loans; you don’t just have to follow up with banks. Here are four notable options worth exploring and discussing with a consultant:

• Some towns and cities offer Property Assessed Clean Energy (PACE) solar energy financing solutions. These are repaid once a yearly assessment is carried out on the property owner’s tax bill.
• Many solar panel manufacturers have loan and lease options outlined on their website.
• Private lenders and local government agencies may agree to some solar energy loan programs as they pair up and offer solar loans with low interest rates.
• Many credit unions around America have many low-cost solar solutions to offer to business owners and homeowners.

Tax Credits and Other Financial Incentives

When you opt for a solar energy, there could be many financial benefits for you. The following financial incentives can apply to both residential and commercial properties with new solar power systems.

Solar Investment Tax Credit (ITC)

Depending on the area you live in, some states offer tax credits for installing a solar panel system. You can deduct part of the cost of the system from your tax bill and make a significant saving on your investment!

Solar Renewable Energy Certificates (SRECs)

Some states require a proportion of their power to come from solar energy, so you will benefit if you live in one of these states. Your solar power system could generate solar renewable energy certificates for the amount of electricity your system produces.

Tax Deductions

You may not be required to pay tax if your property increases in value after your solar power system has been installed. Similarly, your new system might also be exempt from state sales tax which can create additional savings.

System Operations and Maintenance Costs

As well as the initial costs of a solar panel array, you may also be wondering about the costs of system maintenance. Luckily, this will not be an issue for anybody, as solar energy systems require very little maintenance during their lifetime. The majority of solar panels come with a twenty-five-year warranty, which will give you peace of mind when you purchase. Solar installers will also offer a warranty that covers the installation itself too.

If you don’t buy using cash and you have chosen a leasing option, the company will usually offer a service program to cover any potential maintenance issues that may arise during your contract. If you choose to take out a solar loan to buy your solar PV system, you will be solely responsible for the maintenance of the system. If you have any questions about the operational costs of your solar solutions, please contact an energy consultant for more information on your individual circumstances.

How an Energy Consultant Can Help

If you are still unsure about your options, Verde Solutions and The RXSun can help you to implement your financial arrangements for renewable energy. You should also understand that solar energy is just one solution; an energy consultant will be able to discuss other energy efficiency options in more detail with you.

Verde Solutions, LCC is a turn-key, full-service energy consulting firm working closely with its clients to develop comprehensive energy strategies for municipalities, large industrial and commercial companies and small businesses in providing solar installations in Illinois and across the country. The RxSun is the residential solar branch of Verde Solutions. Together they can assist with solar installations and solar financing for your commercial business or home.

Reach out to a reputable Chicago energy consultant today and find out more about your solar energy finance solutions and much more. Do you have any questions? Our friendly team is ready to answer your questions, so please get in touch today for more useful information!

About Verde Solutions

Verde Solutions is full full-service, energy efficiency consultant firm founded on three main principles; Innovation, Sustainability, and Efficiency. At Verde, we create value for our clients and communities by providing innovative energy-efficient solutions. By reducing energy use and utilizing renewable energy, we lower costs and set a sustainable path for the future. Call 800-541-1137 to connect with our team!