The United States Congress revealed an omnibus spending bill on Tuesday, December 15th, that includes an important component for renewable energy. The Wind and Solar Tax Credits, previously destined to sunset at the end of 2016, have been given new life through 2020 and 2022 respectively. Specifically for residential Solar Energy, the Federal Income Tax Credits (FITC) have been extended as follows:
The current 30% FITC remains in effect through 2019.
- The FITC will decline slightly to 26% thereafter through the end of 2020.
- The FITC will decline again slightly to 22% thereafter through the end of 2021.
- The FITC will decline more significantly to 10% in 2022 and remain in effect through the end of 2024.
- Projects starting in each calendar year are eligible for that year’s credit, as long as they are completed by 2024.
Analysts and pundits watching the renewable energy industry are already predicting growth of the Solar Power segment at an average of 10 to 15 GW per year and totaling anywhere from 22 GW to as much as 58 GW nationwide, or enough to power between 15 and 40 million homes. Here in Massachusetts, by the end of 2015 we will have installed just over 1 GW (enough to power over 150,000 homes) in the fastest growing renewable energy market in the country.
“The success of the solar industry relies heavily on keeping residential solar projects affordable for homeowners. That being said, the five year extension of the 30% Federal Investment Tax Credit came with great rejoice from our team here at RevoluSun. Not only is this monumental decision imperative for homeowners and business owners, but too it is vital for the sustainability of current employment and even more so for the future of employment in the solar industry. This is a paramount victory for customers, employers, employees, and the quality of life on the planet we have set forth to protect. The solar energy tax credit extension tells the world that, as a country, we are prepared to continue working towards a cleaner and brighter future!” – Kip George, President, RevoluSun Massachusetts
Along with the FITC, other solar incentives and subsidies in Massachusetts have greatly benefitted local homeowners. The FITC, with its 30% credit and the MA State income Tax credit of $1000 means that a homeowner purchasing a $20,000 solar power system would actually get back a combined $7000 from the IRS and DOR. When the MA Commonwealth Solar II Rebate was active, homeowners could get up to an additional $4000 back. The Solar Renewable Energy Certificate (SREC) subsidy contributes another $1200 or more per year for a period of 10 years after the project is energized. In many cases, the homeowner’s solar power system was paid for in as few as 5 to 7 years by subsidies alone! Once the avoided cost of electricity is factored in, homeowners saw not only real savings in home energy costs, but in some cases actually made money. They then get the benefits of free electricity for 25 to 40 years depending upon the equipment installed.
A great many homeowners in Massachusetts chose to solar lease vs buy. The solar lease, more commonly referred to as a PPA or Power Purchase Agreement, is characterized by a 3rd party company who purchases solar panel array on behalf of the homeowner, then sells all the power produced by the system back to the homeowner at a greatly reduced rate – sometimes as much as $0.10 to $0.12 less than the utility rates. The PPA enjoys the same economics as the purchased system, including the FITC rebates, which usually go to investors. With its inherent simplicity, homeowners leverage the PPA to replace the electricity purchased from the utility, and usually save anywhere from 30% to 50% on electricity costs for the term of the 20 year program.
Another option for non-homeowners and other electric rate payers with homes that don’t qualify for their own solar power arrays is community solar membership.
“Extension of the Federal Income Tax Credit is vital for our industry’s growth, but is only one leg of the stool. Our community’s future energy needs require the legislators of Massachusetts to support and increase Net Metering Policies while maintaining the already robust Solar Renewable Energy Certificate subsidy.” – Doug Pierce, Director of Project and Business Development, RevoluSun Massachusetts
In 2014, Massachusetts ended its highly successful solar rebates program with well over 13,000 homeowners and small businesses receiving an accumulated $36 million for being early adopters of solar power. This investment in our environment and infrastructure spurred over $407 million in construction of solar electricity panel arrays. Since the solar rebates program ended, the SREC program has scaled down as well. The FITC, as stated earlier, was slated for termination at the end of 2016. In 2015 the Net Metering policy in Massachusetts was challenged by the utilities when arbitrary caps were reached and entire communities were prevented from installing solar power.
Despite the challenges faced by the renewable energy sector and solar power specifically, legislators, economists, analysts, industry leaders and more all recognize the value to homeowners in terms of real savings on home energy costs, the value to the local economy in terms of new jobs and spending, and the value to all of us in terms of a healthier environment in which to live. However, the flip side is that eventually the industry will need to stand on its own without subsidies, and this means solar customers late to the table will pay much more for their systems than earlier adopters. While the mantra may be: “The best time to go solar was yesterday!” we note it’s never too late… With a generally declining average cost of solar panel materials and efficiencies in installation, combined with strong subsidies for a short while longer, solar power and all the advantages it offers is still within reach of most residents of Massachusetts.
The omnibus spending bill containing this important change for the solar power industry is scheduled for a vote in both the Senate and the House on Friday, December 18th, before the two chambers recess for the holidays.
Locally owned and operated RevoluSun (Burlington, MA) offers free energy evaluations for homes and businesses. We present you with a no obligation, comprehensive, solar project proposal that meets both your energy and financial needs. We then deliver and install only the most efficient and highest value solar components made by proven and reliable manufacturing partners, and backed by the best warranties in the business. Ask around and you will learn we are a completely different Solar Power installer. If you were thinking about going solar, Now Is The Time, Massachusetts!