Resources and Financial Incentives for Solar
Applicable Sectors: Commercial, Industrial, Agricultural, Residential, Institutional, Government
Ensures that customers of investor-owned utilities and electric membership co-ops (but not municipal utilities) in Virginia can make use of net metering such that excess generation from a solar system is credited to a customer’s next bill at retail rate. After a 12-month cycle, customers may opt to roll over credit indefinitely or to receive payment at an avoided-cost rate (usually only $0.03 per kWh or less). Net metering in Virginia is available on a first-come, first-served basis until the rated generating capacity owned and operated by customer-generators reaches 1% of an electric distribution company’s adjusted Virginia peak-load forecast for the previous year. The capacity limit for residential customers is 20kW, while agricultural customers are limited to 500kW and non-residential to 1 MW. Details for Appalachian Power’s net generation policies are here.
A taxpayer may claim a credit of 30% of qualified expenditures for a system that serves a dwelling unit located in the United States that is owned and used as a residence by the taxpayer. Expenditures include labor costs for on-site preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home. The cost of installing battery storage in conjunction with renewable energy generating systems is eligible for the tax credit if the system is scaled and designed such that at least 75% of the power used to recharge the batteries comes from the renewable energy generating system.
In cases where the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year.
The business ITC is the equivalent of the Residential Renewable Energy Tax Credit, but targeted toward businesses instead of residential electricity customers. The ITC provides a credit of 30% of qualified expenditures for various renewable energy technologies place in service before December 31st, 2019. Expenditures that qualify for the ITC also typically qualify for accelerated depreciation through the MACRS program.
This program, administered by the USDA, Provides guaranteed loan financing and grant funding to agricultural producers and rural small businesses for renewable energy systems and/or energy efficiency improvements. Those eligible for REAP grants and loans include agricultural producers with at least 50% of gross income coming from agricultural operations and small businesses in eligible rural areas*. To be eligible, agricultural producers and small businesses must have no outstanding delinquent federal taxes, debt, judgment or debarment.
Funding sources available through REAP include:
- Loan guarantees on loans up to 75% of total eligible project costs (between $5,000 and $25 million) with rates and terms negotiated with the lender and subject to USDA approval;
- Grants for up to 25% of total eligible project costs (between $2,500 and $500,000 for renewable energy or between $1,500 and $250,000 for energy efficiency);
- Combined grant and loan guarantee funding up to 75% of total eligible project costs (i.e., farm or business owner must provide 25% of total project cost).
The deadline for REAP grants and loan guarantees for FY2017 is March 31st. More information on the REAP program is available here: http://programs.dsireusa.org/system/program/detail/917
* Rural areas are any areas other than:
(1) A city or town that has a population of greater than 50,000 inhabitants; and
(2) The urbanized area contiguous and adjacent to such a city or town, as defined by the U.S. Bureau of the Census using the latest decennial census of the United States.
Applicable Sectors: Commercial, Residential, Non-Profit Institutional
Property Assessed Clean Energy (PACE) programs allow qualifying energy improvements to be financed through assessments on a property owner’s real estate tax bill. By setting up a PACE program, a locality can enable private sector loans for 100% of total project costs by placing a special assessment lien on the property that the owner repays over time as part of his/her tax bill.The special assessments are used to secure local government bonds issued to fund the improvements without requiring the borrower or the sponsoring local government to pledge its credit. By allowing participating property owners to pay for energy improvements to their properties via a bond issue tied to a special assessment on their property tax bill, PACE financing enables property owners to reduce energy costs with no upfront investment.
PACE Program Benefits
- 100% Financing requires no upfront cash investment
- Long-term financing with low interest rate and up to 20 years results in immediate positive cash flow
- Repayment through a tax assessment that transfers with the property title and is not tied to the borrower
- Assessment costs and savings can be shared with tenants
- Treated as off balance sheet financing
Legislation passed in the 2015 Virginia General Assembly, and signed by Governor McAuliffe, enables commercial PACE loans in Virginia. In April 2016 Virginia Community Capital released a PACE Feasibility Study, the result of a grant from the Oak Hill Fund to explore implementation of PACE financing in Virginia. Currently, Arlington County is the only county developing a program. They announced the recipient of their program administrator in January 2017 and plan to pass the County Ordinance this spring. Arlington’s program is expected to be up and running by summer/fall 2017.
Applicable Sectors: Commercial, Industrial, Non-profit Institutional, Local Government
The Virginia Department of Mines, Minerals and Energy (DMME) has created the VirginiaSAVES Green Community Program to provide subsidized financing to private commercial and industrial, non-profit institutional and local government borrowers for energy efficiency, renewable energy, alternative fueling, and other qualified conservation purposes across the Commonwealth. Using the Commonwealth’s allocations of Qualified Energy Conservation Bonds (“QECBs”), the Program works with CleanSource Capital, LLC to provide financing for the Projects. VirginiaSAVES stands for Sustainable, Verifiable Energy Savings and DMME has initially capitalized the Program with $20 million of Qualified Energy Conservation Bonds (“QECBs”) allocated to the Program under the initial allocation, with the ability to provide more QECB allocations as needed. Using QECBs to fund the Program is advantageous because they offer a direct pay credit subsidy from the U.S. Treasury to offset the interest rate on the financing, with this credit payment historically being between 2-3% and fixed over the life of the financing of up to 20 years or longer. More info: http://www.vasavesgcp.com/program-overview/
And here is more information on the QECBs that were used to fund the program: http://programs.dsireusa.org/system/program/detail/3098
Power Purchase Agreements and Customer Generation Agreements
Here’s an example of an RFP for a solar PPA in our region:
Solar + Storage (a.k.a. “Resilient Power”)
Creates possibilities to improve project economics by allowing more useage behind the meter, even when the sun isn’t shining, but also allows for sales of ancillary services such as power and frequency regulation. Here are some good primers
Ideas on how foundations and impact investors can help develop solar and solar+storage in low income communities:
Applicable Sectors: Commercial, Industrial, Federal Government, Agricultural
Clean Renewable Energy Bonds (CREBs)
Applicable Sectors: Local Government, Schools, State Government, Tribal Government
MACHINE AND TOOL TAX CREDIT
HB 1297 enacted in March 2015 provides option for local governing body of any county, city, or town to impose a different property tax on renewable energy generating machinery and tools than other normal use machinery. The rate of property tax imposed must not exceed that is applicable to the general class of machinery and tools.
Renewable energy means energy derived from sunlight, wind, falling water, biomass, sustainable or otherwise (definitions liberally constructed), energy from waste, landfill gas, municipal solid waste, wave motion, tides, or geothermal power and does not include energy derived from coal, oil, natural gas, or nuclear power.
This rate of tax does not apply to machinery and tools used in generating renewable energy by qualifying co-generator or qualifying small power producer under Public Utility Regulatory Policies Act (PURPA), unless the rate of tax under this section would result in a lower property tax on such machinery and tools.