Most solar systems that are installed in the country nowadays take advantage of what’s called net metering. Net metering allows for a system to generate electricity in excess of what is being consumed in the building and receive credit for the oversupply. The electricity literally flows back into the grid and the meter spins backwards accruing credit until demand exceeds generation, at which point the meter spins forwards and any built up credit is applied. For every kilowatt hour a solar system supplies the grid, the owner is able to pull one kilowatt hour back from the grid free of charge. In this manner, a system tends to over produce relative to a buildings needs during the day so that at night, the building can draw electricity back from the grid without being charged.
To find out home much energy you use and how much solar generation your site will support, interested business and homeowners should contact a NYSERDA certified installer to come out and conduct a site inspection, which will involve a look at the roof, a look at the electrical panel and a look at the utility bill. Once you know the size and cost, you can then calculate the incentives that are available for going solar, compare your savings to what you would have paid the utility and thus determine a payback period and a total savings scenario.
In terms of incentives, small commercial (under 200 kilowatts) in New York City has some of the riches incentives in the country, qualifying for a state rebate, a federal investment tax credit, a New York City specific property tax abatement and accelerated depreciation.
To illustrate these incentives let’s take a 100 kilowatt, small commercial solar system, which would produce roughly 120,000 kilowatt hours annually, enough to power most small businesses. A fair price for this system, assuming a straightforward installation would be around $3.5 per watt, bringing the total to $350,000 (100,000 watts * $3.5 per watt). The state rebate for this small commercial system in Con Edison territory is $.80 per watt for the first 50,000 watts and $.50 per watt for the next 150,000 watts. At 100,000 watts that comes to $65,000. Most installers will take the rebate directly and reduce it from the total cost of the system so in this scenario, a customer would pay $285,000 for the turn-key system.
Upon purchase the owner then receives a 30% investment tax credit on the cost of the system minus the rebate, or $85,500 ($285,000 * 30%) It is important to note that this is a tax credit, not a deduction, so assuming the business has the tax liability, they will get $85,500 back when they do their taxes. If they do not have the tax liability to use the credit in full in year one it can be carried over for the following four years.
On top of the federal investment tax credit, business owners installing solar in New York City will also qualify for a 20% property tax abatement. The abatement is also calculated on the post rebate value and in our example would equal $57,000 ($285,000 * 20%). This abatement is applied in quarters over four years, so each year a customer would pay $14,250 less on their property taxes.
The final incentive available to commercial projects is accelerated depreciation, more specifically, the Modified Accelerated Cost Recovery System (MACRS), which is a method of depreciation where business investments such a solar can be recovered for tax purposes over five years through annual deductions. Although the value of this incentive will depend on one's tax bracket, it is roughly equal to 25% of the post rebate value and in our example, at a 30% federal tax rate it would equal $72,675 as a cash benefit.
So to summarize, a 100 kW system, producing 120,000 kWh annually would break down as follows:
Total Cost - $350,000
Rebate to installer - $65,000
Cost to customer to purchase the system - $285,000
Federal investment tax credit to customer - $85,500 (claimable in year one)
Property tax abatement to customer - $57,000 (applied in quarters over four years)
Accelerated Depreciation to customer - $72,675 (schedule for deduction applied over 5 years)
Net after all incentives - $69,825
If we assume the value of a kilowatt hour to be $.17 factoring out the demand charge that solar is not guaranteed to offset, than 120,000 kWh equals $20,400 worth of electricity annually. That means it will take about 4 years to recoup the solar investment. With guarantees on the equipment that span 25 years, a customer would save $673,944 by going solar over the same period assuming a 3% annual increase in electricity rates. And if the upfront cost is too much to swallow, there is a myriad of loan and leasing options available that will also produce consider savings and allow building owners to go solar for little to zero money out of pocket.
As you may imagine, these incentives are so rich that they will not be available forever. The federal investment tax credit is slated to expire at the end of 2016 and the state rebate is continuously dropping as more people go solar. With so much state and federal support for going solar if you have the ability to do so, now is the time.