(click above to view video on our new YouTube channel)
(click above to view video on our new YouTube channel)
I recently gave a talk for the Montana Sustainable Business Council on the incentives available for energy conservation. I touched on federal and state tax credits, utility based grants and rebates and the state of Montana DEQ Revolving Loan Fund for renewable energy.
In the talk I mentioned that there has been some question as to whether the 30% federal tax credit for renewable energy installation (which is no cap and can be carried forward for multiple years), is to be taken on the gross cost of the system or the net cost (after applied utility grants) of the system.
Turns out it’s either — depending on your system, residential or commercial, according to Kenton D. Swift, PhD, CPA, Associate Professor of Accounting, The University of Montana, School of Business Administration.
He was in the audience at my talk and was kind enough to approach me afterward to further discuss this question. After some research he got back to me via email with the following information:
I wanted to give you a little information about one part of your presentation. When a homeowner installs a solar pv system, and receives a utility rebate, they need to reduce the cost of the system by the utility rebate before calculating the 30% federal tax credit. For instance, if the system costs $13,000 and the utility rebate is $6,000, the credit would be 30% of $7,000 or $2,100. This is actually the way you calculated the credit in your presentation, but you hinted it might be possible to take the 30% credit on the full cost. This seems to be a common confusion.
There are actually two separate 30% federal income tax credits, one for personal residences (IRC Code Sec. 25D), and one for business (IRC Code Sec. 48). Generally, the credits are the same except for this one issue about netting utility rebates. The law requires that the rebate be netted against the cost before calculating the 30% credit when taking the residential credit (IRC Code Sec. 25D). I have attached a recent letter from the IRS chief counsel’s office which describes this netting process. Again, it is the same way you actually did your example at the meeting, which is great.
For the 30% federal BUSINESS credit (IRC Code Sec. 48) there is no specific requirement to net the utility rebate against the cost of the system, before calculating the credit. Actually, there does not seem to be any current law explaining what to do. Thus, I believe that when taking the business credit, most taxpayers take the credit on the full cost of the system, before utility rebates. This is a better result than one can get when calculating the residential credit.
I hope that helps to clarify a confusing issue, which you have handled very well.
Someone at the meeting also asked about the property tax exemption for solar pv systems in Montana. Kent went on to clarify that “such systems are exempted from property taxes for 10 years.”
At SBS Solar we go to the DSIRE database for all of this information and have even been referred to this site by the IRS when we called them about the above questions! This is also the site that Kent relies on for much of his information, or confirmation of information. He notes that he has “checked their information for many states, and it always seems to be up-to-date, when I compare their explanation to state law.”
Feel free to be in touch with SBS Solar on your energy conservation incentive questions, or to get a project started in Montana.
What follows is a great Q&A with a recent install for Bert Lindler and Kristi DuBois:
1. Why did you decide to install solar panels?
When we first bought our home, we realized that the south-facing roof offered an opportunity for solar photovoltaic panels and solar hot water. We want to minimize our environmental impact and installing solar panels is one of the easiest ways to do so.
Kristi feels strongly that every south-facing roof is wasted space that should be generating electricity. Industrial forms of “green” energy like commercial wind and solar farms impact a lot of habitat for wildlife, or in the case of solar farms, replace the habitat completely with solar panels. Rooftop solar units have no effect on natural habitat, so they are a much greener way to meet our energy needs than industrial energy facilities.
We were considering refinancing our home to take advantage of low-interest rates at about the time we were reminded of the subsidies available for installing solar photovoltaic panels. Once we had the roof evaluated for solar power potential and had received a bid for the installation (along with an estimate of the subsidies), we knew we wanted panels.
2. Did you encounter any challenges during the installation process?
The first challenge for us was approval from the homeowners association for our installation. Our installer prepared drawings showing the appearance of the eight panels mounted on our roof. We took to the drawings to our immediate neighbors and discussed our plans. All but one of the neighbors were supportive and the remaining neighbor said that while he didn’t want to look at solar panels on our roof, he understood why we wished to install them and would respect whatever decision the homeowners association reached. The association’s architectural review board approved our request.
The next challenge was a couple of tall non-native trees growing in our yard. We were considering having them removed anyway, but did so promptly after we learned that they would shade the panels. We still have some shading in winter from our aspen trees, but the effects on our power production are minimal. We left the trunk of one of the trees standing as a wildlife snag.
3. How long will it take for your system to pay for itself?
If the price of electricity stays in the range of 10 cents per kilowatt-hour and our photovoltaic system produces 2,289 kilowatt-hours of electricity each year as estimated, the system should pay for our cost of installation in 15 years (the system has a 25-year warranty). If the price of electricity goes up, the recovery period may be much shorter. If the price of electricity goes down, we may never recover the cost of installation.
Our cost was much less than the system’s total cost of $12,629. We received a subsidy of $6,000 from Northwestern Energy for our 2-kilowatt installation and federal (almost S2,000) and state income tax refunds ($1,000).
Our system includes microinverters that convert the DC electricity produced at each panel to AC electricity we can use in our home or return to the grid for use by other Northwestern Energy customers. The microinverters reduce the risk that more than one panel will be affected by shading and are provide real-time monitoring of the power being produced by each panel.
Our account is credited if we produce more electricity than we use (only likely during the summer). This arrangement allows us to receive full benefit of all the power we produce without requiring us to buy a bank of batteries to store power.
We do expect that our home will be easier to sell and may command a higher price because of the panels.
4. How do you see your solar panels contributing/fitting into the larger Missoula effort against climate change?
Our purchase reflects our personal values, greatly influenced by subsidies offered by the power company and federal and state governments. Even though Missoula’s solar energy potential is not as high as in areas with more sun, our community could reduce our environmental impact if more of us took advantage of the subsidies that turn roofs into power plants.
What sort of lessons has the process of installing your own solar panels taught you?
Snow melts quickly off our south-facing roof. We had expected the snow to melt just as quickly off the panels. It doesn’t. The panels, mounted an inch or so above the roof, have cold air beneath them.
We use a pole-mounted plastic snow rake to clear snow from the panels and onto our deck. The deck never used to get shoveled, but it does now.
In general, we were extremely lucky. The cost of solar panels has dropped dramatically in recent years and the cost is still dropping. The installer handled the $6,000 reimbursement from Northwestern Energy so we didn’t have to pay that cost up front. The remaining up-front costs weren’t a problem because we refinanced our home loan when interest rates were at record lows.
The panels were installed on schedule at the agreed-upon cost. Within a week after our panels were operating, Northwestern Energy installed the special meter that gives us credit for the electricity we produce.
During December, our solar panels produced just 18 percent of the electricity we used, but as the days became longer, the panels produced 30 percent of the electricity we used during January and 43 percent during February.
We enjoy having the panels and we’re happy to see them producing more electricity as the days keep getting longer.
Bert Lindler and Kristi DuBois
We are moving. That’s right, SBS-Solar will have a new home by the end of November 2011!
While we are super sad to be leaving our cool office cooperative on S. 4th W. (ho. hum.), we are very excited for our new office at 401 S. Orange St., Suite C on the corner of S. 2nd W. and S. Orange streets. In reality, it is only about 4-blocks from our current spot. (We are in the old Missoulian Angler building.)
The new office will give us parking, great drive-by visibility along Orange Street, easy access to Downtown and Midtown, a large entry/display area, separate offices for each of us and a great conference room with a deck. (can you say 4pm deck meetings in summer….)
A small remodel begins THIS WEEK and we plan to be in there and open by the end of November. In our new space we will have standard retail office hours: Monday-Thursday 10am-5pm and Fridays from 10am-2pm or by appointment.
Check out the changes as you drive by and come for a visit soon.
Over 80% of Montana’s housing stock was built prior to 1980. These homes offer the largest opportunity for Montana to reduce energy consumption through retrofitting and consumer education, as well as a huge opportunity to bolster our local economy by growing the green-collar job sector with verifiers and installers to do this work.
The fact remains that the majority of residents in these 1980 and older homes tend to be first-time home buyers, the elderly, and working-poor. Even when the desire is there, the main sticking point in Montana seems to be the ability for a consumer to cover first-costs on a project. There is a fair amount of assistance out there for those who qualify and are willing to do the work to recover it.
As of late, there has been much debate and confusion over the continuation of certain tax credits, grants and rebates that were implemented during or enhance as part of the American Recovery and Reinvestment Act (ARRA). In many cases, a project must be third-party verified or certified to qualify for some of these rebates or credits. There is good news and bad news:
The bad news is that a few of these options have shrunk back to pre-recession era levels.
The good news is that there is still a lot of money out there for Energy Efficiency and Renewable Energy applications in the residential and commercial sectors.
ENERGY EFFICIENCY TAX CREDIT: There has been an Energy Efficiency tax credit around for a while. It was traditionally a 10% credit, maxing out at $500. For the past couple years this was increased to 30% and $1500 cap. For 2011 we are back to the originally levels of 10% and $500 cap. This article offers a great overview of the information for 2011 as well as eligible projects, mounts and forms to get started, scroll down to point 3 for 2011 info.
RENEWABLE ENERGY TAX CREDIT: The big kicker that keeps on giving is the 30% renewable energy tax credit. It has no monetary cap and is still in place through 2016. This credit can also be carried forward for a few years should you expect a year in the future where it might be more helpful. In addition to the website above, the information at Energy Star is also quite good.
NEW HOME TAX CREDIT: While these credits are for retrofitting to existing buildings, there are great incentives for new construction as well. A credit of $2000 is still available to home builders who build homes (including both site-built and manufactured homes) projected to save at least 50% of the heating and cooling energy of a comparable home that meets the standards of the 2004 International Energy Conservation Code (the 2003 code including the 2004 supplement). A $1000 credit is available to manufactured home producers for models that save 30% or that qualify for the federal Energy Star Homes program.
In most cases a third-party verifier is needed to qualify that the home is indeed projected to save at least 50% over a comparable home. Businesses should have RESNET or BPI certification and the ability to offer a REM/Rate reading. Other incentives are offered through Northwest Energy Star homes and the NAHB Green program.
CHECK LOCALLY: It is also a great idea to see what sort of complimentary tax credits or rebates are offered by your state governments and local utilities. In Montana, the Energy Conservation Installation Credit is a tax credit applied against a taxpayer’s income tax liability. Montana resident individuals can claim the credit for energy conservation investments made to a home or other building. The credit is equal to 25% of expenses, up to a maximum credit of $500. Two or more people may each qualify for the credit, as long as the building in which the investment is made is owned by all of the people claiming the credit.
As well, The Alternative Energy System Credit is a tax credit against income tax liability for the cost of purchasing and installing an energy system in a Montana resident’s principal home that uses: (1) a recognized nonfossil form of energy such as, but not limited to, solar energy, wind energy, solid waste, and organic waste; or (2) a low emission wood or biomass combustion device such as a pellet or wood stove. The credit cannot exceed $500. Two or more people may each qualify for the credit, as long as the building in which the investment is made is owned by all of the people claiming the credit. For further instructions on the alternative energy system credit, and to calculate this credit, see Montana Form ENRG-C.
SOLAR PV GRANT IN MONTANA: As far as utilities go, there Co-Ops and others tend to have different offerings and you’ll have to check with yours for the best information. For much of Montana, Northwestern Energy offers a $6000 grant for Solar PV installations that are at least 2kW in size. The installer must be NABCEP certified for the project to qualify for the grant. Here at SBS both of our installers have the NABCEP certification, so we have a handful of these grants to give away to customers in 2011 and were able to do apply over 10 of these grants to projects in 2010.
MT REVOLVING LOAN FUND FOR RENEWABLES: As well, here in Montana, we have access to the MT DEQ revolving loan fund. This is a 10-year note at 4% for renewable energy implementation. Each project must be at least 80% renewable energy and can have up to 20% energy efficiency in the mix. That would mean on a $10,000 loan a minimum of $8000 would have to go to renewable implementation and up to $2000 for efficiency implementation. We find that at least half of our customers take the time to go through this application as it is well worth their while.
Here is the breakdown on the rebates for a basic 2kW qualifying solar system for a Missoula household with 2-income earners. A system of this size tends to offset 20-30% of the average MT home’s energy use. Coupled with basic energy efficiency measures and small changes in behavior, it is not uncommon to find 35-50% of energy use offset in the end:
$15,000 2kW Solar PV system
-$6,000 NWenergy PV grant
=$9,000 NET COST
-$2,700 30% Federal Tax Credit
-$1,000 MT Alternative Energy System Credit
=$5,300 NEW Net Cost
If this couple also wanted to implement energy efficiency measures and get the MT DEQ loan, this is a plausible breakdown. They could choose to take the loan based on the gross amount of the System or the net cost at the bottom. If they take it on the gross, this couple would end up having much more than the $3500 allocated below for their efficiency work:
$15,000 2kW Solar PV system (including parts, labor, permits, engineering, etc…)
+ $3,500 extra for some energy efficiency work
= $18,500 TOTAL MT DEQ Loan amount
$ 180 approx. monthly payment
In addition to the federal& state tax credits as well as the utility solar grant in the example above, this customer would also qualify for the additional $500 in federal tax credits from the Energy Efficiency tax credit listed above, as well as numerous rebates from Northwestern Energy with a few more here.
Here at Sustainable Building Systems (SBS) we have the needed certifications listed above in order to work with you on your energy efficiency projects. Of course, SBS is not a licensed tax preparer and more information on tax credits and energy efficiency incentives is available at www.dsireusa.org . This summary in no way constitutes guaranteed savings; we recommend consulting an accountant to verify how tax credits apply to you.
If you would like more information of getting started with an energy audit, implementing energy efficiency measures or a renewable energy application, give a call today: 406/541.8410 or visit us at www.SBSlink.com. Here you’ll find access to our Solar Calculator and a basic questionnaire on getting started with SBS.
Remember, the Greenest Energy is the Energy We Don’t Use.
Ahhh… trade shows. Ever notice that trade shows usually happen in the coldest months of the year. Sometimes I wonder if the economy would really slow down in winter if it weren’t for all of the trade show travel. Especially in the building industry. While there certainly could be retrofitting and renewable energy work going on in Montana in, say, February, it is a lot more pleasant on a warm spring day in May (like today). I’ve overheard on more than one occasion, “I’m starting to think it is only the trade show industry that’s making money in renewable energy right now.”
What spawned this post was yet another request for us to display at a trade show. Now, don’t get me wrong. As a born marketer and sales person, I like the opportunity to shameless spout quippy marketing phrases about our company as much as the next marketeer. But I have to ask myself, “when is enough, well, enough?” And more importantly, “what is our/my motivation for participating?” Or, “what to we expect from this event and/or hope to accomplish by attending?” And don’t forget, “how much is this really going to cost us?” Being a softy, I often ponder, “is this good for my community?” Finally, “will there be, could there be, should there be a decent ROI (return on investment) for participating, how am I going to measure that, what is break event???”
ETC… ETC… etc… etc… and so on and so forth.
It is only May and SBS has already participated in 5 trade shows (where we actually set up a display of some sort), 3 or 4 conferences and numerous trainings (as in a half-dozen or more). I feel confident that we’ve passed up at least as many opportunities as we’ve taken.
While the hard part starts with deciding to attend or not, what to bring, how to make the display look better than last time, finding staff to work without going over-time, etc… I really think the most difficult part is after the show.
It does get a little tedious and disheartening when the first half of the day (or even the first full day) of the trade show revolves around the folks who are only looking to sign-up for raffles, scoring for free swag, or who’s kids are looking for candy to put in their free plastic hard hat. Isn’t Halloween in October?
I digress, the hardest part comes after the event. FOLLOW UP CALLS. I am still sitting on a list of calls that need to be made. I did an online survey for the folks who had email (with minimal response). Some of the staff called the folks that they markedly remember having in-depth conversations with – decent warm leads that are turning into a little business. The rest are up to me. (Can I get an intern?)
When it comes down to it, a trade show is never free or just a few hundred dollars for the booth. They are set-up hours and tear-down hours, they are manning the booth hours, they are printing marketing pieces and buying bottle-opener key chains hours, and they are hours of followup calls.
Be sure to assess all of these areas before you commit to your next event. We certainly did and that’s why we’re delighted to be at the Hamilton, Montana Farmer’s Market Energy Fair on May 22nd from 9am-noon.
C’mon down and say hi. We’ll be shamelessly marketeering and you may even score a free bottle-opener key chain.
Hello All…SBS is now officially carbon neutral. We’ve entered into an agreement with Clear Sky Climate Solutions (http://www.clearskyclimatesolutions.com/) to offset SBS’s carbon footprint (51.4MT) based on a full year of utility data and 2009 vehicle info.
This has been accomplished after a solid year of analysis, education and strategy sessions. Our first decision was to determine that as a Green Energy Services business we all felt that we must put our money where our mouth is per se and enact an aggressive sustainability policy for our own operations. At the same time we were hired by The Clark Fork Coalition (http://www.clarkfork.org/) to assist their organization in calculating their carbon footprint and helping them to author an organizational sustainability policy.
The end result is that beginning in 2010 Sustainable Building Systems is committed to carbon neutrality and ongoing reduction efforts. We will be sharing more of the details on this blog and on our website so keep your eyes peeled.
-Jim Roach, Energy Efficiency Technician and Chairman of the SBS Carbon Neutrality Project.
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