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Solarize your Business

Paul Kando

When it comes to converting to solar electricity, businesses have economic advantages not available to home owners. Not only can they take advantage of net metering and the still available 30% federal tax credit (which expires on December 31, 2016), but they can also depreciate the solar system as a business investment. Until November 30, businesses in central Lincoln County can also take advantage of Solarize Central Lincoln County, a partnership between the Midcoast Green Collaborative and ReVision Energy, and share a bulk purchase discount with all others who install solar systems in the area.

Solar Array on Damriscotta Hardware's Roof
photo credit: Google Maps

For example a 100 kW roof mounted system, generating 120,000 kWh of energy per year, installed under the Solarize CLC program, may cost $3.30 per watt, or $330,000, less a $20,000 discount based on system size. There is an additional Solarize discount of $24,000 to $48,000, depending on the collectively installed kilowattage by the community. So the up-front price is reduced to between $286,000 and $262,000. The 30% federal tax credit reduces the net amount still further to between $200,200 and $183,400.

Once installed, the solar system of a business can be depreciated under the IRS’ Modified Accelerated Cost Recovery System (MACRS). This translates to a 10% tax deduction in the first year, 32% in the second, 19.2% in the third, 11.52% each in the fourth and fifth and 5.76% in the sixth year after the installation - a total of 90%. This depreciation, in effect, reduces, over 6 years, the net cost of the $330,000 solar system to between $20,020 and $18,340.

So much for the capital investment. What about the electric utility bill? A typical commercial electric rate may be a combination of 6.9¢/kWh power charge plus 5.4¢/kWh distribution and delivery charge - a total of 12.3¢/kWh. Under the rules of net metering, the power generated by the solar panel first satisfies the business’ concurrent needs; i.e. all the power used during the business day, during daylight hours. This power will cost nothing. Any excess power is fed into the power-grid for credit, to be claimed at any time within a calendar year, paying only the utility’s (5.4¢/kWh) distribution and delivery charge. A solarized business will only pay the full rate (12.3¢/kWh) for power purchased after all net metering credits have been exhausted.

Two thirds of solar power is generated between May and September. This is when excess power feeds back into the grid, ready to be drawn on during the remaining months. With a properly sized solar system a business will be unlikely to pay full price for power again.

Solar panels are clearly a good business investment, given the Solarize discounts (expiring November 30), and the 30% federal tax credit (set to expire at the end of 2016). I must also mention the environmental benefits. A 100kW PV system will reduce the carbon footprint of a business by about 52.91 tons per year - the exact amount dependent on the source of the grid power displaced. If there ever was a time for action, this is it.