There may not, for a long time to come, be a better time to install photovoltaic equipment on your home. Specific federal and state incentives now exist – but will expire – and interest rates are low. Plus, Thurston Energy, a local nonprofit, has introduced a program they call “Solarize Thurston.” Let’s take a look at the financial incentives which make now a great time to install solar on your home. Then we’ll describe the Solarize Thurston approach.
The specific financial incentives in place now, which make the installation of solar worthy of serious consideration are:
- Sales tax exemption
- 30% Federal tax credit
- Washington state production incentive
- Net metering
There currently exists in Washington a Renewable Energy Sales and Use Tax Exemption. Through June 30, 2013, purchases of machinery and equipment that will be used directly in a facility that generates no more than ten kilowatts of electricity using solar energy are exempt from Washington State sales/use tax. Click here for more details about this exemption. It’s under the heading “Machinery & Equipment Used to Generate Electricity Using Renewable Energy – Sales/Use Tax Exemption”.
The 30% Residential Renewable Energy Tax Credit expires at the end of Tax Year 2016. You 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. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year. The excess credit may be carried forward until 2016.
“Qualified expenditures” include labor costs for on-site preparation, assembly or original system installation, and for wiring to interconnect a system to the home.
And remember, this is a tax credit, not a tax deduction. A tax credit lowers your tax bill dollar for dollar. A deduction only shaves money off your taxable income, so the value depends on your tax bracket. A tax credit is usually much more desirable than a tax deduction.
You with all this, so far? Good. Now we come to the Washington Renewable Energy Production Incentives. This was set up to both encourage the installation of equipment to generate power, plus help to grow the capacity of solar manufacturing right here in our state. With this incentive, your electrical provider, Puget Sound Energy, will pay you for the power your system generates, through June 30, 2020. How much will PSE pay? It depends on where your system’s solar panel and inverter were manufactured.
If your solar panels and inverter are both manufactured in Washington, you will receive from PSE a production credit of $0.54 per kWH, to a maximum of $5000 per year.
If one component – the solar panels, for example – are manufactured in Washington state, but the other component is not, you will receive from PSE a production credit of $0.36/kWh (again, a $5000 annual maximum).
If both your panels and your inverter are from out-of-state, your production credit is $0.15/kWh ($5000/year maximum).
So, you can see there’s a significant incentive to buy from in-state. There are presently two manufacturers in-state and a third is coming online soon.
Why would PSE participate? Because the state’s utilities earn a tax credit equal to the cost of the production incentive payments they make. Plus, there are regulations which oblige a certain portion of the electricity generated by the utilities to be from renewable sources. Installation of solar generation equipment on private homes help to achieve these objectives.
Special notice regarding the tax information in this piece: Although efforts have been taken to provide accurate information, it is up to you, the individual taxpayer, to confirm the tax credit, tax exemption and production incentives apply to you and the system you choose to install.
Now we come to the gift that keeps giving: Net metering. You’re probably already familiar with this. It’s the concept some folks describe as “running your electrical meter backwards.” If you install a photovoltaic system on your home, a second meter will be installed. This meter will register the amount of electricity your system generates. The electricity produced by your system is first used to offset electricity provided by the utility to you; any excess kilowatt-hours from a billing period will be credited equally to your PSE meter. This is credited to your bill at the retail rate; granted by utility at the end of 12-month billing period.
Some limits apply. But the size of the typical residential system will keep you below the limit on the excess production PSE will be obliged to purchase from you.
What is the combined effect of these incentives? Depending on your tax situation and the size of the system you install, you could receive close to half the cost of your system back to you, by the end of the first year. By the end of the first year.
If you’ve been generally interested in installing solar power on your home, these combined incentives have probably really got your interest.
What’s a typical cost for solar equipment? As you can probably guess, it depends on the installation and the size of the system. A modest-sized system is 4kW in size. The Solarize Washington experience has been that systems of that size cost about $16,000 before the federal tax credit.
Now, what’s this “Solarize Thurston” program all about?
Beginning in Portland, a couple of years back, and then spreading to Seattle, an concept grew up around the idea of taking a “group approach” to installing solar equipment. Put simply, individual homeowners will come together and seek the best deal from a single installer which will produce economies of scale. Discounts through this group approach have generally run from 15% to 25%.
This concept has been championed by the non-profit Northwest SEED (Sustainable Energy for Economic Development). In our state, this effort was named “Solarize Washington” and has already been used in several Seattle area neighborhoods to allow individual homeowners to come together, get the best deal, and contract individually with an installer to put solar equipment on their homes.
Here in Thurston County, the “Solarize Thurston” program is led by Thurston Energy. You may know Thurston Energy as the organization that helps individual homeowners and companies achieve greater energy efficiency in existing and new buildings. The combined expertise of Thurston Energy and the knowledgebase of Northwest SEED will be used to help groups of homeowners to get the best deal on solar equipment and to get that equipment installed quick, to take advantage of all the incentives described in the first half of this (very lengthy) piece.
Here’s how Solarize Thurston could work, right here in the Steamboat area:
First, some folks will need to volunteer. Two groups need to be created. One group is the “communication committee” and the other is the “contractor selection committee”. It’s okay for some of the same people to be on both committees, but we don’t want people to burn out, so it’s better to have more volunteers, than fewer.
It’s the responsibility of the communication committee to work with Thurston Energy to get the word out to local homeowners about this opportunity. This doesn’t need to be a big committee. Maybe three to five people. Thurston Energy can host informational meetings and provide materials, but it’s up to the communication committee to schedule meetings and talk this up with existing groups (the Griffin Foundation, the Griffin PTO, Prosperity Grange, neighborhood groups, church groups, staff a table outside the Island Market, take over a couple of tables at Character’s Corner, etc.).
The goal of the communication committee is to gauge individual homeowner interest and to build a mailing list of those who might be interested – if the price is right – in installing solar equipment on their homes within the next few months.
Within the next few months?! That’s right; the beauty of the Solarize Thurston concept is that it’s possible to compress the kind of work it might take an individual up to 2 years to accomplish, in just a few short months.
While the communication committee is doing their work, the contractor selection committee springs into action. This committee, comprised of only three to five members, is responsible for working with Thurston Energy and their partner, Northwest SEED, to create a Request for Proposal (RFP) for solar equipment and installation. The objective will be to obtain competitive bids at a price per watt, including any permitting and other fees and including certain variations. These variations might include different prices for equipment manufactured in-state and out-of-state, installation of equipment on rooftops or ground-mounted, increased costs of installing on difficult rooftops (steep roofs, for example), etc.
With assistance from Thurston Energy and Northwest SEED, the contractor selection committee will – well, like the name of the committee says – actually select an installer.
At that point, a contract will be available for interested homeowners to use. The communication committee re-enters the picture. It’s time to gather interested homeowners together to meet the selected installer and to hear and ask questions about the RFP and what the selected installer is actually offering.
A no-obligation site evaluation will be conducted by the installer selected by the contractor selection committee. A design for the installation will be completed, based on the site assessment. The homeowner is still under no obligation to purchase the system. On the other hand, should the homeowner decide to buy, the final contract is between the homeowner and the installer. The actual scheduling of installations in the area and the purchase of all the needed equipment will be handled by the installer for all participating homeowners in the Steamboat area, at the same time.
And now we come to one more financial incentive. Thurston Energy has made a deal with the local Generations Credit Union to provide 3% financing over seven years, for installation of solar equipment under the Solarize Thurston program. Called “Title 9 financing,” This isn’t tied to home equity and it’s not a home equity line of credit. It’s available for a $46 fee. Generations CU will require homeowners to undergo an energy assessment of their home. Many of you may have already had such an assessment, through Thurston Energy or some other provider. These currently cost $300-$350 to complete.
The offer of 3% financing from Generations CU presently expires on June 30.
Financing through Generations CU is simply an option available for those who wish to take advantage of it. Homeowners do not have to finance their purchase through Generations CU to participate in Solarize Thurston.
What’s your next step?
If you have ever been interested in installing solar on your home, please re-read this article, visit the web pages to which it is linked, and consider whether this might possibly be something of interest to you.
Are you interested in serving on either the communication or the contractor selection committee? If so, please contact Mark Messinger, by email.
Are you interested in installing solar equipment on your home, as part of the Solarize Thurston project? Add your contact information for the “Steamboat neighborhood” group, to the Solarize Thurston web page at http://solarizethurston.org/sign-up-today/. Your contact information will be kept secure and you are under no obligation to install solar equipment, by indicating your interest.
If neighbors are able to put together the communication and contractor selection committees, it will be possible to host informational meetings, led by representatives of Thurston Energy, to describe the Solarize Thurston approach and answer questions. But, if those of us living in this area cannot staff these two committees, we will not participate in the Solarize Thurston program and homeowners will be left to their own devices to install solar equipment on their homes.