Table of contents
1. Overview
2. Definitions
3. Investment Tax Credit (ITC)/Direct Pay
4. LMI 1 and 2
5. Energy Community
6. Domestic Content
7. State incentives
8. Utility incentives
Overview
This is a summary of publicly available resources. Property owners should refer to the resources linked in this document for the status of any incentives mentioned. This summary does not represent tax or financial guidance in any form. Talk to your certified licensed financial experts for more details on how to leverage these programs to improve your finances.
1. Definitions
a. Incentives. Incentives are financial vehicles provided to asset owners from Federal, State, Utility, or other stakeholders that improve the financial returns of investments in solar panels. For Federal incentives, asset owners apply for the incentives on their tax return the year of installation and receive a check from the Federal Government the following year. If the tax credit amount is more than what the asset owner owes the Government in tax liability, then the remainder is rolled over for up to 5 years. The tax credit is calculated on the initial purchase price. The initial purchase price does not include any fees related to loans such as interest, closing costs, or dealer fees.
b. Benefits. Benefits are a non-financial gains property owners receive when installing solar and batteries. Improved ESG ratings, public opinion, and more reliable power are a few benefit examples. A detailed description of benefits is outside the scope of this document.
c. Tax Credit. A financial vehicle the Federal Government uses to return money to asset owners based on the solar and battery installed price and annual tax liability.
d. Direct Pay. The same as a Tax Credit applied to Non-Profit organizations since they do not have a tax liability.
e. Asset owner. The entity that owns the solar and/or battery installation.
For the purpose of this discussion, Real estate is not an asset that is included in these calculations. The real estate owner is a separate topic from the solar and battery asset owner because they are not always the same entity. Property value is not a part of the incentive calculations in this document. In some jurisdictions there is an exemption from increased taxes due to increase property value when solar and/or batteries are installed.
2. Investment Tax Credit (ITC) and Direct Pay Incentive
a. 30% of the total initial purchase price of the equipment and installation.
b. ITC is for For-Profit Corporations. Direct Pay is for Non-Profit Corporations.
c. Period of availability. Facilities placed in service after 12/31/24. Phase-out starts the later of (a) 2032 or (b) when U.S. greenhouse gas emissions from electricity are 25% of 2022 emissions or lower. Tax Mechanism: Investment tax credit.
d. The ITC is sometimes referred to as the Federal Tax Credit (FTC)
e. Resource: Building a Clean Energy Economy, page 28. Link
3. Low to Moderate Income (LMI) Incentive
a. 10% or 20% of the total initial purchase price of the equipment and installation.
b. Asset owners qualify for the LMI incentive when the electricity from their assets is serving citizens in the LMI range for their county.
c. Resource: Building a Clean Energy Economy, page 16. Link
d. Resource: HUD GIS database. Link
e. Resource: Solar For All program funding. Link
4. Energy Community Incentive
a. 10% of the total initial purchase price of the equipment and installation.
b. Asset owners qualify for the Energy Community incentive when they are in a county where fossil fuel production and employment is declining.
c. Resource: Energy community map. Link
d. Resource: Building a Clean Energy Economy, page 14. Link
5. Domestic Content Incentive
a. 10% of the total initial purchase price of the equipment and installation.
b. Asset owners qualify for the Domestic Content incentive when they purchase solar panels and related hardware that has thresholds for content manufactured in the United States.
c. Resource: Building a Clean Energy Economy, page 14. Link.
6. State incentives
a. Some states provide incentives for Solar and Battery installation. A comprehensive list is available through the DSIRE website.
b. Resource: DSIRE database. Link
7. Utility incentives
a. Utility rebate incentives are typically awarded to the asset owner shortly after the solar array goes live on the grid. Going live has several names; Energized, Commissioned, Permission to Operate (PTO).
b. Utilities provide several types of solar incentives. Three examples are: Fixed cost per installation, $/W installed price, and $/kWh for power generated that is above the host property’s consumption (also known as Net Metering/Solar Buy Back/Value of Solar credit).
c. Fixed price example. Austin Energy pays homeowners a fixed price of $2,500 once the solar array on their home is producing power.
d. $/W installed price example. Austin Energy pays for profit companies $0.55/W of the installed price.
e. $/kWh example. Austin Energy pays $0.097 per kWh that a solar array generates over what the property consumes.
Appendix
Image 1. Map of the density of LMI households by County.
Image 2. Table of annual MW capacity for several Federal incentive programs.
Image 3. Example Energy Community Tax Credit Map
