Solar Integration
The most effective solar power systems are the ones designed specifically for you and your business. Based on your energy needs and the suitability of your location solar power integration can offer you the ability to significantly offset your energy costs.
To better understand some of the factors that will determine solar’s viability at your location we will cover some of the basic elements that allow solar to work; including the components that make up a solar array.
How It Works
1
Sunlight is collected by the solar modules and turned into DC electrical current.
2
The DC current is then transported to an Inverter. The inverter converts the DC current to AC current making the power compatible with the electricity grid. The AC power is then fed into the facility’s main electrical service panel.
3
Once the electricity is fed into the main service panel it will flow to wherever it is needed. When the system produces more power that what is required by the facility it will be fed back into the electricity grid. This is called Net Energy Metering (NEM).
4
NEM is a system that allows individual customers to use the utility grid system like a battery to “bank” kW hours when they are not being used by the customer; the customer’s meter will run backwards building a credit with the utility.
When the facility starts drawing again from the utility they will first use that credit prior to incurring any new charges. NEM is widely used and in some cases it is mandated by state government, in fact, there are only three states in the US do not have some form of NEM
ATTENTION BUSINESS OWNERS & OPERATORS
Solar arrays installed in 2011 are eligible for 100% depreciation in the first year!
Incentives
Currently there are three main incentives for solar that can be found at both the State and Federal level; combined they can offset the investment in solar by more than 50%.
State
The California solar incentive is based on the size of your system and is issued on a first come first serve basis. For most installations the incentive is distributed in monthly payments over a five year period.
Federal
Currently the most effective incentive available is a 30% tax credit or grant that is available for all commercial customers in the US. Through this program companies installing solar can receive a tax credit or grant payment that is equal to 30% of the installation cost.
In addition to the tax credit/grant commercial customers also have the ability to use accelerated depreciation to write off the cost of the installation. The IRS has categorized solar has having a 5 year useable life (when in fact it is 25 years); this allows businesses to use a 5 year accelerated depreciation (MACRS)on the installation.
Tax Implications
DL Energy always recommends that our customers discuss their solar installation and its tax implications with their tax professional prior to committing to an installation. However there are some rules that apply to most business customers.
Federal Grant – the federal grant is considered non-taxable income for both federal and California state tax purposes.
State Incentives – at the present time it is uncertain as to whether or not state incentives can be considered taxable income. However there are indications that they are not be considered taxable.
Carry Forward – if for whatever reason you are unable to use all of the available tax credits in the first year you can use them the following tax year because they carry forward indefinitely.