Solar PV System technology has been around since the 1950’s, but there is no better time to adopt solar for commercial and residential properties than now. And here are the top 5 reasons why.
1. The Tax Credit is Decreasing From 26% To 22%
Since the beginning of the solar market in the U.S., one of the biggest incentives for solar adoption has been the Solar Investment Tax Credit (ITC). The tax credit currently stands at 26%. The credit has been at 30% since 2005. This year, the tax credit decreased to 26% and is now on a downward slope. In 2021, it will decrease to 22%. Then finally in 2022, the tax credit will plateau at 10% for commercial properties and will completely disappear for residential properties.
To qualify for the 26% tax credit now, commercial customers only need to make a 5% deposit before the end of 2020. See more information on the IRS website .
See below for an example of how this tax credit decrease will affect the savings on a solar project:
Example Project Cost: $1,000,000
Tax Credit at 26% in the year 2020: $260,000
Tax Credit at 22% in the year 2021: $220,000
Loss in Savings: $40,000
Tax Credit at 10% in the year 2022: $100,000
Loss in Savings: $160,000
2. Bonus Depreciation is Decreasing in 2023
Along with the Federal Tax Credit, the IRS is allowing for bonus depreciation for Solar PV systems. In a nutshell, this means that companies can expense 100% of the taxable basis of the solar property from their taxable income (a tax deduction) in the year it is placed in service.
Unfortunately, this too has a time limit. Starting January 1, 2023, companies will only be able to expense 80% of the taxable basis. The remaining amount would have to be depreciation- based on the IRS schedule over a period of five years.
The 100% bonus depreciation along with the Tax Credit give companies a huge financial incentive to take advantage of solar this year.
3. Incentives Are Running Out
Although many states have incentives for companies to adopt solar PV systems either through a state-run program or through utility companies, there is typically a funding cap. This means that incentives will only be available as long as there are funds available. In states such as California, these types of incentives have run dry leaving many companies without the additional benefit. So if your company is in a state or region that has an incentive for solar, it is best to take advantage of it as soon as possible before the funds run out.
An example of a state that currently has incentives but is close to running out is New York. Their incentive for upstate commercial solar projects is has almost reached its funding cap.
4. Decrease in Utility Bills
One of the biggest considerations companies have had this tumultuous year is how to reduce operating costs. One of the biggest ways is by reducing monthly utility bills. As electricity rates have been steadily increasing over the years, a solar photovoltaic system can help reduce a facility’s energy consumption from the grid. Using sustainable and renewable energy helps reduce a monthly utility bill.
5. Reduce environmental impact
At Big Shine Energy, our biggest drive is to approach zero carbon emissions. That’s how our Approaching Zero campaign came about. One way to reduce carbon emissions is through renewable energy – using solar photovoltaic systems in as many commercial and residential properties as possible.
As we see an increase in natural disasters resulting from climate change, it is important for companies to consider how to reduce their environmental impact. Solar PV systems have increased in efficiency in recent years and they allow companies to considerably reduce their carbon footprint and contribute to the vision of a world powered by renewable energy.
The year 2020 is pivotal regarding the solar photovoltaic market. A lot of the incentives are dependent on time, and the expiration dates are in the horizon. As such, companies who have considered adopting the sustainable technology have to seriously consider it in the current year. At Big Shine Energy, we provide a full turnkey solution for solar PV system installations including a free solar audit, incentive research and application, and proposal compilation.