In 2009, the United States federal government converted a 30 percenttax credit for business owners who power their property with solarenergy into a 30 percent treasury grant. What’s the difference? Theproperty owners receive a check reimbursing them for 30 percent of theproject’s cost within 60 days of completing the installation rather than waiting to use the tax credit against taxes they owe once a year.
The “Cash is King” approach worked, as it provided a stronger incentive for property owners to invest in such systems. As The New York Times reports, a property owner who installs a 500-kilowatt (KW) photovoltaic (PV)system on a 100,000-square-foot for $2.2 million would receive $660,000back within that 60-day period. Up to the end of October 2010, the cashincentive had led to 1,118 solar energy installations and helped nearlydoubled business investment in solar energy from $3.4 billion to $6.7billion between 2008 and 2010.
But when the clock strikes midnight on New Year’s Eve, the party is over.
Congress is unlikely to extend the treasury grant option and,accordingly, it will revert back to a tax credit in 2011 and remain that way until 2016. This has left owners of commercial buildings scrambling to begin projects before the new year in order to take advantage of the cash offer. So many projects have sprung up recently that there aresimply not enough of some solar energy system supplies to covereveryone’s needs.
Jamie Hahn, managing director of Solis Partners — a New Jersey-based solar project developer — says many manufacturing companies are havingtrouble keeping up with material demand. Specifically, PV panels andsystem inverters are on back order. Companies that don’t get to thecurrent supply in time could be forced to wait as long as eight to 12weeks for new supplies to arrive, far too late to take advantage of the treasury grant.
When the tax credit option returns, solar industry experts expect asharp decrease in solar business installations. Most of the systemsinstalled after the deadline will be by way of power purchasingagreements (PPAs), but even those are not as enticing as the treasurygrant that makes it feasible for companies to outright own the systemthey install. Under a PPA, the solar installer owns and operates thesystem, and consequently receives all the tax credit and subsidy perksthat come along with it.
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