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What are the economics of solar today?

The state has launched a new program, NY Sun Initiative, that makes investment in solar power more beneficial than ever before.

The economics of have never been better for site owners or investors to install a solar electric (photovoltaic) system in New York!

Paid for out of a tiny sliver of each consumer’s monthly electric bill, New York State’s incentives will often cover 25 to 30% of the installation costs. The state has programs for both smaller, residential-scale systems (under 50 kilowatts capacity) and for larger, commercial-scale systems (above 50 kilowatts).

Federal tax incentives include an Investment Tax Credit (at 30%) and a five year depreciation schedule, that combine to reduce the present value of after tax cash flow by 50% to 53%.  In short, adding state rebate or performance payment incentives to the federal tax credit and depreciation incentives yields as much as 70% of the investor’s return.

Of course, the PV system will produce electricity that offsets energy the building owner previously bought from the utility.  Using the solar electricity from your roof or parking lot means you avoid the risk of the price escalation from the utility for 20 years or longer.

For organizations that have a tax appetite and access to larger areas with unobstructed sun, the investor’s internal rate of return on a PV power plant can be quite healthy.

Especially in the down-state areas, both grid congestion and higher electric rates predominate. In short, the lower Hudson Valley and New York City metro area, where we live and work precisely, is particularly benefited by adding new generation on the customer’s side of the meter.

Energy that comes off the roof goes right into the building’s service panel and lowers the power that buildings needs to import via the utility meter from the grid. As it happens, peak power demands in mid-afternoon coincide with peak solar electric output in most installations.  When the grid most needs you to curb your demand, your PV panels are most productive.

From New York State’s perspective, however, the total amount of PV installed has lagged behind. For these reasons, the state has launched a new program, NY Sun Initiative, in 2012.

NY Sun Initiative has several very attractive features, starting with it’s effort to bring together and expand existing programs administered by the New York State Energy Research and Development Authority (NYSERDA), Long Island Power Authority (LIPA), and the New York Power Authority (NYPA).

In short, the Governor’s goal is to ensure a coordinated, well-funded solar energy expansion plan, by making three key changes: (1) expanding the state and local tax benefits, (2) funding new, longer term incentives available, and (3) improving coordination between NYSERDA, NYPA, and LIPA to reduce customer confusion about the incentives and how to access them.

In August 2012 Governor Cuomo signed new legislation as part of the NY Sun Initiative with several key tax provisions that go into effect January 1, 2013.

  • Statewide Tax Credits for Leased Solar Systems: The law provides statewide tax credits for homeowners who obtain solar equipment through a lease or a power purchase agreement, where the agreement spans at least ten years. The tax credit would be available for up to 14 years with a maximum of $5,000 for all years.
  • Sales Tax Exemptions on Commercial Solar Systems: The law exempts the sale and installation of commercial solar energy systems equipment from sales taxes, and allows municipalities and cities to exclude these costs from local sales tax, lowering the cost by 4 to 8%, depending on location.
  • New York City Real Property Tax Law Abatement: The law extends the property tax abatement available to solar energy generating systems in New York City through 2013 and 2014. This extension will help mitigate the cost of installing solar installations in the City.

During 2012, the state’s energy agencies, led by NYSERDA, announced significant new funding allocation for solar power.

  • For small to medium size systems (under 50kW): the state has $40 million available in an open enrollment, first-come-first-served basis. Owners are eligible for a $1.50 per watt grant (e.g. under NYSERDA PON 2112).
  • For larger and aggregated systems (50 kW or larger): a Statewide competitive bidding, performance-based program is funded by NYSERDA at approximately $70 million annually (outside of Long Island) includes a geographically targeted offering focusing on businesses, colleges and universities, and other large buildings located in New York City, Westchester and the lower Hudson Valley (e.g. under NYSERDA PON 2589).

The state’s investment does not stop there! About half the cost of solar system material stems from the installation and components (such as inverters, racking, etc) other than the solar modules themselves. NY Sun also earmarks new funding for innovation and cost reduction around the balance of system components.

The NY Sun BOS Initiative asks NYSERDA and NYPA to collaborate, providing at least $40 million to promote activities that will reduce the overall installed cost of PV. CUNY and the PV Manufacturing Consortium have already done good word on reducing the cost of balance of system. This funding will help extend and expand that work.

All in all, the economics of investing in solar power have never been rosier in New York .

Notes about PV system sizes (what is small versus large?): A typical single-family home system is often small, such as 5 kW which will produce about 540 kilowatt-hours per month or the equivalent of a monthly electric bill of about $120 (at ConEd’s current residential rates in Westchester). A 50 kW system typically produces just over 5,400 kilowatt-hours per month, or the equivalent of a monthly electric bill of about $2,000 (at ConEd’s current commercial rates). For these larger systems, the state pays the installation’s owner a set price for each kilowatt-hour actually produced for a 3-year period, known as a performance payment, rather than a grant per watt installed.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Leo Wiegman October 06, 2012 at 04:26 PM
Just in from Herb Oringel, chair of the Northern Westchester Energy Action Council (a non-profit made up of 15 municipalities): http://www.nweac.org/2012/10/05/nweac-municipal-solar-buyers-group/ On Wednesday, October 3 at Somers Town Hall most of the 15 Municipalities of NWEAC were joined by Ted Jenkins (GSF) and his team to describe the scope and intent of our innovative Municipal Solar Buyers Group....
Ed Robin October 07, 2012 at 12:42 PM
Great solar article highlighting the incentives for home owners EAR Consulting Associates

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