|Bellingham's Wood Stone Manufacturing Solar Panel Installation|
A business in Washington may benefit from adding a solar system in many of the same ways that a home-owner benefits, plus there are additional federal tax benefits for a business.
The primary difference between home solar and solar for a business is size and scale. In general, a business uses more electricity and has more roof space available thus the solar system is larger.
When planning for solar, the first question is how much electricity is needed? A business should first reduce its usage of electricity by making cost-effective energy efficiency improvements. The Northwest Energy Efficiency Council is an excellent resource for finding ways to reduce electrical consumption through efficiency as is your local utility.
|UW Seattle Mercer Dormitory Solar Project|
The next question is how much electricity can your site produce? The online calculator PVWatts can be used to begin to answer this and the solar site evaluation from a solar design and installation company will yield a more site specific calculation. How much electricity your rooftop can generate is affected by the direction it faces, the pitch, and the amount of sunny space available.
The price of going solar presented to you by the solar design and installation company will be based upon the solar equipment and the complexity of the installation. Racking for solar on a flat roof is usually higher than it would be for a roof that is tilted.
Solar Incentives for a business
Federal Income Tax Credit
- 30% of the total cost of the solar system comes back to the business as a tax credit based upon the year the system becomes operational when installed between now and 12-31-2019. The percentage is reduced for solar installed after 2019. For systems installed during calendar year 2020, the tax credit is 26%. For systems installed in 2021, it is 22%. It falls to 10% the following year (2022), and from 2023 on, the tax credit is 10% for commercial systems. (It falls to zero for residential systems.)
- Can be carried forward if the credit exceeds tax liability for the year.
- Requires that the business owes sufficient taxes that it can use these benefits.
- Visit the SEIA site to learn more. https://www.seia.org/solar-tax-manual
MACRS Accelerated Depreciation on Federal Income Taxes
Businesses may depreciate 85% of the cost of a solar electric system following the five-year Modified Accelerated Cost Recovery System (MACRS). The five-year depreciation schedule can be found in the most recent version of IRS Publication 946.
When the system size is greater than 12 kW, the system is considered to be commercial in scale, regardless of whether the owner is an individual or business. This incentive is unique to the State of Washington. It pays per kilowatt hour (kWh) based on system size, where the modules are made, and the state budget year in which the system becomes certified to receive the incentive.
Administered by the WSU Energy Program in Olympia, this program is governed by SB 5939 (RCW 82.16.165). Funding for the total program is capped at $110 million and as of 10-9-2018, projections show that the allocations made to date are likely to use up all of the available funds. Below describes the program’s parameters, however, it is unknown if funds will be available to participants whose solar is installed and reported to WSU after January 31, 2019.
- Maximum of $25,000/year based upon the KWH of electricity produced and measured on a Production Meter.
- Incentive is paid annually after June 30 year-end (state budget year) for 8 years or until the 50% of the total system cost has been earned back.
- System must be pre-approved by WSU Energy Office.
- Utility participation in this program is voluntary. Click for a list of participating utilities.
- This incentive program also creates a new category of recipient which is called a “shared commercial” in which 2 or more businesses collaborate to build and pay for solar and share the benefits. RCW 82.16.175 describes the organization, administration and requirements for “shared commercial solar” projects which must be organized and administered by a utility.
- Incentive payment rate is in the chart below.
|Fiscal Year Ends||Base Rate: Residential or Community Solar (per KWH)||Base Rate: Commercial or Shared Commercial Solar (per KWH)||Bonus for Modules (solar panels) Made in WA|
- When more power is generated than the business needs at that moment, the excess power is credited to the business utility account to be used to reduce later bills; account zeroes out once a year on April 30 and a new year starts.
- Due to the larger scale of commercial solar, it is important to work closely with your utility from the outset as the utility may need to make local improvements such as a new transformer to be able to handle the added local power.