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
In August 2022, Congress passed the Inflation Reduction Act which includes an extension to the federal income tax credit (ITC) and raises it back to 30% for installations under 1 Megawatt done between 2022-2032. A business that has a tax liability upon filing can deduct 30% of the cost of solar energy system from its business taxes. The installation of the system must be complete during the tax year.
It also includes a stand-alone ITC for batteries. This is expected to be a great incentive for solar + storage and will likely be a boost for microgrids.
If the system is over 1 MG, it can still qualify for 30% for projects meeting prevailing wages registered apprenticeship requirements.
Thirty percent for solar and batteries can be combined with one or more adders:
- 10 % adder for meeting certain domestic content requirements for steel, iron, or other manufactured products
- 10% adder for location in “Energy Community”, for ex. located on a brownfield or a closed mine or power plant, or community with large population depending for employment or taxes from mining or fuel-processing for employment (guidance still needed and likely to be very restrictive)
- Location in Low or Middle Income (LMI) – limited to 1.8 GW/year for 2023-2024 (additional information will be issued by the Department of the Treasury)
- 10% for location in low-income community or Tribal land AND
- 20% for projects that are part of a qualified low-income residential building project or a qualified low-income economic benefit project
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.
Washington State Sales and Use Tax Exemptions
Beginning January 1, 2020, through December 31, 2029, the purchaser of eligible machinery and equipment for solar energy systems greater than 100 kW but no more than 500 kW may be eligible for a tax exemption, in the form of a remittance, in an amount equal to 50% of the state and local sales and use tax paid, if the Department of Labor and Industries (L&I) certifies that the project meets certain labor and procurement standards and the purchaser provides certain documentation.
Beginning July 1, 2019, through December 31, 2029, the purchaser of eligible machinery and equipment for solar energy systems smaller than 100 kW in size is entitled to an exemption Senate in an amount equal to 100% of the state and local sales and use tax paid if the purchaser meets certain requirements. Click to the bill report as passed during the 2019 legislative session.
Beginning June 2022, through June, 2032, persons constructing solar canopies of at least 50,000 square feet placed on large-scale commercial parking lots at qualifying commercial centers can apply for sales and use tax deferral. More information. Solar Canopies Application for Sales and Use Tax Deferral - RCW 82.90
- 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.
Utilities Solar Incentive Programs
A number of utilities have solar incentives for their business or residential customers. Check with your local utility about what support might be available.
Grants and other opportunities for businesses, public buildings and more
Check our Grant and Funding Opportunities page for the latest opportunities.
Washington State Department of Commerce
Businesses located in rural areas can apply for Commerce’s Rural Clean Energy grants. Solar is an eligible technology but solar without storage will be considered Tier 2
To learn more about current and upcoming grant programs, click to be taken to Commerce's Energy Efficiency & Solar Grants page
Community Solar Expansion program
Business can participate in the Community Solar Expansion program which provides $100 M in solar incentive payments but the benefits of projects must flow to low-income individuals and/or low-income service providers. Learn more.
United States Department of Energy
The Solar Energy Technologies Office (SETO) funds early-stage research and development in three technology areas: photovoltaics (PV), concentrating solar-thermal power (CSP), and systems integration with the goal of improving the affordability, reliability, and domestic benefit of solar technologies on the grid. Click to learn more about current and upcoming projects.
The mission of the Office of Energy Efficiency & Renewable Energy (EERE) is to create and sustain American leadership in the transition to a global clean energy economy. Its vision is a strong and prosperous America powered by clean, affordable, and secure energy. Click to learn more about current and upcoming projects.
Rural Energy for America Program
The United States Department of Agriculture Rural Development is a federal agency tasked with administering the Rural Energy for America Program (REAP). REAP provides grants (25% of project cost) and loan guarantees for renewable energy (a majority of which are solar installations) and energy efficiency projects undertaken by businesses. Next round of applications due on March 31 and October 31, 2023. Click to be taken to the REAP website for more information.
On January 28, 2023, Solar Washington hosted a webinar with Rural Development's Mica McLean who explained the REAP application process and grant criteria. Listen to the webinar.
- In partnership with the USDA, Spark Northwest works to assist rural communities in Washington with renewable energy development.
- The Pierce (County) Conservation District also has a REAP assistance program in partnership with Spark Northwest.
- Along with Pierce Conservation District, the Snohomish Conservation District has developed a free state-wide assistance program for farmers and rural business owners (also in partnership with Spark Northwest).