Solect - Clean Energy...Today

Federal Solar Incentives – Incentives at the federal, state and local level enable customers to reduce the cost of going solar by as much as 50%. Typically, these results are achieved through a mix of government tax incentives, Solar Renewable Energy Certificates (SREC) and electric cost avoidance.  Property owners can achieve a 2-5 year simple payback and then benefit from “free” electricity for the next 15 – 20 years.  This article explains the current federal financial incentives for investing in solar energy projects.

Investment Tax Credit (ITC) / Tax Grant

Residents and businesses receive a tax credit worth 30 percent (30%) of the cost of buying and installing a photovoltaic (PV) solar system. This legislation is part of the Energy Policy Act of 2005 (Section 1336- 1337).

The latest renewable energy tax credit went into effect on January 1, 2009. Commercial and residential property owners can reduce their tax burden by 30% of the entire cost of the solar power system with no cap on the amount.

In addition, the American Recovery and Reinvestment Act of 2009 (H.R. 1), enacted in February 2009, created a renewable energy grant program that will be administered by the U.S. Department of Treasury. This cash grant may be taken in lieu of the federal business energy investment tax credit (ITC). In July 2009, the Department of Treasury issued documents detailing guidelines for the grants, terms and conditions and a sample application. There is an online application process, and applications are currently being accepted.  The US Department of Treasury program web site has additional information, including answers to frequently asked questions. And, as always, see your tax advisor to determine the applicability to your specific circumstances.

Federal Modified Accelerated Cost-Recovery System (MACRS)

Under the Modified Accelerated Cost-Recovery System (MACRS), 26 USC § 168, businesses can recover investments in solar and wind and geothermal property through depreciation deductions. The MACRS establishes a set of class lives for various types of property, ranging from three (3) to fifty (50) years, over which the property may be depreciated. For solar, wind and geothermal property placed in service after 1986, the current MACRS lifetime class is five (5) years.

Solar power has never been more economical and the Federal government has taken a policy stance by providing incentives designed to reduce costs and grow the renewable energy portfolio in the United States.



Solar PV Ownership Benefits – There is a bit of a “perfect storm” brewing, in a good way, in the solar photovoltaic world.  The industry itself is enjoying a 23% annual growth rate.  More importantly, three key areas are coming together to increase the adoption rate for business owners: 1) financial incentives and government policies have never been stronger, 2) solar PV panel pricing is extremely attractive and 3) public awareness and support for renewable energy systems continues to grow.

The list below highlights some specific benefits which may create a strong case for initially researching and ultimately purchasing and installing a solar PV energy system.

• Financial Incentives – Federal and State incentive programs result in competitive development costs and timely payback periods.  A 30% Income Tax Credit/Grant, accelerated 5 year depreciation, and Ten Year Solar Renewable Energy Certificates (SREC) have stimulated solar investment.  Competent solar systems developers will model and assist customers with incentives.

• Reduced and predictable energy costs – Customers can control their energy costs with guaranteed cost savings generated through a solar energy system.  No longer will they have to be at the mercy of ever increasing and fluctuating electricity costs from utilities.

• Low maintenance and longevity – The performance warranties of quality panels and electrical components provide 25+ years of dependable low maintenance electricity.  These systems are built to produce and last, with minimal moving parts and maintenance.

• Green Marketing – Customers can reduce their carbon footprint and attract environmentally conscious customers who care about contributing to a cleaner world.  Professional solar system developers will assist with press releases, web articles, marketing events, etc… The average 100 KW solar system offsets the carbon emission equivalent of :
  • planting 20 acres of trees, and
  • driving 90,000 miles every year for 30 years, and
  • 660 tons of CO2 emissions over 25 years

The timing is perfect for businesses to seriously consider solar PV’s financial and environmental advantages.  Professional solar system developers will first educate and then consult, providing guidance throughout the process for prospective customers.

Power Purchase Agreements (PPA) –  What, Why & When !

Definition – A contractual commitment to purchase electric power for a fixed period time at an agreed upon rate.

Power purchase agreements have been around for quite a long time – power generators have used this approach to secure long term purchase agreements with utility companies who use the power to distribute to their customers.  These contract vehicles eventually evolved as a tool for government entities to purchase distributed power to help take advantage of the government tax incentives available in the private market. Today, these same agreements are enabling commercial businesses to install distributed solar facilities across the country.  These contracts have proved to be an effective way for businesses to have solar energy system installed today with no capital upfront costs while still helping to contribute to a clean energy society.  Solect is helping to further the availability of solar energy through their Solect Power Purchase Agreement.

Going Solar with a Solect Power Purchase Agreement (SPPA)       

Solect’s Power Purchase Agreement, or SPPA, is typically a 10 – 20 year agreement to purchase power from Solect at predictable and competitive rates.  Solect works with clients to install and maintain site-based solar energy systems by utilizing existing rooftop space.  A Solect PPA, combined with today’s favorable incentives, enables clients to continue focusing their capital on the core business of optimizing their properties and enhancing revenues while contributing to the clean energy movement.

Solect PPA Benefits

• No Ownership Risk/Responsibility
• Predictable Energy Costs
• Maintenance Free
• Streamlined Approval Process
• Green Marketing Benefits

Steps To A Solect Solar PPA

The following steps outline the process to a Solect Power Purchase Agreement.

• Feasibility Study – Solect performs a survey of the client’s electrical consumption, roof condition, orientation, structural capacity and electrical service equipment. A summary determination is made with a recommendation for a system size and location.

• Preliminary Design - Solect designs the approximate photovoltaic system size along with a roof plan showing panel locations, a schematic of the solar collection and distribution system along with a draft PPA.

• Project Approval – The client provides Solect with a “letter of intent” indicating their commitment to proceed. Solect outlines the overall project timeline and identifies the required approval process.  The final version of the PPA and Site Access agreements are presented to the client by Solect indicating the exact rates, terms and conditions.
• Final Design – Solect’s engineers analyze the facility’s structural and electrical capacities in greater detail and engineers the final drawings and specifications for permits and installation.
• Permitting and Construction – All permits are obtained by Solect’s project engineers. The client is provided with a final schedule and Solect begins construction.  Daily oversight of all construction activities including a high level of quality assurance is provided by Solect’s project managers.

• Commissioning – Solect performs final quality control testing of all components and obtains final inspections by the engineers and local authorities. The system is then approved by the “grid supplier” for interconnection and the system is turned on and producing solar electricity for the client.

Power Purchase Agreements play a vital role in the solar energy adoption cycle and may be a fit for you.  Professional solar project developers, such as Solect, can help customers with this analysis and match their specific requirements to the most suited ownership model.



SRECs….background & financial benefits!!   – Solar Renewable Energy Certificates (SRECs) are a tradable, non-tangible energy commodities in the United States that represent proof that 1 megawatt-hour (MWh) of electricity was generated from an eligible renewable energy resource.  SRECs became available in Massachusetts due to the creation of a Renewable Portfolio Standard (RPS) – see below – with a specific allocation for solar energy. This program provides a means for SRECs to be created on behalf of solar energy system owners and sold to Massachusetts electric suppliers to meet the solar RPS requirement. Electric suppliers are required to use the SREC program to show compliance with this part of the state’s Renewable Portfolio Standard.

The SREC is separate from the value of the electricity itself and permits the owner or purchaser to claim the benefits of clean energy production by effectively subsidizing the cost of the installed system. SRECs are designed to provide individuals and/or businesses with an economic incentive to invest in solar electric systems. They represent the renewable attributes from a solar facility, bundled in minimum denominations of one (1) megawatt hour (MWh) of production. The additional income received from selling the solar certificates increases the economic value of an investment. Instead of up-front subsidies from the state, solar system owners can recover their investment by selling SRECs to electric utilities that use them to fulfill their portion of the state mandate.

Background in Massachusetts

Massachusetts’ 1997 electric-utility restructuring legislation created the framework for a renewable portfolio standard (RPS). In April 2002, the Massachusetts Department of Energy Resources (DOER) adopted RPS regulations that required all retail electricity providers in the state to utilize new renewable-energy sources for at least 1% of their power supply in 2003, increasing to 4% by 2009. The RPS was significantly expanded by legislation enacted in July 2008 (S.B. 2768); this legislation established two separate renewable standards — a standard for “Class I” renewables, and a standard for “Class II” renewables.

Starting in 2010, retail suppliers must provide a portion of the required renewable energy under the Class I Standard from qualified in-state, interconnected solar facilities. The DOER carried out a stakeholder process during the second quarter of 2009 to determine the details of this requirement, called the Class I Solar Carve-Out, and emergency regulations were issued in January 2010. Qualifying solar facilities (officially known as “Solar Carve-Out Renewable Generation Units” in the regulations) must be 2 MW (DC) or less, and must have become operational January 1, 2008 or later. Facilities that received funding prior to 1/1/2010 from the Massachusetts Renewable Energy Trust or more than 67% funding from the American Recovery and Reinvestment Act (except the federal grant in lieu of tax credit) are ineligible.  When 400 MW (DC) of qualifying solar facilities have been installed in MA, no additional solar facilities will be qualified for the Solar Carve-Out, although they would be eligible to qualify as a RPS Class I Renewable facility and continue to satisfy the overall Class I Standard.

Electric retail suppliers must pay the alternative compliance payment (ACP) if they are unable to procure enough renewable energy attributes, however the ACP rates are designed to be higher than the market price of SRECs.  In addition to the ACP, Massachusetts has set a minimum rate of $300 to enable the securitization of an income stream for financing institutions. The Solar ACP will decrease only if DOER determines it is needed based on market conditions; they will not reduce it more than 10% in any given year.

Professional solar project developers, such as Solect, can assist with financial modeling which will allow potential owners to understand the financial effects of SRECs.   They form a key revenue stream from which savvy owners can benefit.



Massachusetts Solar Incentives – Incentives at the federal, state and local level enable customers to reduce the cost of going solar by as much as 50%. Typically, these results are achieved through a mix of government tax incentives, Solar Renewable Energy Certificates (SREC) and electric cost avoidance.  Property owners can achieve a 2-5 year simple payback and then benefit from “free” electricity for the next 15 – 20 years.  This article provides an overview of the current Massachusetts incentives for investing in solar energy projects.

Massachusetts has various incentives and programs in place to help support and grow the solar photovoltaic (PV) system marketplace in the state.  The Database of State Incentive for Renewables & Efficiency (DSIRE – www.dsireusa.org) lists specific details for these and other programs.  Below are four (4) incentives which are of particular interest to prospective non-residential solar energy system owners:

Solar Renewable Energy Certificates – Solar Renewable Energy Certificates (SRECs) are a tradable, non-tangible energy commodities in the United States that represent proof that 1 megawatt-hour (MWh) of electricity was generated from an eligible renewable energy resource.  SRECs became available in Massachusetts due to the creation of a Renewable Portfolio Standard (RPS) with a specific allocation for solar energy. This program provides a means for SRECs to be created on behalf of solar energy system owners and sold to Massachusetts electric suppliers to meet the solar RPS requirement. Electric suppliers are required to use the SREC program to show compliance with this part of the state’s Renewable Portfolio Standard.

The SREC is separate from the value of the electricity itself and permits the owner or purchaser to claim the benefits of clean energy production by effectively subsidizing the cost of the installed system. SRECs are designed to provide individuals and/or businesses with an economic incentive to invest in solar electric systems. They represent the renewable attributes from a solar facility, bundled in minimum denominations of one (1) megawatt hour (MWh) of production. The additional income received from selling the solar certificates increases the economic value of an investment. Instead of up-front subsidies from the state, solar system owners can recover their investment by selling SRECs to electric utilities that use them to fulfill their portion of the state mandate.

Net Metering – Net Metering is defined as a method of crediting customers for electricity generated via on-site solar PV systems in excess of their electricity consumption.  Building owners with their own solar generation capability, offset the electricity they would have purchased from the utility.  When these building owners generate more than they use in a billing period, their electric meter turns backwards to indicate their net excess generation.  In Massachusetts, net metered electricity is credited at the full retail generation cost.

The Massachusetts Department of Public Utilities (DPU) adopted amended net-metering rules in July 2009. These DPU rules were ordered in accordance with the legislative changes instituted in 2008. Furthermore in August 2009, the DPU issued its model net metering tariff so that customers in Massachusetts are subject to the same net metering tariffs regardless of utility.

Local Loan Program – The Boston-based non-profit organization New Generation Energy offers low interest loans for the installation of solar electric and solar water heating systems via its Community Lending Program. The solar loans are available to companies (including sole-proprietorship) and non-profits in New England (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont), with an emphasis on those located in low and middle-income communities. The interest rate is currently 5.0%, although certain projects may be awarded grants and receives a lower interest rate. Only projects applying for loans are eligible for grants. The interest rate and terms are subject to change.

Property Tax Incentive – Massachusetts law provides that solar-energy systems and wind-energy systems used as a primary or auxiliary power system for the purpose of heating or otherwise supplying the energy needs of taxable property are exempt from local property tax for a 20-year period.  This incentive applies only to the value added to a property by an eligible system, according to the Massachusetts Department of Energy Resources (DOER). It does not constitute an exemption for the full amount of the property tax bill.

Solar power has never been more economical and the Massachusetts state government has taken a policy stance by providing incentives designed to reduce costs and grow the renewable energy portfolio in the area.  Professional solar project developers, such as Solect, can aid in determining which incentives are appropriate and will maximize a customer’s return on investment.