Financing a Solar Electric System

Buying a PV system is like buying 25 or more years of electricity up front at a fixed cost. Today, commercially available solar modules cost around $4.50/watt for the equipment, and about $8 - $10 per watt installed. A system for a 1-4 family house will be about 5 Kilowatts (kW) depending on size of the roof, home usage and the budget of the purchaser. A 5kW system will cost about $40,000 to install before incentives. Federal, state and city incentives and tax credits currently cover about 75% of that up-front cost in NYC.

 

Available Incentives

• New York State Energy and Research Development Authority (NYSERDA) Solar Electric Incentive Program  provides the most significant incentive to purchase solar. NYSERDA buys down the initial retail cost of the installed system by up to 35%. The incentive is available on a first come first served basis to Con Ed customers who use NYSERDA-approved installers. Payments are made directly to the installer but the full amount of the savings must be passed on to the customer. The first payment of 75% of the incentive is paid after all permits are received and the equipment is delivered to the worksite. The remainder is paid upon connection to the grid and upon completion of all inspections and paperwork. NYSERDA provides a list of quality installers who are knowledgeable about incentive programs and the tax credits you may be eligible for. S/he will help get the necessary permits, agreements and inspections to get your system up and running. More information can be found at www.powernaturally.org  (and see details for PON 2112 Solar PV Program Financial Incentives here).
• Federal Tax Credits allows up to 30 percent of the system costs for qualified solar water heating and photovoltaic systems for both commercial and residential properties. On October 3, 2008, the federal tax credit was extended for eight years under the Emergency Economic Stabilization Act of 2008. The legislation eliminates the $2000 cap for both residential and commercial property). The tax credit is applied to the portion of costs after the NYSERDA incentives are deducted. Visit www.seia.org for more information.
• The New York Solar and Fuel Cell Tax Credit offers a 25 percent credit for residential PV systems in New York State. This credit pays up to $5,000 for 10kW residential systems or 50kW on condos and co-op installations. This money is deducted after the Federal Tax Credit is calculated; excess credit can be rolled forward for five years. Visit www.dsireusa.org for more information.
• The NYC Property Tax Abatement Bill further reduces the expense of buying and installing solar in New York City by up to 35 percent of the balance of the cost of the system to the owner after the prior listed incentives are deducted, thus defraying the otherwise high costs of solar installations in the NYC. The credit is applied to the owner's property tax over a four-year period (8.75% per year). Both residential and commercial systems are eligible for a credit of up to $62,000. This credit will remain in effect until January 2011, when it will be reduced to 5% per year over four years.

Solar incentives may be used in conjunction with NYSERDA's incentive programs  to provide energy upgrades to existing buildings and new construction projects. In addition, the owner's portion of the costs can be financed using the New York Energy $mart^SM Loan Fund program , which provides an interest rate reduction of 6.5% off a participating lender's normal loan interest rate for a term up to 10 years on loans in NYC.  For residential projects, the interest rate is reduced by 4% (for Con Ed customers) off a participating lender's normal interest rate, not to fall below 3%; the loan term is up to 10 years and can cover up to $30,000.  There are also loan options for multifamily and commercial projects.  To see how a photovoltaic system would affect your specific situation, check out NYSERDA's Clean Power Estimator that calculates savings and cost based on your energy use. (However, it doesn't subtract the new Property Tax Abatement which reduces the final cost by an additional 35%). Learn more about these incentives here .

A utility customer with an on-site electric generating system can participate in "net metering," which means sending excess power back onto the grid. The clean and renewable energy is bought by Con Edison at a wholesale rate, then resold to others who need it. Another option for consumers is to store the excess electricity in a battery to be used during cloudy days or at night. Learn more about Con Ed's energy saving incentives.

Solar incentives at a glance

• NYSERDA -- Solar Electric Incentive Program
  Covers 25-35%: www.powernaturally.org 
  • Residential -Incentives per kW up to a maximum of 8kW per site meter
    $3,000 per kW for 1 -- 4 kW
    $2,000 per kW for 4 -- 8 kW
  • Commercial - incentives per kW up to a maximum of 80kW per site meter
    $3,000 per kW for 1 -- 40 kW
    $2,000 per kW for 40 -- 80 kW
  • Schools, Not for Profit, Government -Incentives per kW up to a maximum of 25 kW per site meter
    $5,000 per kW for 1 -- 25 kW

• Building Integrated PV (BIPV) Systems

  • Extra Incentives for building-integrated qualified systems

  • Additional $500 per kW up to a maximum of 80 kW per site/meter

• Federal Tax Incentives -- Emergency Economic Stabilization Act of 2008
  Form: http://www.irs.gov/pub/irs-pdf/f5695.pdf 
  • Residential
    30% of cost
    Put into operation after 1/1/2009
  • Commercial
    30% of cost, put into operation after 1/1/2009
    10% after 12/31/2008 (permanent)
    Source: www.seia.org 
• State Tax Incentives
  

  Form: http://www.tax.state.ny.us/pdf/2008/fillin/inc/it255_2008_fill_in.pdf

  • Residential only
    25% of cost up to $5,000
    10kW -- Residential maximum
    50kW -- Condos and Co-Op maximum
• NYC - Property Tax Abatement
  • Residential and commercial
    35% of cost of Solar Electric hardware and installation (reduced in 2011 to 20%)
    8.75% per year for 4yrs (reduced in 2011 to 5%)
    $62,500 max or amount of real property taxes owed during a year
  • This abatement applies to the following properties:
    Class 1 -- Residential
    Class 2 -- Condos and Co-Ops
    Class 4 -- Commercial

Real world example of how these incentives work:

Market rate averages range from $6.60 to $12.60 per watt -- a large system is more economical than a small system.

Residential Solar PV System	4 kW	8 kW
System Cost	$34,000	$68,000
Cost per watt	$8.50	$8.50
NYSERDA Solar Incentive	($12,000)	($20,000)
	$22,000	$48,000
Federal 30% Tax credit	($6,600)	($14,400)
	$15,400	$33,600
NY State 25% Tax credit	($3,850)	($5,000)
	$11,550	$28,600
NYC Property Tax Abatement	($4,043)	($10,010)
Adjusted System Cost	$7,508	$18,590
Adjusted Cost per watt	$1.88	$2.32

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If a 4 kW system for a 1-4 family house at $8.50 per watt costs $34,000, federal, state and city incentives and tax credits can reduce owners’ net investment to $7,508. If an 8 kW system (suitable for a larger property) at $8.50 per watt costs $68,000, incentives and credits can reduce owners’ net investment to $18,590. Both of these systems would pay for themselves well before their 25 year warranties expire. 

 

Challenges and opportunities for PV in NYC

Even though costs have been reduced considerably, installing a PV system in the city presents its challenges. Taller buildings add to overall installation costs, and older buildings may have asbestos or other materials that make wire installation difficult. Multiple inspections and permits add significantly to the cost and time of NYC projects. NYC's network grid is unique and complicated, and obtaining Con Edison approvals adds significant time for new installations. Interconnection and “Sale and Purchase” agreements are required before any net metering can take place. Therefore, while the actual installation work may be completed in less than 2 weeks time, the process from the point of conducting the initial shading study until installation may be 3-4 months; after installation it may take another 3 months to get the required inspections and approvals before the installation is connected to the grid and operational.

New York City is particularly well suited to benefit from a solar future. PV systems reach maximum production when New York is at its peak usage, in the middle of the day, when grid rates are highest and the city needs it most. As more solar systems come online, our power system becomes less vulnerable to power failures or attacks, and simultaneously reduces air pollution. While fossil fuels are dwindling, silicon (the material used to make solar panels) is the second most abundant element on earth. Manufacture of solar panels is similar to that of glass making and in some areas recycling for obsolete panels already exists. The young and growing solar industry has the potential to provide more than enough energy, cheaply and sustainably to everyone.