Financing a Solar Electric System

Photo credit Kristin Resurreccion

Financing a Solar Electric System

Buying a PV system may be thought of as 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 one- to four-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 percent of that up-front cost in NYC.

Download this guide

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 percent. 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 percent 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 to choose from when beginning this lengthy process. Your installer will be knowledgeable about incentive programs and 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. Detailed program information can be found at www.powernaturally.org  (see PON 1050 Solar Electric Incentive Program).
• 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 was passed in June 2008 and will remain in effect until January 2011, when it will be reduced to five percent 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 in 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 loand term is up to 10 years and can cover up to $30,000.  There are also loan options for multi-family and commercial projects.  To see how a photovoltaic system would affect your specific situation, NYSERDA provides a 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 percent). Learn more about these incentives here .

In addition to these direct financial incentives, New York State legislation passed in June 2008 expands consumers' ability to take part in net metering for renewable electric generating systems. Net metering allows a utility customer with an on-site electric generating system to send excess power back onto the grid. The change affects the maximum size requirements for photovoltaic systems attempting to sell power. The new measures allow for up to a 2 MW system to qualify for net metering up from 10 kW previously, opening doors for larger commercial system which often produce a surplus on Sundays when offices are closed. This clean and renewable energy is bought by Con Edison at a wholesale rate, then resold to other customers 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 Note: The NYSERDA Solar Incentives were reduced from 5 kW and 10 kW residential rates to 4kW and 8kW respectively, effective 2/2/09.
  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

• NY State Energy Star Labeled Homes®

  • Extra incentives for homes participating in the program

  • Additional $500 per kW up to a maximum of 8 kW per site/meter

• Building Integrated PV (BIPV) Systems

  • Extra Incentives for building-integrated qualified systems

  • Additional $500 per kW up to a maximum of 8 kW per site/meter

• Commercial -Incentives per kW up to a maximum of 80 kW per site meter
  $3,000 per kW for 1 -- 40 kW
  $2,000 per kW for 40 -- 80 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

• 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 (educed 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

Examples of financial incentives to use solar PV in NYC

Following are teo examples of how these incentives work.  Market rate averages for PV Home Systems range from $6.60 to $12.60 per watt -- a large system is more economical than a small system.

Normal 0 false false false MicrosoftInternetExplorer4

If a 4 kW system for a one- to four-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 installing wiring difficult. Multiple inspections and permits add significantly to the cost and time of NYC projects. New York City'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 two weeks time, the process from the point of conducting the initial shading study until installation may be three to four months; after installation it may take another three 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.