Taking your business solar

Direct ownership means that you will buy the system for your building or property. You own all of its electrical output. Direct ownership of a system makes sense if you:

• Have cash on hand,
• access to financing, or
• want to keep ownership of additional incentives. These include the federal tax credit or Solar Renewable Energy Credits (SRECs).

Owning the system also makes you eligible for accelerated depreciation. The Modified Accelerated Cost Recovery System (MACRS) allows businesses to recover investments in assets through tax deductions. Businesses can deduct 85 percent of qualified solar equipment over a five-year period. Read this article from the Solar Energy Industries Association to learn more. Talk to your accountant about how best to manage the tax benefits of going solar.

The Inflation Reduction Act of 2022 provides several new benefits for businesses who want to go solar as well.

• The tax credit can be upfront (Investment Tax Credit or “ITC”) or over time (Production Tax Credit or “PTC”)
• The ITC is 30% of installed system cost through 2032 (for projects under 1 MW)
• The PTC value changes over time and is priced per kilowatt-hour (kWh)
• Businesses can transfer the tax credit to another party in exchange for payment for the tax credit’s value (IRS FAQ & another explainer)
• For projects under 1 MW, there are additional credits:
  • You receive an 10% for projects located in energy communities (eligibility mapping tool, U.S. Dept. of Energy)
  • Your receive an additional 10% for projects using defined minimums of domestic content
• The adders above also apply to projects under 5 MW when certain labor requirements are met.
• For projects under 5 MW, by application and approval, there are also other adders available:
  • 10% for selected projects located in low-income communities or on, tribal lands (map tool)
  • OR 20% for selected “Qualified Low-Income Residential Building Projects” (eligible housing) OR “Qualified Low-Income Economic Benefit Projects” (See “Program Resources” section on DOE site for more information)
• See the Solar Energy Industries Association fact sheet on the law for more details

Under third-party ownership, a separate entity owns and operates the solar system on behalf of your business. You pay the third-party for the monthly electricity produced by the solar system.  You may prefer a third-party ownership model if you don’t want to process the federal tax credit or maintain the system over its lifetime. Third-party ownership is only available in certain states.  Find out where.

• Department of Energy ITC for Business – Comprehensive information about ITC for business
• Why your business should (finally) go solar – This is an overview of the benefits of adding solar to your business.