If you own commercial property in Connecticut, 2015 is the best year to go solar ever for these six reasons:
1. Costs of Solar have plummeted. Forget what you thought you knew about the costs of solar power. Prices for panels have plummeted in the past 24 months – down from over $2.50 per watt to less than $1.00 per watt. Total installed cost has also dropped from over $4.50 per watt to less than $2.50 per watt. With total solar costs more than 40% lower than two years ago, return on investment is higher and the payback period is shorter. Also, solar power systems now last 30 to 40 years or more.
2. 100% Financing Available through C-PACE for Solar. The Connecticut Green Bank’s C-PACE program offers 100% financing for solar and other renewable energy and energy efficiency measures. With 100% financing, 20 year amortization and low rates between 5.5% and 6%, solar projects can now be cash flow positive from day one with zero cash investment required.
3. Cut your Income Tax Bill with the 30% Federal Tax Credit for Solar. Solar projects come with a 30% federal income tax credit that goes right to cutting your federal income tax bill. For example, if you install a 122 kilowatt solar power system for $300,000 this year (even using C-PACE to finance 100% of the costs), you can chop $90,000 off your taxes this year. This tax credit expires in 2016 which partly explains why 2015 is the year to get solar power done. Even if you can’t use the tax credit, we help clients monetize this tax credit through innovative financial structures that get landlords a check when systems are turned on. This tax credit can be carried back one year and forward up to 20. Solar Tax Credit details here.
4. Five Year Accelerated Depreciation for Solar. If the 30% federal income tax credit is not enough, solar qualifies for five year accelerated depreciation on 85% of the total project cost. Using the same example above, 85% of $300,000 would give you an additional $255,000 in depreciation deductions over five years. Of course consult with your tax adviser, but commercial property owners who can fully use this deduction who are in the 28% tax bracket could see over $70,000 in additional savings off their federal income tax bill.
5. 15 Year Renewable Energy Credit Subsidy for Solar Production. Both United Illuminating and Connecticut Light & Power are offering long-term contracts for 15 years to pay you for every kilowatt of solar electricity you can produce at your property. You get this subsidy whether you use the power on site or sell it back to the grid as excess production. Continuing with the same example above, the owner of a 122 kilowatt size system producing 155,000 kilowatts per year in Connecticut with a Renewable Energy Credit of 9 cents per kilowatt would These subsidies are only offered four more times in the next 24 months by lottery and bidding which is yet another reason to get solar done in 2015. The next round of applications in due in February. Details on Connecticut renewable energy credit program.
6. Get Away from Spiking Electricity Prices in Connecticut. CL&P just announced a 25% increase in electricity generation charges. Because of electricity and gas transmission problems, Connecticut and the rest of New England will be stuck with the highest utility costs in the country. (See recent article on electricity price spikes in Connecticut here). By moving to solar, electricity users are not only saving money today but also locking in decades of lower electricity prices. In addition, property owners have the opportunity to generate additional income from selling excess power production back to the grid at today’s substantially higher wholesale generation rates.
If you own a commercial property and either use the electricity for your own business or pay the electricity for your tenants, then solar is a no-brainer to get done in Connecticut in 2015.
Even if you own a property where the tenant pays the electricity, you can still go solar by offering your tenant a power purchase agreement that will benefit both you and the tenant. The tenant will benefit from a reduced cost of electricity and the ability to take credit for going green (many companies now need to certify to their corporate and government customers that they are going green when bidding on new projects). You as the landlord will benefit from an additional income stream from your property and the up-front income tax savings.
In 2015, commercial property owners in Connecticut can use 100% financing to purchase a low-cost solar system that generates a huge federal income tax savings and net positive cash flow from day one supplemented by renewable energy credits. At the end of the loan term, the property will have a solar asset that will generate substantial additional net cash flow for 10 to 30 years after the end of the initial 20 year term. This additional cash flow will increase the net operating income and in turn the actual value of the property in the same way an income from adding more square feet to rent would.
If you are a commercial property owner in Connecticut, don’t look back next year and cry that you should have gone solar in 2015. Get your solar project done in 2015. The same applies for commercial property managers – be a hero to your clients by showing them the path to more cash this year.
Michael Licamele is President of MSL Group, Inc., which provides turnkey energy project development and commissioning services for commercial property owners in Connecticut.
January 27, 2015
