Invest in Solar to Maximize Available Incentives
By John Shaw, co-owner and commercial solar project developer, Namaste Solar
The opportunity to earn a compelling return on investment by installing clean solar power on your commercial property has never been greater. Corporate tax rules allow up to 100% depreciation in the first year for solar installations. In conjunction with the 26% Federal Investment Tax Credit, these tax benefits total a minimum of 47% of the system cost in the first year. Between the available tax benefits and increasing green building requirements, businesses can no longer afford to ignore solar capital energy improvements.
The reasons for going solar are as varied as the types of businesses that have already invested in solar. Some choose renewable solar energy to stabilize their electric bill and reduce exposure to rising utility costs. Other investors have used solar to increase building value and attract and retain tenants who want to be seen as environmental stewards. Finally, others have installed solar to strengthen their corporate brand and more closely align with their customers’ values.
What do these businesses have in common? Each has increased cash flow, boosted net operating income, and raised the value of their properties. Solar doesn’t just make good financial sense; it’s a differentiator in today’s hyper-competitive commercial real estate sector.
The adoption of solar is increasing nationally and globally. According to Deloitte’s “2022 Renewable Energy Outlook,” there was an additional 13,800,000 kW of wind and solar installed in the first 8 months of 2021 alone. Many states and municipalities have committed to clean energy goals, and to reach them, are implementing new standards for commercial properties. On-site solar can help commercial property owners meet these new requirements.
Locally, commercial solar owners can take advantage of generous production-based incentives. Under the Medium Solar*Rewards Program, Xcel Energy purchases Renewable Energy Credits (RECs) at 3.75 cents per kWh produced over a 20-year period. In year one, a 200 kW system (~30,000-squarefoo rooftop) generates REC payments of more than $11,000 and reduces utility expenses by $19,000, both of which increase net operating income (NOI).
Now is the time to go solar since many of these lucrative incentives decline each year. Commercial property owners have until the end of 2022 to capture the 26% tax credit (which drops to 22% in 2023 and a permanent 10% in 2024). Additionally, in 2023, Bonus Depreciation drops from 100% to 80% in the first year (with the remaining 20% depreciation occurring on a 5-year MACRS schedule).
Colorado’s Commercial Property Assessed Clean Energy (C-PACE) program enables businesses to implement solar projects that are cash-flow positive from year one on leveraged deals between 50-100% loan-to-cost.
C-PACE can be used to finance any energy improvement to your building (not just solar) with fixed-interest loans up to 25 years. This non-recourse financing minimizes risk to property owners and is tied to the property via a special tax assessment. As a result, C-PACE financing can transfer to the next owner if the property is sold and is non-accelerating.
To capture these significant benefits and maximize ROI, commercial businesses and building owners need a local, experienced, connected solar developer to design, engineer, and install their customized solar solution. Now is the time.
Namaste Solar’s purpose is to transform energy and transform business. The company’s experienced solar advisors will help you understand your project goals, timelines, and milestones. Look at their extensive commercial experience and see how they measure up. John Shaw can be reached at email@example.com