Renewable Energy Tax Incentives

As of recently, I’ve heard of tax credits and incentives for the use of renewable energy such as solar power, wind power and other alternative energy sources.

However, trying to find and understand them left something to be desired.  So I thought I would translate them from “legalese” into English.

Note: This is my personal interpretation and serves only to give the average person (such as myself) an idea of what’s available, in terms of tax credits and incentives for installing renewable energy sources in your home. For the “authoritative” information you will still have to weed through official documents. But at least you can go in with a concept of what its all about.

Renewable Energy Incentive and Tax Credit Definitions

Net Metering

Net metering refers to the practice of selling excess electricity generated by the customer, back to the electrical company. An example of this would be if you installed solar panels on your house but stayed connected to the electrical grid. At times when your solar panels were producing more electricity than you were consuming, the surplus or excess electricity would be fed back into the electrical grid. Your electrical company will then buy this electricity from you.

Net metering is available in many states and is a standard practice. Some states even have net metering written into their laws, in other words the electrical company would be required by law to buy your excess electricity. Be sure to check what your local laws are.

For the official rules regarding net metering see this website.

One of the advantages of a solar home system or wind turbine combined with net metering is that you are still connected to the electrical grid. At night you can draw power from the grid, you also eliminate the need for a battery back-up as part of a home solar panel or wind turbine system. When you produce “too much electricity” for your own consumption it is automatically sold to the electricity company. In other words you have all bases covered as during a power outage, as long as the sun shines or the wind blows, you will still have access to some form of power.

Public Benefits Fund

Public benefit Funds (PBF) are state-level programs developed in the late 1990s.

Their purpose is to provide continued support for renewable and clean energy sources, energy efficiency programs and low-income energy programs. The way these programs are usually funded are through small surcharges on the electricity we buy.

Public Benefit funds are used to support state rebate programs on renewable energy systems, loan programs, energy education programs and sometimes research and development. Some states offer rebates of up to 50% or up to on the installment costs of a clean renewable energy source in your home.

For a state by state listing on tax benefits and incentives through the PBF, see http://www.dsireusa.org/incentives/index.cfm?Type=PBF&Back=regtab& .

Renewable Energy Tax Incentives

Personal tax incentives fall under personal income tax credits and deductions. Many states offer these incentives in order to cut the cost of buying and installing renewable energy or energy efficiency systems and equipment. How much credit or deduction depends on the state you live in. Almost all states have a maximum limit on the dollar amount of the credit or deduction.

But in recent years the federal government has also started to offer personal income tax incentives, so this is something to check out as well.

Last I checked there was a federal personal tax credit for residential Solar Water Heating, Photovoltaics, Fuel Cells, and other applicable solar technologies. Note that it says residential, for your home in other words. At the time of this writing the Federal income tax credit is 30 percent of total costs, with a maximum credit of $2000. Excess credit may be carried over into the next year. So if 30 percent of your renewable energy system exceeds $2000 you can credit the additional amount the following year.

Renewable Energy Rebate Programs

Most states and some local governments and utilities offer rebates as an incentive to promote the installation of renewable energy systems. Most rebate programs that support renewable energy are administered by states, municipal utilities and electric cooperatives. Solar water heating and/or photovoltaic systems i.e. solar panels are some of the items commonly supported through these programs. Energy efficiency programs tend to be supported by utility companies.

The rebate amounts vary depending on technology in question and who runs the program.

Sales Tax Incentives

Sales tax incentives normally provide an exemption from the state sales tax (or sales and use tax) when buying a renewable energy system, an energy-efficient appliance, or other energy efficiency measures. Some states have even designated an annual “sales tax holiday” for energy efficiency measures during which the sales tax on such items is suspended for a few days.

Property Tax Incentives

Most property tax incentives that are available provide that the increased value of your property due to the installation of a renewable energy system is excluded from the value of your property for taxation purposes. For example, if a solar water heating system costs more to install than a conventional heating system, the added value of due to the solar water heating system will not be included in the property assessment. I hope the above was understandable. It definitely shows that you can get a lot of money back for going energy efficient or using renewable energy.

If you do the actual calculations you will see that you can reduce the cost of a renewable energy system such as solar panels or solar water heating for your home, by hundreds if not thousands of dollars. Combine this with the actual savings you will be making, money that you will not be spending on energy bills and you will see that renewable energy can be very affordable in some locations. It’s worth checking into, and aside from savings on your energy bill, renewable energy is good for the environment, its an investment in to the our future generations.

For the exact laws on a state by state and federal basis visit DSIRE.  It’s a government site, that keeps an up to date data base of all renewable energy and energy efficiency programs, both on a local and federal level.

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2 Responses to “Renewable Energy Tax Incentives”

  1. CW@Alternative Energy Guides
    September 19, 2009 at 3:29 pm #

    These incentives make it much easier financially to install a renewable energy system. Now is a good time to go solar in California with the combined state and federal incentives so high. Unfortunately, the state subsidies will begin to decline step-by-step based on the volume of solar power added in each utility district. It’s an excellent time to go solar!
    .-= CW@Alternative Energy Guides´s last blog ..Alternative Energy =-.

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