|Credit Available||30% of total cost (materials & labor); no maximum
Unused credit may carry over to future tax years
|Timeline||Must be "placed in service" (ready and available for use)
Jan. 1, 2009 – Dec. 31, 2016
|Solar Electric||Photovoltaic systems must provide electricity for the residence, and must meet applicable fire and electrical code requirements|
|See summary chart: Stimulus at a Glance|
Welcome to the new frontier. “The solar industry is in its infancy and it’s a tremendous opportunity for remodelers,” says Jeff Shubert, director of global marketing for Suntech Power, a solar panel manufacturer. Yet, despite a 20% to 25% price drop for solar panels and the passage of the American Recovery and Reinvestment Act (ARRA) with its tax credit incentives, demand has been low. Consumers are holding off, nervous about the still shaky economy. The hope is that as awareness of environmental issues grows along with interest in the “green” movement, the tax incentives will help push consumers into investing in sustainable and renewable energy.
The ARRA creates investment tax credits for “residential energy efficient properties,” such as solar, wind, and fuel cell power generators, and geothermal heat pumps.
Taxpayers are eligible for a 30% tax credit on the cost of qualified solar systems (also called photovoltaic or PV systems) used to generate electricity for their primary residence in the U.S. (Solar pool heaters are not eligible.) There is no cap on the credit amount (as there was in earlier bills).
The “cost” to the consumer on which the credit is based includes site preparation, assembly, original installation, and piping and wiring that might connect the device to the home, as well as labor and markup. According to the April IRS notice 2009-41, “the credit applies to residential energy efficient property placed in service before January 1, 2017.”
While there’s no Energy Star–label equivalent for solar panels, they must have a UL or OSHA certification. Although there is no set standard for efficiency, currently the best panels have about 15% efficiency, i.e., 15% of the energy attracted from the sun is converted into electricity. To get the credit, consumers should keep a copy of a manufacturer’s certification in their files and fill out IRS form 5695 [PDF]. Tom Chiavetta, a CPA and director at Freed Maxick Battaglia based in western New York, who has been focusing on the ARRA, says that consumers should “show their accountants contractor backup support with regard to the work done and any paperwork they received from the manufacturer that shows the property meets the standards for the credit.”
Benefit for Remodelers
According to a recent Johns Manville–sponsored survey of 784 U.S. homeowners, 68% are aware of the energy-efficiency tax credits, and 46% of those homeowners intend to take advantage of them. But just 8% of those intending to take the credit say that they will use it for solar energy.
Yes, solar systems have come down in price, but it still could be considered an expensive endeavor for many homeowners. According to the Solar Electricity Global Benchmark Price Indices, in May 2009 a standard 2 kWh roof-mounted residential unit, installed, cost about $17,645. (In addition, the index breaks out prices for a sunny climate at 36.88 cents/kWh and a cloudy climate at 81.14 cents/kWh). “The average home,” says Ron Kenedi, vice president of Sharp Electronics’ solar energy solutions group, “requires about 4,000 watts [or 4 kW] in solar panels.”
“Most people cannot afford to install the amount of solar PV that they would need to offset their current energy bill,” says Bob Fleming, president of Classic Remodeling & Construction, in Johns Island, S.C., who is about to launch a new company focused on energy audits and upfits.
But price is not the only deciding factor. With all the paperwork as well as the learning curve for both consumer and remodeler, prospective clients will be looking for professionals who they feel confident in and who can offer them a hassle-free experience.
To install PV systems, you need to “look at the sun, the home’s electric bill, the size of the house,” Shubert says. “There’s a skill to designing the system that is right for the property without taking advantage of people.” Remodelers need to take care to hire out work to qualified installers.
Many distributors, such as SunWize Technologies, in Kingston, N.Y., train installers, and there are a few well-recognized independent groups offering training, including Boots on the Roof, Solar Energy International, and the nonprofit Solar Living. Installers are certified by the North American Board of Certified Energy Practitioners.
Many states offer training and incentives as well. For example, the New York State Energy Research and Development Authority (NYSERDA) provides training and certification through certified agencies. NYSERDA will reimburse a substantial portion of training and testing fees. (For more about PV in New York State go to www.powernaturally.org.)
“Installations and the tax credit processing is too much of a burden for a small contractor,” says John Berger, CEO of Standard Renewable Energy, an energy services company based in Houston. “Putting on a solar system is not as straightforward as you think.” SRE has a staff that deals with all the administration involved — permits, tax rebates, communications with local utilities, licenses, accreditations, manufacturer’s certifications, financing.
When utility companies offer rebates, there’s often a gap in payment that someone has to bridge. “Most remodelers couldn’t afford to carry the rebate,” Berger says. “It’s a big balance sheet issue, very capital-intensive.” SRE’s financing arm handles that. “Remodelers can be successful in solar by outsourcing the installation, just as they do plumbing or electrical,” he says.