If you’ve got residents who might be a little reluctant to dive into a solar energy project, it just got a little easier to convince them to take the plunge. In the latter half of 2008, rules regarding tax credits for solar energy and solar heating projects were passed or extended by both New York City and the federal government.
“There is a lot more reason now to look to solar,” says Bhagavathi Natarajan, mechanical engineer for Quixotic Systems, a Manhattan-based solar power installer. “Absolutely there will be more people looking to do solar projects.”
A federal tax credit for solar projects was set to expire by the end of 2008, but in October, President George W. Bush signed a law extending the credit to 2016. Consequently, co-ops and condos can continue to deduct 30 percent of the total cost of a solar electric project. The way that trickles down to individual residents is that they can deduct their percentage or share of the savings from their personal income tax returns, says Monique Hanis, spokeswoman for the trade group, Solar Energy Industries Association.
“This is a huge improvement,” says Hanis. “The extension for eight years gives people time to plan and save money for projects, to maximize their roof space so they can get the most out of it.”
The tax credit had previously been capped at $2,000 but the new law removes that limit. If you install a solar heating system for your hot water, you can deduct another 30 percent of that project off your federal income taxes, too, although a $2,000 cap remains on that end as well.
The law also makes an important change regarding who can claim the tax credit for solar or photovoltaic power (PV). Previously, anyone who paid the so-called alternative minimum tax (imposed on higher-income earners) could not claim the PV tax credit. The new law removes that ban. “That is a huge thing,” says Hanis. “It makes so much sense because, if you think about the demographics of those filers, they have more disposable income to invest in PV projects, and they need the tax credits.”
As for the city tax credit, if you install your PV project from August 8, 2008, to December 31, 2010, you can get a property tax abatement of 8.75 percent of the system cost per year for four years for a total of 35 percent. (Projects installed from 2011 to the end of 2012 get less: 20 percent of the project cost.) The maximum incentive is $62,500 per year or the full sum of your property taxes. The proposal made by Mayor Michael Bloomberg was enacted by the legislature in August.
New York State additionally provides a 25 percent tax credit based on the cost of the project, and that trickles down by percentage or share to the individual co-op or condo owner’s income taxes. In both cases, each individual cannot get more than $5,000.
One co-op board that is looking forward to taking advantage of these credits is the 12-unit building at 176 Sterling Place in Park Slope, Brooklyn. Their solar project plans began about a year ago, long before the tax credits were passed. But once residents learned the tax credits were in the works, board president Michael Fram says it was another incentive. “It helped us get to thinking about this as a reality,” he notes.
At 176 Sterling Place, Quixotic Systems is installing a three-kilowatt solar electric system that will power between 80 and 100 percent of the power needs for the common areas and about 70 percent of the hot water for the entire building. The project is expected to be up and running in mid- to late November. The cost is estimated at $100,000; the board converted a line of credit with its bank into a loan and also raised maintenance by about 10 percent for a five-year period to help fund it, reports board treasurer Robert Dascoli.
The New York State Energy Research and Development Authority (NYSERDA), will also pay about $12,000 in incentives. Each resident will be able to see about $5,300 in state and federal tax savings. Dascoli also predicts the building’s property taxes will go down by about $3,000 a year for the four years, savings that will be passed on to each shareholder in reduced maintenance.
Once the project is completed and the loan paid off (in about five years), Dascoli says residents can expect to save about 15 percent on their maintenance charges because of energy production from the solar panels. Dascoli also foresees a boost to the resale value of units in the building. One expense the board did not immediately anticipate was a small increase in property insurance – about $400 a year to cover risk of damage to the PV system.
Overall, Fram reports, the residents of the building are very environmentally conscious. The building is individually metered and each resident has opted to pay a little extra to purchase wind power from Con Edison. The solar project will take up about one-fourth of the roof space and residents will not lose any of the common deck area. There was some question as to whether PV technology might improve in coming years.
“We realized that if we keep waiting for [it to get] better and better, it would never happen. So we said, ‘Let’s do this,’ ” Fram says.
Another change in the world of solar has been caused by the recent passage of a New York State law that deals with what is known as “net-metering.” When a PV system generates more power than it uses, the power flows back into the grid. Essentially, the meter runs backwards and the customer gets a credit for supplying power, not using it.
It used to be that in Con Edison territory net-metering was limited to 10 kilowatts of power and only residential customers could do it. In August, New York passed a law that permits net-metering up to 2,000 kilowatts of power and expanded it to commercial customers.
(Natarajan, who created the Sterling Place PV project, says that net-metering will not have an impact there because the building will rarely produce more power than it needs.)
The solar industry is looking for a federal bill to set a nationwide net-metering standard of 2,000 kilowatts. A bill to do that expired last year and no new bill is pending.
While the state of the economy might make you think twice about spending, David Buckner, president of Solar Energy Systems, says he doesn’t think people will be more skittish. He also says he doesn’t see a lot of people driven in by high or low oil prices. The impact of the economy is more psychological, he says.
The only possible cloud is whether people are able to obtain bank financing to begin such projects. He recalled the recent case of a large commercial solar project where the banker admitted that if the project were proposed now instead of a year ago, the funding would not have been available.
Buckner says he’s thrilled with the new and expanded tax breaks. One of the keys is the combination of federal, state, and local tax relief as well as the net-metering change. All, he says, work together. He adds that the combination of tax breaks make it easier for smaller buildings to take on a solar project. Smaller projects generally have a higher per-watt charge to install but the additional tax relief helps to ease the sting. “It’s a good time to do this,” he says.