The Perfect Storm: Why Now is the Time to Seize the 30% Credit on Commercial and Industrial Solar
Although the 30% business investment tax credit (ITC) for installing solar expires at the end of 2016, the window for taking advantage of the ITC is actually much sooner. Unless Congress extends the ITC—which is an open question at this time—business owners should begin planning now for solar projects to be completed by the end of 2016. Combined with lower costs than ever before, businesses are seeing a perfect storm of conditions that make now an ideal time to go solar.
You might think that 2 years is a long time to pull the trigger on going solar, but like any large commercial or industrial upgrade, solar projects can take 1 to 2 years to complete and go online. Here’s why:
1) Commercial solar evaluations and decisions take months.
While some business owners can make a snap decision to go solar, we’ve found that most businesses typically need 1-3 months to complete the process. That includes learning about all the options and assessing solar’s value to the business, while waiting on several solar providers to prepare and revise comprehensive quotes. Regardless of whom you choose as your commercial solar partner, they will need to analyze utility charges and rates, the times that your business uses the most energy, roof integrity or existing site condition, and utility connection infrastructure.
The location and type of business also matters. Solar installed on a plot of land for an agricultural facility and solar installed at a hotel or shopping center with a solar carport each have specific considerations that a solar provider will have to evaluate for an optimal proposal and design.
Similarly, if you own multiple retail locations, or have multiple buildings on a single industrial campus, each potential site will need to be assessed for generating the most solar electricity at the lowest cost.
As a result, the solar evaluation process alone can take several months, and that inches everyone closer to the 2016 completion deadline to qualify for the 30% ITC.
2) Solar financing takes months.
Unless you intend to pay for your solar installation with cash, there are many financing options to consider when installing solar. Loans, solar power purchase agreements, solar leasing agreements, and commercial solar PACE loans may all be viable financing options, so your provider needs time to prepare and present these options so that you can choose the best financing option for your business. At REC Solar, we’ve found that this process typically ranges from 1-3 months.
Once you choose the best option to finance your solar installation, the financing partner will need time to go over the proposal and qualify your company. That can also take several months, depending on the size and cost of your commercial or industrial solar installation.
3) The solar permitting process varies wildly.
The solar permitting process is notoriously variable. Consequently, depending on your city and type of installation, the plans may need to be inspected and approved by several local authorities, potentially including the building department, the utility, the fire department, as well as environmental agencies.
After submitting plans, changes to solar designs are sometimes required by each agency, and subsequently, installers must resubmit plans. Even when plans are perfect the first time, the municipal engineering departments that approve solar designs for permitting are frequently overwhelmed and understaffed. Fortunately some cities are developing streamlined best practices for solar permitting, though today those are few and far between.
This unpredictable solar permitting process can range from 10 minutes in San Francisco to 6 months in Denver. This uncertainty can further extend the project development phase, before breaking ground on the project, bringing the 2016 deadline to qualify for the solar ITC even closer.
4) Solar installations take up to six months.
Once you’ve been through evaluation, design, engineering, procurement of equipment, and permitting, you’re finally to the second to last step: The actual installation.
A good solar installer needs to plan and schedule a time that is most convenient for you and your operations, avoiding any decrease in productivity or interrupting normal business.
Aside from the scheduling, the larger and more complex the installation, the more time it will take to complete. Yet even a relatively small 100-250 kW solar installation can take 1 to 3 months to construct. As we noted before, each site is unique and may require upgrades to infrastructure, trenching and concrete, roofing adjustments, or utility interconnection upgrades.
A large 1 MW and above solar installation can take 2 to 6 months to complete construction, which includes the last step: final inspections and approvals from the utility and other local permitting authorities.
5) Add it all up, and the solar process can take up to two years
While some installations can take just a few months, larger and more complex installations can run up to two years. The solar industry is innovating new systems to streamline this process in the future. But today, businesses stand to benefit by planning ahead and seizing the ITC today.
Will the Solar ITC be extended by Congress?
We hope so! Solar advocates in Washington DC are doing their best to convince Congress to extend the solar ITC by another year or more. However, many believe that this extension is unlikely, especially given the fact that the wind industry lost their own subsidy extension fight.
If nothing is done, the 30% ITC will sunset into a 10% credit. That’s better than nothing, but it’s certainly not better than the full 30%.
The window to take advantage of the 30% ITC for solar is quickly coming to a close – especially for larger installations. If your business is sincerely interested in going solar, now’s the time to start the discussion.
UPDATE 12/2015: The Solar Investment Tax Credit has been extended! Learn more about how changes to the ITC will benefit commercial solar in 2016 and beyond.