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Solar Power: Forward Thinking Businesses See a Growing Benefit

April 27, 2012

There are signs that the national economy may be slowly digging its way out of its long-term slump, and now could be a good time to review fixed business expenses with an eye toward stability and predictability.

One possible consideration would be installation of a solar power array for business energy uses. There are a number of reasons why solar power can help provide business energy and consistency is one of them.

Businesses don't like uncertainty. Yet one of the most basic of business needs — energy to operate myriad machines from the office to the factory floor, or to heat work spaces and provide hot water and light – can become one of the most uncertain areas of the balance sheet as energy prices fluctuate. Uncertainty over energy costs can play havoc with budgets.

But there is good news on the alternative energy front. First, installation of solar arrays is looked on favorably by tax collectors on both the state and federal levels. Also there are many incentives to convince businesses to start looking into alternative energy sources and solar is foremost among those sources to benefit from these incentives.

Connecticut, for instance, has incentives to attract business to the state and to keep existing businesses there. These include loans and rebates, sales tax exemptions and reductions, and utility loans and rebates. Even local communities are involved in helping local businesses reduce their operating costs through use of alternative energy such as solar.

Likewise, in Massachusetts, there is a broad array of tax incentives and rebates, offered both by state and local governments and the utility companies that serve the state. Massachusetts also provides excise tax deductions and exemptions for businesses installing solar power systems.

At the federal level the tax credit for solar installation is equal to 30% of expenditures, with no maximum credit. Eligible solar energy property includes equipment that uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat.

In addition, hybrid solar lighting systems, which use solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight, are eligible although passive solar systems and solar pool-heating systems are not eligible.(1)

Most credits are for eligible projects that are placed in service on or before
December 31, 2016, which provides plenty of time to gather information, study the applications that may apply for your firm and explore all relevant costs.

Convincing individuals and businesses alike to install solar has been difficult over the past several decades, in part because it was considerably more expensive to generate a watt of solar power than the same amount of electricity through traditional power generation. Also, as long as electricity generated through coal, oil or natural gas sources, as well as nuclear or hydroelectric power was relatively cheap, further research and development on solar generation was limited.

But the relative costs of solar power compared to energy produced from more traditional sources has changed in the favor of solar energy in the last decade or so and solar power has suddenly become a viable alternative. In addition, one of the most misunderstood facets of generating electricity through solar power is the belief that heat is necessary – as in direct sunlight – to provide solar power.

But we don't need heat to stay warm. While there are some solar configurations that rely on heat from direct sunlight, photovoltaic cells generate electrical power with light, not heat, and can work at varying levels so long as light is available. Thus, a somewhat cloudy winter day in the northeast still can provide sufficient light to contribute to the heating needs of a small business.

Depending on the size of the solar array and the type of materials used, sufficient current can be generated to fit the needs of the individual business. And there is another attraction for solar installations – they can be built in remote "off the grid" areas where supplying other forms of power can be difficult.

Solar panels also can be installed on rooftops negating the problem of trying to find the necessary room for them. In recent years solar energy companies also have been able to declare with certainty that they can save their customers money over the long term both because of the expense of traditional electric sources and improvements made in the durability of solar panels.

Although startup costs can be significant depending on the type of solar array needed, the payback in many cases can begin in just a few short years.

Businesses that are considering moving into solar generation should proceed with caution, however. The myriad regulations including building codes and tax write-offs that are involved require assistance from an experienced and knowledgeable professional.

Tax codes have been flexible and can change from year to year, state to state and certainly within the federal tax framework. It is advisable to meet with your financial advisor and explore in depth how the tax breaks and other incentives for solar energy can benefit your business.

A reasonable measure of certainty, especially in terms of energy savings, can go a long way.



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