Residential 2.7 kW grid-tied PV system located in Durham. This project is part of the North Carolina Green Power Program, designed and installed by Sundance Power Systems in 2005 (Photo by Dave Hollister).
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Incentives for renewable energy have increased with new state and federal tax credits and a new regulation approved by the North Carolina Utilities Commission. Solar energy won a victory in last year's federal energy bill. The provision may one day be considered a sign of the most significant renewable-energy policy shift in more than three decades. The federal commercial tax-credit incentive increased from 10 percent to 30 percent. And there was no residential incentive before the new 30 percent credit.
"If consumers have been waiting for a tax credit for solar, now is the time to do it," says Rhone Resch, executive director of the Solar Energy Industries Association.
These credits are available as of Jan. 1, 2006:
State commercial credits
There's a 35 percent North Carolina credit of up to $250,000 for commercial photovoltaics (generating electricity from sunlight), wind, hydroelectric, solar hot water and space-heating applications. Credit is taken in five equal installments, and credit may not exceed 50 percent of a taxpayer's liability for the year.
Federal commercial credits
The federal credit of 30 percent has no cap on the amount of credit for commercial PV, solar hot water and space-heating applications. Excess credit may be carried forward two years.
State residential credits
There's a 35 percent North Carolina credit of up to $10,500 for photovoltaics, wind and hydroelectric systems. A credit of up to $3,500 is available for active space-heating systems. For solar water-heating systems, there's a credit of up to $1,400. For each of these credits, excess credit may be carried forward five years, and credit can't exceed 50 percent of a taxpayer's liability for the year.
Federal residential credits
You may take both a 30 percent credit up to $2,000 for photovoltaics and a 30 percent credit up to a separate $2,000 for a solar water-heating system. Excess credit may be carried forward to the next tax year.
What we call the best investment under the sun refers to the North Carolina and federal tax credits for a residential solar-thermal heating system. Solar-thermal heating provides heat for water, space heating and swimming pools. Solar collectors change energy from the sun into heat energy, which is transferred to a storage system or interior space. Solar thermal is the oldest and most widely used renewable energy technology worldwide. It is also the most affordable such technology, enhanced by the increased credits.
Home-heating costs in Western North Carolina were expected to skyrocket this winter. If supplementing a propane heating system, a solar-thermal system will save an average of $1,945 in offset propane costs annually. If used to supplement an electric heating system, solar thermal will save an average of $1,700 in annual electricity costs. If used to supplement natural gas heating, solar will offset $900 a year of the cost of natural gas.
The average cost of a four-collector solar-heating system with installation is $10,000. A state tax credit of up to $3,500 is available, and a federal credit of up to $2,000 is available. An initial $10,000 out-of-pocket expense is reduced to $4,500 when credits are taken over five years. The system payback equates to a 36 percent return on investment in the first two years if supplementing a propane heating system, a 34 percent return as a supplement to electric heat and a 26 percent return as a supplement to natural gas heat. The system payback occurs in as soon as three years. The return-on-investment and payback calculations do not take into account an increase in fuel costs. If fuel prices were $2.62 a gallon for propane, 10 cents a kilowatt-hour and $1.56 a therm for natural gas, the return on investment after the fifth year, when all credits had been taken, would be 19 percent, 17 percent and 9 percent respectively.
Another important development for renewable energy took effect Jan. 1. The North Carolina Utilities Commission issued the net-metering regulation long awaited by the North Carolina Sustainable Energy Association and North Carolina Solar Center. About 40 states have net-metering laws. Net metering allows residential and commercial consumers with grid-tied renewable-energy systems to run their meter backward when they produce more electricity than they consume. Net metering provides a potentially valuable option for photovoltaics systems. North Carolina customers of Dominion, Duke and Progress power companies may participate in the program. Electric co-ops and municipal utilities may participate on acceptance.
Solar-energy advocates hope the net-metering program eventually will include systems that incorporate batteries, state electric co-ops and municipal utilities. Advocates also hope that net-metering regulations eventually may be used with the NC GreenPower Program. Energy rates depend on time of day and season. Net-metering guidelines include time-of-use rates, which means off-peak generation cannot offset peak usage. Similarly, excess summer production cannot be carried over to winter. The net-metering program is based on offsetting usage from the utility. The offset credit is the same retail rate per kWh at which a consumer purchases electricity from the utility. In North Carolina, that averages 10 cents a kWh. Homeowners and businesses with small renewable-energy systems (up to 20 kilowatts for residential and up to 100 kilowatts for commercial) now have the choice of supplying energy for the NC GreenPower program or taking advantage of the net-metering rules.
"While NC GreenPower may provide a better deal for customer generators with small solar-electric systems, net metering provides a potentially valuable option for larger photovoltaic systems and small wind generators," says Steve Kalland, director of the NC Solar Center.
NC GreenPower is a nonprofit renewable-energy organization funded through rate-payer donations. It's the first statewide green-energy program in the nation supported by all the state's utilities. About 7,000 utility customers purchase blocks of 100 kWh for $4 to support the program. NC GreenPower aims to supplement the state's power supply with more green energy. The NC GreenPower production credit incentive is 18 cents per kWh of excess power generated. In addition to the credit from NC GreenPower, the utility pays an "avoided cost" rate at the wholesale rate for each excess kWh produced. The wholesale rate is based on what it costs the utility to generate a kWh of electricity, which averages 3 cents a kWh.
Rising energy prices and decreased supplies are real. Many of us have been thinking about renewable energy for years. Now is the time to pursue it.
[Leslie Segal is marketing director at Sundance Power Systems Inc., which provides renewable-energy and hydronic heating systems with design and installation services. Contact Sundance at 689-2080 or info@sundancepower.com, or visit www.sundancepower.com.]
