Federal Investment Tax Credit (ITC)

  • Available for residential, commercial, and utility-scale solar projects.

    Provides a tax credit based on a percentage of the eligible solar project costs.

  • As of the last available information (knowledge cutoff in January 2022), the ITC offered a 30% credit for projects commenced in 2021 and 2022.

    The percentage is subject to change and decreases over time, so it's essential to check the latest regulations.

  • For commercial and utility projects, the entity that owns the solar project can claim the tax credit.

    For residential projects, homeowners can claim the credit.

  • Keep track of any legislative changes or updates to the ITC, as government incentives for solar projects are subject to periodic revisions.

SBA 504 Loans for Solar Projects

Long-term, fixed-rate financing for solar projects.

Key Features

  • Low down payment (10% equity).

  • Up to 25 years for real estate, 10 years for equipment.

  • Fixed interest rate.

Impact on Solar Projects

  • Capital accessibility for small businesses.

  • Cost reduction with predictable energy costs.

  • Economic incentive for property improvements.

Eligibility and Use:

  • For-profit businesses with specific financial criteria.

  • Up to $5 million for most businesses.

  • Structured with private-sector lender, CDC, and borrower.

Application Process

  • Application through a CDC.

  • Project assessment for SBA 504 program goals.

  • Timeframe varies based on project complexity.

Long-Term Benefits

  • Sustainable growth, reduced operating costs.

  • Challenges: Property occupancy, limited refinancing options, and market variability.

U.S. Department of Energy

Low-Income Communities Bonus Credit Program

    • Increase renewable energy adoption in underserved communities.

    • Encourage new market participation.

    • Benefit marginalized communities.

    • DOE, Treasury, and IRS partnership.

    • Bonus credits for solar and wind facilities (<5 MW).

    • 10% for low-income communities or on Indian land.

    • 20% for low-income residential or economic benefit projects.

    • Categories for different locations and projects.

    • 50% of each category reserved for specific criteria.

    • Online application with category, ownership, location, and size details.

    • Early applications treated simultaneously.

Energy Community Bonus Tax Credit

    • Tools by IRS and Treasury.

    • Cover MSAs, non-MSAs, and areas with fossil fuel history.

    • Additional 10% tax credit for eligible projects.

    • Released April 4, 2023.

    • 10% ITC boost for eligible projects.

    • Definition and criteria for Energy Communities.

    • Confirmation at service placement or project location.

    • Fixed Energy Community status if construction begins in such areas.

    • Location determination tests.

Behind the Meter Solar Projects

Control by Property Owner

  • Property owner has control over the project scope (within code limits).

  • Example: Off-grid cabin in the woods.

Financing Models

Purchase Model:

  • Owner purchases solar panels as assets.

  • Installation companies may offer financing.

  • Monthly cost is often less than traditional electricity expenses.

    Lease Model:

  • Owner pays fixed monthly payment (PPA).

  • Challenge if property is sold in the future.

    Residential vs. Commercial:

  • 50/50 split in residential; lease/PPA more common in commercial.

Financing Sources

Commercial Banks:

  • US Bank, Wells Fargo, and others are involved.

  • Tax Equity Investments also play a role.

    Private Equity:

  • Black Rock, Siena Capital, and brokers.

  • Usually involves debt instruments.

Front of Meter Solar Projects

Utility Scale Projects:

  • Longer timeline, involves utilities, interconnection permits.

  • Fast track: Utility determines demand and issues RFP for bid.

Development Funding

Land Purchase Options:

  • Needed for development.

Permit-Ready Package:

  • Geotech studies, surveys, permits.

Development Fee:

  • Typically 15%; some banks allow pledging to equity.

    Line of Credit:

  • Developers use it for materials, with net 30 terms.

Funding Sources

IRA Fed Tax Credit:

  • 30% direct payment option.

  • Additional 10% for "Made in USA."

Job Creation Incentives:

  • New markets tax credits, Inflation Reduction Act.

DOE Grants:

  • Up-front grants for development.

    Tax Equity Partners:

  • Coast Energy, Pentagon Partners; excellent depreciation benefits.

    Key Thoughts:

  • Developers handle financing; wholesalers focus on adding value.

  • Consider offering credit and helping with processes.

  • Explore potential financing gaps through NCT.