Now that Congress has extended the Investment Tax Credit (“ITC”) for five more years, new profitable opportunities to deploy solar have opened up for companies and real estate owners. Solar energy — deployed at the right locations, in the right way — makes solid economic sense.
Will you reap the benefits: financial, sustainability, brand value and long-term energy security?
That depends. Have you analyzed your options? Do you have a five-year plan?
With commercial and industrial (“C&I”) solar, there is no one-size-fits-all solution. To maximize the benefits, you need to evaluate all of your properties and determine where, when and how to deploy solar. The analysis can be daunting — with variations in local incentives, technologies, utility rate structures and rules, installation costs, vendors, financing and other factors.
And, five years is not a lot of time if you own a number of properties in different states across the country. The full 30% tax credit is in place for only three years — through 2019. How quickly can you cut through the complexity, make sound decisions and complete projects in a profitable, confident manner?
This is where Alta Energy can help.
FIND THE PROFITABLE SITES TO UTILIZE THE TAX CREDIT
The ITC will be phased out gradually, which provides a rational “soft landing” and enables companies and property owners to make smart investment decisions. The investment tax credit is 30% through 2019, then drops to 26% in 2020, 22% in 2021, and 10% in 2022 and beyond. The 2015 legislation also includes a “commence construction clause” which extends the credit to solar projects that started development before the deadlines listed above, as long as they are completed by the end of 2023.
How does the ITC extension affect the economic value of C&I solar projects? It provides an ability to plan solar deployments in a more systematic fashion and better anticipate when and where projects might meet internal return requirements. Alta Energy’s white paper, “The Sun Also Rises: The Solar Investment Tax Credit Extension and New Opportunities to Profitably Deploy Solar,” analyzes the impact on returns (internal rates of return or IRRs) from a solar project with and without the ITC extension. The disruptive 2016-2017 drop in returns without the ITC extension is replaced by steady returns and a more predictable curve of energy costs with the ITC extension. Even as the tax credit tails down in later years, the returns more than support the economics of a solar system, due to falling solar installation costs and increasing utility rates along the way.
With the ITC in place through 2022, companies and real estate owners can analyze all the properties in their portfolios in a disciplined manner and rank the solar potential of each property to provide a strategic deployment picture. Properties can be grouped by IRR into “Deploy,” “Watch” and “Wait” categories. (See chart below, colored green, yellow and red.)
The analysis is based on assumptions about energy rate increases and installation price declines for each specific location (3% and 5%, respectively, in the table below).
To learn more about this approach and the analysis presented in the table, download Alta Energy’s ITC white paper here .
This methodology requires a company or property owner to dedicate the resources and time to assess its property portfolio and create the right metrics up front (operational savings, project IRRs, energy offsets, carbon offsets, etc.). Then a disciplined deployment strategy can be established. Armed with this strategy and analysis, energy managers can have confidence in the plan and gain long-term buy-in from vital decision-makers and stakeholders. The next five years can then be spent deploying solar – and other renewable energy systems – efficiently and profitably. This results in a more structured, time-efficient and profitable approach than reacting to one-off, often disruptive, deployment opportunities.
HIT A MOVING TARGET?
It is par for the course in the complex energy policy environment that there will be unpredictable factors moving beneath the surface all the time. Policy changes are one of many potential moving pieces in the solar future, and the ITC extension helps stabilize the economics of C&I solar. It also makes markets far less reliant on state-level incentives in the coming years, which in the past have been major drivers in determining whether or not a state has favorable solar energy policies. However, companies and real estate owners should continuously monitor state incentives and their impact on the economics of potential solar sites in their portfolio.
Your five-year solar plan should incorporate “check points” and other ways of looking out for variabilities so you can fine-tune your strategy along the way. Ongoing monitoring of the economics within a consistent framework, along with knowledge and flexibility, are the keys to successfully executing a long-term strategy.
With only three years of full investment tax credit support, now is the time to go solar — with a solid deployment plan that delivers dependable returns and sustainable climate benefits.
ABOUT ALTA ENERGY
Alta Energy’s sole focus is to help companies analyze and deploy renewable energy efficiently and profitably. We work with Fortune 1000 companies, real estate firms and other enterprises to help define their financial and sustainability goals; create deployment strategies fitting their unique needs and limitations; and then execute these strategies while they continue to focus on their core business activities.
We provide on-site solar, off-site renewables, energy storage and other renewable energy solutions. We are objective and neutral with respect to vendor, technology and financing structure options. We do what is best for our customers.
We welcome the opportunity to hear your unique needs and goals, then help you develop and execute a customized, profitable solar strategy for the next five years. www.altaenergyinc.com