One of the biggest criticisms leveled about solar is its intermittent nature: the majority of energy is created when the sun is shining brightly, but virtually none is generated at night or when there is a lot of cloud cover. Storage systems combined with solar are proving to be a viable option in regions where traditional energy sources dominate the grid. Additionally, these storage plus solar projects also offer significant economic incentives to invest in.
Incentives for energy storage projects
Due to the contribution of two important federal tax incentives, renewable energy investments are becoming more appealing. Depending on who owns the battery and how it is utilized, the investment tax credit (ITC) and the Modified Accelerated Cost Recovery System (MACRS) depreciation deduction may apply to energy storage systems such as batteries.
Battery storage systems that are held directly by a public institution, such as a public university or a government agency, are not eligible for tax-based incentives. Battery systems that are owned by a private party (i.e., a tax-paying business) may be eligible for some or all of the federal tax benefits listed below.
Modified Accelerated Cost Recovery System
Without a renewable energy system, battery systems may be eligible for the 7-year MACRS depreciation schedule, resulting in a 20% decrease in capital cost.
If the battery system is charged by the renewable energy system more than 75% of the time on an annual basis, the battery should qualify for the 5-year MACRS schedule, which equates to a 21% decrease in capital expenditures.
Investment Tax Credit
Battery systems that are charged by a renewable energy system more than 75% of the time are eligible for the ITC, which is presently 30% for PV systems and will drop to 10% in 2022.
Battery systems that are charged by a renewable energy system 75%–99.9% of the time are eligible for that percentage of the ITC value.
For example, if a system is powered by renewable energy 70 % of the time, the 30% ITC is multiplied by 70%, resulting in a 21% ITC rather than a 30% ITC (the tax credit is vested over 5 years, and recapture can occur in unvested years if the percentage of renewable energy charging declines). On a yearly basis, battery systems that are charged by a renewable energy source 100% of the time can claim the entire value of the ITC.
The tax exemptions for solar projects
Property Tax Exemptions
Property tax exemptions allow companies and households to deduct the additional value of a solar system from the assessment of their property for tax reasons. A tax break makes it more affordable for a taxpayer to install a solar system on a home or business property. Because property taxes are collected at the municipal level, several states have given local taxing authorities the option of providing a property tax benefit for solar. Property tax exemptions for solar energy are available in 36 states.
Sales Tax Exemptions
Sales tax incentives generally give a state sales tax (or sales and use tax) exemption for the purchase of a solar energy system. This sort of exemption aids in lowering the initial expenses of a solar system. There are 25 states that exclude solar energy from sales taxes.
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