As more people become conversant with the dangers of fossil fuels and gases, they become environmentally conscious and look for sustainable solutions to everyday needs like energy. And this has made way for the solar industry to blossom.
Solar energy refers to energy from the sun. The sun gives off radiation that can produce electricity using a photovoltaic system. And this system uses panels and mirrors to convert the sun’s energy to renewable electricity that has little or no effect on our environment.
With the benefits of solar power and how it can save a nation’s resources and environment, governments encourage their citizens to use it. For instance, in New York, the government offers several solar programs to encourage homeowners and businesses.
Embracing solar power might not be easy for some people due to the costs of initial installations and purchases. However, they may become more open to it with beneficial laws and incentives.
Learning a thing or two about the incentive programs in your area can boost your interest. So, if you stay in New York City and are indecisive about whether or not solar is for you, this article might help. We will discuss three types of incentives offered in New York.
Types of Incentive Programs in New York
The New York government offers several incentive programs for solar users. However, we could group them into three – tax incentives, solar rebates, and performance-based bonuses.
Tax Incentives
Producers usually calculate and add their cost of production, tax, profit margin, and other expenses before fixing the selling price of goods. So, paying more taxes can increase the cost of a product and vice versa.
The government understands the impact of taxation on businesses and uses it as a tool to control the economy. Also, they can use it to motivate sales in a particular industry.
For instance, tax burdens on the production of photovoltaic technology used in solar systems are expensive. And this is the major reason for the high cost of the system. However, reducing taxes on the technology can lead to a reduction in the cost of the system.
There are two major types of tax incentives offered in NYC. They include tax credits and exemptions.
Tax Credits
Here, the government provides some discount on purchasing a solar system in the form of tax credits. And these are offered at both federal and state levels. For instance, in New York, you are entitled to a 30% tax credit claim as a Federal benefit after purchasing a system worth over $20,000. Also, the state gives you a 25% tax return.
So with these tax credits, you can cover half the cost of your installation. Also, these offers are available to both businesses and homes. You can click on https://www.investopedia.com/ to read more about tax credits.
Tax Exemptions
The government also offers some exemptions on taxes that apply to purchasing or installing a solar system. And this is a popular tax incentive in most places in the United States.
There are two types of tax exemptions. They include sales exemptions and property exemptions.
Sales Exemptions
After purchasing a product, you are charged a percentage tax. However, the government offers a tax-free purchase to increase solar energy consumption. Also, this helps reduce the cost of the system and make it more affordable.
Property Exemptions
Homeowners are usually charged higher taxes after making some improvements to their building. This is because home improvements increase the value of the property. However, the government does not charge any tax for improvement in home value that concerns solar panels.
Solar Rebates
Rebates are incentives that offer you cashback after a purchase. And it is usually subtracted from your purchase costs. You can read this article to learn more about rebates.
Although sales-men use rebates to drive sales, the government also offers them to increase interest in this renewable energy source. However, there are some requirements you need to meet to be eligible for it. For instance, you might be required to install a particular system design before qualifying.
Furthermore, rebates are calculated before tax credits when calculating your overall benefits. For instance, if you have a 10% rebate on a $20,000 system purchase, it will be calculated and subtracted from the cost before tax credits. So, instead of getting a tax credit on $20,000, you will get a credit on $18,000, which is the balance.
Performance-Based Bonuses
Asides from tax benefits and rebates, the government also offers other incentive programs like performance-based bonuses. However, these are focused on increasing cash flow within the system and for users.
Performance-based programs can be classified into two. They are bonus payments by kilowatt-hour and SREC (Solar Renewable Energy Credit) bonuses.
Bonus Payment by Kilowatt-Hour
These bonuses are calculated and offered based on the amount of kilowatt your unit generates per hour. For instance, you can receive up to 5 cents for each kilowatt you generate, depending on your local electricity cost. So, if your local electricity costs 20 cents for each kilowatt consumed, you can receive 10 cents. With this, you save 30 cents for each kilowatt.
These kinds of bonus payments help consumers reduce their payback duration and increase the profit on their investment. However, there is usually a limit on the capacity, and it is often smaller. For instance, a performance bonus program launched in Massachusetts in 2018 offered a limit of 1,700 megawatts.
SREC Bonuses
A local government can impose energy consumption targets on large utility firms to boost interest in clean energy. Also, the target comes with heavy penalties. So, these large consumers will be required to generate more clean energy, purchase SREC units, or do both to meet the target.
Furthermore, solar system owners are given one SREC as a bonus for generating 1,000 kilowatts per hour. And since the demand for SCRECs is high due to the penalties on utility users, solar owners can earn over $100 on each SREC unit collected.
Conclusion
The solar industry is only just beginning to expand. However, there are some limitations, like the high cost of production. And with high production costs come high purchasing costs. Therefore, some consumers might not be able to purchase it.
However, several incentive programs can help reduce the costs of clean energy. For instance, rebates and tax credits can help cover 50% of purchase costs.