If you are an owner of a commercial or industrial property who is thinking about investing in a rooftop solar energy system, there is no better time to do so than right now.
A U.S. Department of the Treasury cash grant program designed to promote the production of electricity from alternative sources of energy such as solar and wind is now in effect that makes solar an extraordinarily attractive investment. But, because it is set to expire at the end of 2010, it is important to act now.
The program, the Section 1603 Renewable Energy Treasury Grant Program, offers a cash grant of up to 30 percent for qualified solar projects undertaken by the end of 2010. The program is part of the American Recovery and Reinvestment Act of 2009 (ARRA), commonly known as the Stimulus Act or the Recovery Act.
The program has been widely credited with contributing to strong growth in the renewable energy sector, as well as creating thousands of green jobs and helping the nation meet its renewable energy goals. Nearly $2 billion was disbursed in 2009, helping to stimulate nearly $9 billion of new private investment and creating approximately 72,000 jobs in wind and solar alone.
But, you may ask, isn’t it too late? If I’m only thinking of solar now, is there still enough time to take advantage of the Treasury Grant Program before the end of the year?
The answer is that there is still time — as long as work begins this year. And making a year-end push to begin work on a solar installation in 2010 is well worth the effort. With commercial solar rooftop installations costing hundreds of thousands or even millions of dollars, the Treasury Grant Program could bring huge savings.
The solar industry is pressing Congress to extend the grant program, but since there’s no guarantee this will happen it makes sense to begin a solar project before the end of the year in order to reap the financial benefits. Which leads to the question: How does the Department of the Treasury define “begin”?
The beginning of construction is defined in two ways. The first is the beginning of physical work “of a significant nature.” The physical work must also be continuous. In other words, with the exception of disruptions that are beyond a grant applicant’s control, starting and stopping is not permitted.
The good news for those looking to jump on the solar bandwagon by year’s end is that the work need not take place on site — it can also include work that takes place under a binding written contract with receipt of payment to manufacture solar components. In other words, the manufacture of solar panels for your project also qualifies.
The beginning of construction requirement also can be satisfied with a 5 percent cost safe harbor (the safe harbor test) provision, which occurs when the applicant pays or incurs 5 percent or more of total eligible project costs. Since a 5 percent payment typically goes toward solar panels, however, the 5 percent usually satisfies both definitions.
Finally, the application for a project on which work begins in 2010 must be submitted by Oct. 1, 2011. The government will make payment within 60 days of the date of the application or the date the system is placed into service, whichever is later. Stringent reporting is required to ensure the project continues to meet guidelines.
The pending expiration of the grant program has stimulated a flood of investment in solar, with the result that orders for traditional crystalline solar panels are backlogged, making it difficult for those who are trying to beat the deadline to meet the beginning of physical work requirement through the manufacture of solar panels.
Wise investors might wish to seek out solar module manufactures with innovative technologies that are either not on backorder or can begin work quickly. For example, Solyndra panels, which are usually installed in conjunction with a light-reflecting white roof have two advantages. First, because the new roof is considered part of the solar asset, its cost is included in the 30% grant and second, because the project begins with the remediation of the roof, work could still begin in 2010.
Other manufacturers might have similar benefits but building owners will need to hurry to investigate them in order to start work before the end of this month.
Owners of commercial facilities are in possession of an underutilized asset that can potentially be turned into a valuable profit center. The availability of the federal grant, along with state incentives and a wide range of financing options — some requiring zero funds down — make now the ideal time to invest in solar.