Solar PV Panel Systems for Commercial & Industrial Applications

Solar panels have advanced to the point where they can last many, many years. The consensus is that newer panels will perform for at least 40 years and perhaps even beyond 50 years.

The national average is approximately 164.

Weather is difficult to predict over the short term. Most estimates are that power production will not vary more than 5% from projected production on an annualized basis. Production projections should average out over time. Most projects will have months that exceed projections and months or years where production is more or less than projected.

The project is monitored at least monthly by Solera Energy to ensure all components are working properly. You will also have access to software that allows you to monitor the performance of the system in real time.

Yes. The panels and inverters, the two key components of the system, are covered by manufacturer’s warranties. Solera will review the warranties on selected products with you prior to implementation.

Yes, but it is rare. It would require at least golf ball-sized hail. The panels are usually warranted to withstand golf ball-sized hail and are insured against breakage from weather in general and hail specifically.

Yes. Some insurance policies will already cover improvements made to your property. However, a new solar system is a very valuable asset designed to last for years so we highly recommend that you contact your insurance agent/broker to make sure you have the coverages you need.

Power is measured in kilowatts or megawatts. A 1 MW power plant produces 1,000 kilowatts of power if it is operating at full capacity. When someone says 1 MW, they typically mean the number of kilowatts or megawatts being transferred to the grid. It is a “stream” of power, and it will fluctuate somewhat, even under ideal conditions.

A megawatt is 1,000 kilowatts. A kilowatt is equal to 1,000 watts. A megawatt is equal to 1 million watts.

Solar panels slowly lose their efficiency over time and the rate of loss is referred to as the degradation rate. The rate is estimated to be less than 0.5% per year, and most panels are warranted to produce 80% of their original power at year 25.

Yes. Solar projects will produce power at a reduced level (10% to 25%) on very foggy or cloudy days. All that is required is some level of ambient light.

The solar ITC credit for 2020 is equal to 26% of the cost of eligible solar property installed during the year and is a dollar-for-dollar offset against the owner’s federal income tax liability. For example, claiming a $1,000 federal tax credit reduces your federal income taxes due by $1,000. The solar ITC falls to 22% in 2021.

Eligible solar property includes solar PV panels, racking, wiring, curtain walls, step-up transformers, circuit breakers, surge arrestors, power conditioning equipment, transfer equipment, energy storage devices, installation costs, sales/use tax on equipment, other equipment and supplies necessary for the solar system to operate, and related solar development and construction costs.

Businesses that pay for solar panel installation where the power from the panels is used by the business can claim the solar ITC, so long as the business, or its owners in the case of pass-through entities, have the federal income tax liability in the year of installation. The business must be the owner of the solar panel system to qualify for the solar ITC. If you choose to get solar power through a solar PPA, solar SSA, or solar lease, you will typically not be eligible for the solar ITC because you do not actually own the solar panel system.

The solar ITC is a nonrefundable tax credit, which means you will not get a tax refund for the solar ITC that exceeds your income tax liability for the year. However, you can carry back the ITC one year and carry over the ITC 20 years to obtain a tax refund of your federal tax liability in those years.

The solar ITC is generated at the date the solar system is “placed in service” and must first be claimed in that income tax year before being carried back or carried forward. This generally means that the ITC must first be claimed for the year in which the solar system becomes operational.

The solar ITC is claimed by the C-corporation and does not pass through to the C-corporation shareholders. We recommend consulting with your tax adviser to ensure you are maximizing the federal income tax benefits available to you.

Solar credits generated at the placed-in-service date will pass through to the owners of the partnership or S-corporation as of this date. We recommend consulting with your tax advisor to ensure you are maximizing the federal income tax benefits available to you.

Yes. The solar ITC is a “specified credit” and can offset both regular income tax and AMT.

Yes. The depreciable basis of the solar system is the actual cost of the eligible solar property minus 50% of the solar ITC generated. For example, assume that in 2020 the business installs eligible solar property costing $100,000. The depreciable basis of the solar system is $87,000 ($100,000 cost minus $13,000, which is $26,000 solar ITC multiplied by 50%).

The eligible solar property is depreciated over five years using MACRS depreciation rates for federal income tax purposes. Generally, the MACRS depreciation rates are as follows:

• Year 1 – 20%
• Year 2 – 32%
• Year 3 – 19.2%
• Year 4 – 11.52%
• Year 5 – 11.52%
• Year 6 – 5.76%

Yes, if the solar system is placed in service on or before December 31, 2022.

For businesses that are pass-through entities for federal income tax purposes (for example, partnerships and S-corporations), the owners of the business that “materially participate” may generally claim the credits and depreciation without limitation by the passive activity rules. Owners for which the business is considered a “passive activity” for federal income tax purposes may be limited in their ability to claim the credit and depreciation deductions. Generally, any activity involving the conduct of any trade or business in which a taxpayer does not materially participate, and most rental activities, are passive activities. The passive activity tax rules could cause owners that do not “materially participate” in the business to have solar ITC and losses from depreciation suspended and carried forward until such time the credits and losses can be claimed. We recommend contacting your tax adviser to determine the impact, if any, the passive activity rules may have on your specific circumstances.

Solar credits are “specified credits,” meaning they can offset both regular federal income tax and alternative minimum tax. This generally means that solar credits can offset up to 100% of your federal income tax liability.

Under the tax rules, you are eligible to claim 100% of the solar ITC in the year the solar system is placed into service. To avoid recapture of your solar ITC, you must continue to own and operate your solar system for a period of five years. Once you have owned and operated the system for five years, recapture goes completely away. If you sell or otherwise dispose of your solar system within five years, then a portion of the ITC claimed in the placed-in-service year will be recaptured. The amount of potential ITC recapture goes away 20% per year for each year you own and operate the system — 20% of potential recapture goes away after year 1, a total of 40% of potential recapture goes away after year 2, a total of 60% of potential recapture goes away after year 3, a total of 80% of potential recapture goes away after year 4, and 100% of potential recapture goes away after year 5. For example, assume in 2020 you install a solar system costing $100,000 and claim a solar ITC of $26,000 on your 2020 federal income tax return. If you were to sell the solar system after owning it for only three years, you would be subject to ITC recapture in the amount of $10,400 ($26,000 multiplied by 40% recapture percentage).