Towns, schools can get get a ‘tax break’ for solar panels even though they don’t pay taxes

  • Tom Lewis of Advanced Energy Economy talks at the 2022 New Hampshire Energy Summit in Concord on Monday, Sept. 19, 2022. Sarah Rose PhotoCourtesy

  • ReVision co-owner Dan Weeks stands in front of the largest rooftop solar array in New Hampshire at the Associated Grocers of New England warehouse facility in Pembroke. GEOFF FORESTER / Monitor file

  • Panelists, from left, Erick Johnson of ISO-NE, former U.S. Rep. Dick Swett and Tom Lewis of Advanced Energy Economy answer questions at the 2022 New Hampshire Energy Summit in Concord on Monday, Sept. 19, 2022. Jim Monahan of The Dupont Group is the moderator. David Brooks—Monitor staff

Monitor staff
Published: 9/21/2022 3:17:12 PM

Towns, schools and non-profits should find it even easier to cut their power bill by putting up solar panels or installing batteries, thanks to a dry-sounding provision deep within the complexity of the huge Inflation Reduction Act.

Known as direct payment, it provides an easy way for institutions to get a rebate of 30% of the price of installing solar panels since they can’t benefit from the existing 30% tax break because they don’t pay taxes. 

“This makes it possible for them to take advantage of the tax credit … that they couldn’t before,” said Tom Lewis, a principal at Advanced Energy Economy Institute, a non-profit educational organization. Lewis was one of the panelists Monday at the annual New Hampshire Energy Summit in Concord.

Tax credits, especially the ITC or investment tax credit that covers up to 30% of the installation cost, have long been a big part of the financial calculus for whether to install renewable energy. 

Institutions that don’t pay taxes have a couple of alternative methods to cut the up-front cost of installing solar, batteries or other renewable energy, but they are more complex and sometimes more expensive.

One is tax equity financing, which requires the use of a bank or other financial institution as an intermediary, and the other is a power purchase agreement of PPA, in which  the developer keeps ownership of the solar panels and the institution gets a break on power costs.  PPAs are popular – Dan Weeks of ReVision Energy, which operates in Maine and New Hampshire, said his company built and operates some 220 of them – but can be complicated to set up. 

Under the new direct-pay option, institutions will get a check from the U.S. Treasury Department covering up to 30% of the cost after an installation is completed, Lewis said.

Details are still being worked out, but Lewis said towns and school districts should count on the payment if they’re thinking of asking voters for approval of renewable energy systems at the 2023 annual meeting. “It’s definitely something they should factor in their decision-making,” he said.

Regardless of what they do, however, installation won’t be speedy. Weeks said ReVision Energy has a backlog of orders that is months long due largely to a shortage of trained people to install systems, combined with a rush of interest following the sharp rise in electricity prices announced by the states’ electric utilities this summer.

What is known as behind-the-meter solar, usually relatively small rooftop arrays that are designed to serve just the building they sit on, has become an important part of New England’s power mix. 

During the Energy Summit, speakers noted that almost 250,000 such installations exist in the six New England states providing up to 4,800 megawatts of electricity – roughly four times the maximum output of Seabrook Station nuclear power plant. 

David Brooks bio photo

David Brooks is a reporter and the writer of the sci/tech column Granite Geek and blog, as well as moderator of Science Cafe Concord events. After obtaining a bachelor’s degree in mathematics he became a newspaperman, working in Virginia and Tennessee before spending 28 years at the Nashua Telegraph . He joined the Monitor in 2015.

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