In addition to the state and federal incentives that have stimulated the growth in New Jersey's solar industry, the federal government has augmented incentives for solar and other renewable energy sectors by including a 100 percent bonus depreciation provision in the 2010 Tax Relief Act.

The bonus depreciation allows companies to claim an immediate deduction of 100 percent of the eligible costs of a solar facility in the first year, instead of depreciating it over five years.

"The combination of the Treasury Grant, the 100 percent bonus depreciation and the SREC program reduce the payback for a commercial solar system from five to seven years to three to four years," said Jamie Hahn, managing director of Manasquan, N.J.-based Solis Partners.

"The financials are so attractive that many commercial building owners initially view the investment as too good to be true."

With the availability of various financing options, commercial building owners can finance a project by investing little or no equity. Alternatively, building owners may elect to lease their roof space to a third-party investor, turning an underutilized asset into new rental property income.

After the initial investment is paid back, the commercial property owner will reap the benefits of free on-site electricity generation for 20+ years, as well as receive significant income from state incentives that reward renewable energy production. To prospective tenants, the property is more attractive due to reduced operating costs and long-term fixed energy rates.

New Jersey has one of the nation's largest concentrations of flat-roofed commercial buildings, which are an ideal platform for deploying solar. The state has been dubbed the "Saudi Arabia of rooftops" by a state energy official. The proliferation of rooftop solar has made New Jersey a national leader in solar, second only to California in installed solar capacity.

To date, the key federal program driving the growth of solar has been the Treasury Grant that was extended through the end of 2011 as part of the Tax Relief Act passed by Congress on December 17th. The cash grant covers 30 percent of qualified renewable energy project costs.

Under the program, New Jersey has received more than $72 million in solar grants, representing an investment of more than $240 million in 164 solar projects.

In addition, congress has increased the bonus depreciation allowance from 50 to 100 percent. The 100 percent bonus depreciation will be an additional stimulus to the solar industry, but the catch is that projects must be in service by the end of 2011. Because of this requirement it is imperative for commercial building owners to start planning now since installations can take 4 to 8 months to construct and commission.

"The bonus depreciation allowance means that, presuming there is income to offset, the capital cost of a solar installation may be written off in one year instead of five," said George S. Livanos, a principal with the Sax Macy Fromm and Co. accounting firm.

"In addition, bonus depreciation can create a net operating loss that can be carried back to the two prior tax years, providing an immediate refund, as well as carried forward for 20 years."

The 2010 Tax Relief Act also provides for a bonus depreciation allowance in 2012, but the allowable deduction will be reduced, reverting from 100 to 50 percent of the eligible basis. (The eligible basis is reduced by one-half of the amount of the federal cash grant.)

The combination of the federal cash grant and 100 percent bonus depreciation makes solar highly affordable, reducing the upfront cost by 60 percent or more.

In the case of a $15 million commercial solar system, for example, the building owner would receive a 30 percent cash grant under the federal Treasury Grant Program for $4.5 million, as well as a savings of approximately $4.5 million from the 100 percent bonus depreciation on a depreciable basis of $12.75 million ($15 million minus one-half of the cash grant), assuming a tax rate of 35 percent.

In this example, therefore, $9 million of the $15 million cost - or 60 percent - would be recoverable in 2011. In addition, the owner would receive income from the sale of SRECs (solar renewable energy certificates).

An SREC, which represents 1,000 kilowatt-hours of electricity, is a production-based state incentive for renewable energy. SRECs, which represent an environmental benefit, are tradable certificates for the first 15 years of operation.

"2011 will be the best year for solar yet," predicted Hahn. "The combination of 1603 and bonus depreciation will drive investment in solar and other renewable energy projects. A three-year payback is as good as we have seen it."

del.icio.us	Digg	Reddit
YahooMyWeb	Google	Facebook

Memory Foam Mattress Review

SPACE MEDIA NETWORK PROMOTIONS Solar Energy Solutions Tempur-Pedic Mattress Comparison ... Newsletters :: SpaceDaily :: SpaceWar :: TerraDaily :: Energy Daily XML Feeds :: Space News :: Earth News :: War News :: Solar Energy News