California energy policy has never been more clear, favorable or stable. Three policies in particular combine to create an attractive but short window of opportunity for Californian’s considering solar or other renewable energy projects. Let’s consider Net Metering, Meter Aggregation and the Investment Tax Credit in turn.
Today the California PUC issued a decision which clarified Net Metering policy (Perera AB327) for those considering solar or other renewable energy facilities. The decision removes uncertainty by ensuring that all customers who are considering Net Metered systems have time to complete their projects and will continue to receive bill credits at full retail value for Net Metered electricity for the first 20 years of operation of their solar systems.
But the window is closing – For PG&E, SCE and SDG&E, current Net Metering rules will expire when net metered capacity reaches 5% of customers’ combined peak demand or July 1, 2017, whichever is earlier. Those who delay and complete projects after the Net Metering window closes will be transferred to the new net metering rules known as NEM 2.0 that will be developed over the next year and a half. For more information see our Net Metering page.
The Solar Window of Opportunity opened a bit wider this year with the passage of Meter Aggregation in PG&E territory; it will pass in SCE and SDG&E territories soon. Meter Aggregation permits renewable energy system owner to allocate solar energy to various loads on existing or adjacent parcels… whether leased or owned. For more information see our Meter Aggregation page and glossary.
Investment Tax Credit
The Business Energy Investment Tax Credit (ITC) provides a dollar-for-dollar reduction in federal income taxes; it can be taken against the Alternative Minimum Tax and can be carried forward 20 years. The ITC varies depending on the type of renewable energy project; solar, some fuel cells and small wind are eligible for credit of 30% of the cost of development, with no maximum credit limit. Hence a $1 million project would provide a $300,000 tax credit in the year of project completion.
The value of the ITC depends a great deal on timing. If you seek a reduction in 2014 taxes it is prudent to contract your energy project in Q2 to ensure adequate time for permitting, design, procurement, installation, utility interconnection/inspection and inevitable delays. In any case it is prudent to contract in 2015 and complete projects early in 2016 as the ITC will decline from 30% to 10% n January 1 2017. It is easy to predict a large backlog of projects in late 2016 as the marketplace rushes to capture this incentive; the utilities will get backed up.