Escalating utility costs, generous incentives and an increased need for more sustainable energy sources have created a robust renewable energy industry in New York. While the best renewable energy plan for your business should be tailored to meet your individual needs and geographic location, there are a few basics to understand before taking the next step toward a site-specific evaluation.
There are a number of options available for small businesses to install solar panels in metropolitan New York and Long Island. These include:
- Direct purchase: This is the most common option, and involves the business purchasing the solar panels outright. The business will then be responsible for the upfront cost of the system, as well as any maintenance or repairs that may be needed. However, the business will also be able to take advantage of the federal tax credit for solar energy, which can offset the cost of the system.
- Lease or PPA: These are financing options that allow businesses to install solar panels without having to make a large upfront investment. Under a lease, the business will lease the solar panels from a solar company, and the solar company will be responsible for maintenance and repairs. Under a PPA, the business will sign a power purchase agreement with a solar company, and the solar company will sell the business the electricity generated by the solar panels.
- Community solar: This is a newer option that allows businesses to participate in a solar project without having to install solar panels on their own property. Community solar projects are typically located on large, unused parcels of land, and businesses can purchase a portion of the solar energy generated by the project.
The best option for a particular business will depend on a number of factors, including the size of the business, the amount of electricity the business uses, and the budget for the project. However, all of these options can provide businesses with a way to reduce their energy costs and make a positive impact on the environment.
NY-Sun offers financial incentives to install solar panels for residential, nonresidential, and large commercial and industrial projects. The incentive program is divided into regions across the State.
NY-Sun assigns a certain amount of incentives to each of the three regions. Each region is then broken into blocks that are designated an allocation of megawatts (MW) eligible for NY-Sun incentives. Incentives remain available until all blocks within a region/sector are fully subscribed.
NY-Sun intends to phase out incentives within a reasonable time frame as market conditions become more favorable to solar. The MW block structure is designed to support solar markets in the areas where support is needed most, and decrease incentives as they become less necessary to a self-sustaining solar market throughout New York.
The NY-Sun program in Long Island is currently closed. Ample capacity remains available in the ConEdison region for small commercial systems (200 kW max) and 5% of program capacity remains available for residential systems.
The Inflation Reduction Act of 2022 (IRA) made significant changes to the solar Investment Tax Credit (ITC). One of the most important changes was the introduction of the Direct Pay option for tax-exempt organizations. The Direct Pay option allows non-profits to receive a direct payment from the IRS for the value of their ITC. This is a significant improvement over the previous system, which required non-profit organizations to find a tax equity investor in order to take advantage of the ITC.
The Direct Pay option is available for non-profits that own and operate solar projects. The amount of the direct payment is equal to the ITC for the project, which is currently 30% of the cost of the project. There is a 10% “Domestic Content” adder for projects that source materials manufactured in the United States, but the supply chain to support this benefit is still in development, so the availability of the adder is limited. We expect this to change in 2024-25.
Here are some of the key features of the solar ITC for non-profits under the IRA:
- The ITC is available for non-profits that own and operate solar projects.
- The amount of the ITC is 30% of the cost of the project.
- Nonprofits can choose to receive the ITC as a direct payment from the IRS.
- The Direct Pay option is available for projects that begin construction before January 1, 2025.
- Please work directly with your tax professional to quantify your project’s specific tax benefit.