Brian Sadler, VP of Solar Renewables, talks about the solar financing options that are available for homeowners in Massachusetts, how people can take advantage of them, the process for applying for solar rebates and tax credits, and solar financing on commercial projects.
John Maher: Hi, I’m John Maher, and I’m here today with Brian Sadler, Vice President at Solaris Renewables, a solar company in Massachusetts providing premium solar and storage technologies with exceptional customer service; and designing, installing and servicing solar systems in Massachusetts, Southern New Hampshire, and Maine. Today our topic is financing and solar incentives. Welcome, Brian.
Brian Sadler: Thanks, John. Appreciate being with you.
Financing Options Available for Solar Installations in Massachusetts
John: Sure. So, Brian, what are some of the financing options that are available for solar installations here in Massachusetts?
Brian: Great question, and this is big kind of a biggie, and we hear there’s a lot of misinformation, like the “operator” game when we were kids, where you whisper to the next one, and by the time it gets all the way around the room, it’s a totally different interpretation of what was originally said. And we hear this a lot. So I would say this; there’s two general buckets in terms of acquiring solar. There’s owning the system and then there’s leasing the system, or what we call third party ownership.
So, owning the system, you can obviously pay for it outright from your own type of financing, be it however you have access to cash, and paying for the system outright. And then, in those terms, we’re thinking about how quickly is it going to pay for itself, return on investment, payback years. And then there’s loan options. And the loan options have matured tremendously. It’s a huge industry now, and there are different mechanisms specific to solar and batteries and peripherals for a project. So it’s all set up to be really easy, transparent online portals, everything’s online, electronic signatures, great customer service, that kind of piece. So, there’s really a variety of loan options, I would say.
And then on the other side of what we call “third party ownership”, there’s really two avenues. There’s leasing and then there’s PPA or Power Purchase Agreement. Both of them are basically mechanisms to allow, really, more people to be able to access solar and to keep it simple. That’s really what it comes down to. It’s a different finance mechanism. This is the real avenue that gets a lot of play and bad press and gives our industry, sometimes, a challenged name. And what we have to overcome a lot of times in educating homeowners on how solar works.
Everyone just assumes that’s the only way to go about it, is that you’re going to “lease my roof” or these types of comments that we hear. But really, it’s just a financing mechanism. And what it is that that finance company is going to do is take the tax credits, federal and state, any other local incentives, and then they’re going to pass through, back to the homeowner, cheaper electricity. So you’re really swapping your bill or you’re swapping your utility with a solar utility, with buying the electricity that your solar panels make in the case of a PPA. Or leasing it, you’re going to have a lower monthly payment than you do today because you are realizing some of those net benefits and incentives. They’re just being passed through to you in a different fashion and someone else has taken them.
This is a great opportunity for folks to go solar who are on fixed incomes, have maybe a great credit score, but maybe not a lot of cash on hand, are retired and have no tax equity, things like this, that there’s a mechanism for those folks to be able to go solar as well. So really, it comes down to owning or leasing and what’s your tax situation, what’s your interest to understand and realize the incentives. A lot of homeowners just want cheaper power. They don’t really want to understand how the pieces work. Then potentially third-party ownership is a great opportunity for them to go solar.
Taking Advantage of State and Federal Solar Incentives
John: Okay. And then go ahead and talk a little bit more about the incentives, whether they’re from the state or from the federal government and the role that those play in allowing people to get solar power.
Federal Solar Tax Credits
Brian: Right. We’re fortunate that there has been, federally, a tax credit that has incentivized folks to go solar here since 2007, I believe. And it was supposed to sunset and then it came back and then it was supposed to decline, and it did for a year or two, and then it came back. And it’s a significant piece to being able to save money right away, especially here in Massachusetts because of our other local incentives as well. So, the federal tax credit at 30%, that covers 30% of the cost of the solar system. So, it’s really significant.
State Solar Tax Credits
The state here in Massachusetts offers a $1,000 federal estate tax credit as well. It’s technically 15% of the gross cost of the system, but it’s capped at a thousand. So right now everyone gets a thousand dollars. And then those, how they work for the individual or family really depends on their individual tax situation and that’s what you want to talk to your local CPA or tax professional about. But you want to get some basic guidance on how that works and how it can be used in terms of the economics of the solar system from your installer.
Local and Municipal Solar Incentives
And then there’s local incentives. So here in Massachusetts we have an income program. It’s renewable energy credits. They’re based on the performance of your system and their cash payments made to the customer, on a quarterly basis, based on how many kilowatt-hours their system is making. And again, there’s more nuance to it. And we would go into greater detail with our clients during the education process.
There are also 41 municipal light plants here, or utilities, in Massachusetts, and each one of those has its own solar program. A lot of them have a rebate, their own rebate. So in lieu of this stream of revenue over, we’ll call it 20 plus years, that you might get from the renewable and energy credits, that utility is going to take the renewable energy credits and trade that for an upfront rebate.
So in year one, customers in these municipal light plants are going to be able to realize tax credits and then a significant check back to them from their utility in the form of a rebate. So really significant incentives there.
Net Metering
And then of course, the bottom line that everyone’s going to get, regardless of what financing mechanism you use, is net metering. The net metering is the program that’s going to give the electricity savings through having a bidirectional meter that allows you to build up credits in the months of overproduction and use those credits for future months when your solar system doesn’t cover your full need.
So we have a really robust net metering program, one of the strongest in the country. It’s in the regulation, the utility regulations tariff. So it assures all homeowners and businesses of getting that metering, if their system qualifies. And we’re very lucky to have these robust incentives, but it’s really a necessity given that we don’t source or make fossil fuels or energy from fossil fuels here in the state. And the renewable energy sector allows us to have some energy security for our region.
How To Apply for Solar Rebates and Tax Credits
John: And with those rebates and tax incentives, what’s the process that the customer has to go through to apply for and receive those rebates? And is that something that Solaris helps with?
Brian: Absolutely. Great question, John. We don’t do taxes, so that’s one thing we don’t do. But everything else we do handle on behalf of the customer, in the case of the renewable energy certificates or whatever the current income program is, the registrations of the state, and the utility. However that current program works, we get the paperwork from the customer upfront, we then file the paperwork at the appropriate time, and take care of that on the behalf of our customers.
Same thing if a rebate program is through a municipal light plant. We generally handle that paperwork too, make sure we have the proper filings, the proper equipment, the proper communication set up as well.
And then net metering is all through what we do with the utility for the application and regulations as well. So we handle everything for your solar and energy system aside from doing your taxes for you.
Solar Programs for Low-Income Households
John: Okay. Are there any special programs for low-income households in Massachusetts?
Brian: There are. We’re very fortunate that our state, again, is very progressive and aggressively seeking the adoption of renewables in specifically solar and storage as well, and other peripherals. And they’ve also really seen the disparity between who’s getting solar and who’s not, and have tried to incentivize and create programs for mid- and low-income families to be able to access solar more easily. So, there’s financing mechanisms, there’s different programs through the utility, and depending on which utility you’re in, and then what area you’re in, there’s different cities that have some programs as well. And there’s some rebates to be had, as well, through the utility, depending on the products and services that they’re looking for. So absolutely, there’s more and more access to energy security through solar and storage systems than ever before for all individuals and families.
Solar Financing for Commercial Properties
John: And then finally, can you provide some guidance on solar financing for commercial properties? Maybe I have a company and I wanted to get solar installed in my company. Does that work differently than with households?
Brian: It does. And great point because we do have a lot of customers that also own or are involved in businesses and want to say, “Hey, my friend or whoever, we got this building, and let’s check it out here. It works great for me at my home. I want to see how it works for my business.” So absolutely, we do a lot of that work in that space as well. And then, I would say, there’s even more financing opportunities in commercial, or more variables I guess I should say. So you can still have the same model where it’s like own or third-party ownership. There’s still kind of two avenues there. But inside of that, there’s a lot more nuance and different programs inside of that. So the loans might have different mechanisms for different incentives that are specific to the businesses.
And then with the new Inflation Reduction Act, there are some other criteria. For instance, domestic content, prevailing wage, there’s direct-pay options for the tax credit. So the commercial finance industry has further mechanisms to treat whatever the project scope is and to make sure that it makes sense for the business owner as well. And then of course there’s, very commonly as well, there’s this Power Purchase Agreement or PPA, which is a common third-party owned, and there’s that model as well.
And then some of the additional benefit that…I touched on a couple of them, but a huge piece is the depreciation that business owners can take from a solar system. It can be the equivalent, or even greater, than the tax credit in a lot of cases. And you can accelerate that depreciation and realize it a lot sooner than you could over the five- or six-year depreciation schedule. So, the economics, a lot of times, in the commercial sector really jumps off the page. And then there are a variety of financing mechanisms that have treatments to make it work for the individual businesses’ tax situation and income situation.
John: All right. Well, that’s really great information about financing and solar incentives. Brian, thanks again for speaking with me today.
Brian: Great, John. Thanks a lot for having me.
John: And for more information, you can visit the website at solarisrenewables.com or call 781-270-6555.