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Although the cost of solar energy systems is expected to decrease significantly over the next decade, financial incentives and policies that stimulate demand still drive solar energy purchases in Philadelphia today. This section provides an overview of benefits and incentives that are currently available to property owners who install solar systems and should be considered when developing a PV project.
Benefits of Solar Energy

As pointed out in the US Department of Energy’s Consumer Guide for Solar ―Get Your Power from the Sun,‖ people decide to buy solar systems for a variety of economic, environmental and philosophical reasons. Some people want to reduce our dependence on finite fossil-fuel resources and prevent the negative associated consequences that come with extracting it and converting it into electricity. Others like the security of reducing the amount of electricity they buy from their utility because it makes them less vulnerable to future price increases. And some people just appreciate the independence that a PV system provides.

Despite these opportunities, there are challenges to installing solar systems. An initial investment is required, paybacks can be long, and paperwork is required for permits and interconnection reviews.

To encourage the use of solar energy and to make PV systems even more affordable, several states and utilities offer financial incentives through solar rebates, net metering, feed in tariffs and other programs. Up-front cash incentives encourage customers to install renewable energy technologies by helping reduce high equipment costs. Rebate and grant amounts are often based on system size or system cost and the funding is typically awarded at the time of installation.

Database of State Incentives for Renewables and Energy Efficiency (DSIRE)

Funded by the US Department of Energy, the North Carolina Solar Center and the Interstate Renewable Energy Council maintain this comprehensive source of information on state, local, utility and Federal incentives and policies that promote renewable energy and energy efficiency. This database, presented for each state, is accessible to the public at www.dsireusa.org . For example, Figure 5.1 presents a comparison of grant programs by states. Selecting a particular state allows the user to drill down to particular programs available in that state. Links are maintained on the site to further information for the conditions for applying for each incentive that is available. When considering a solar project, the DSIRE site should be checked to determine the most up-to-date incentives that are available for the project.

Federal Incentives

To encourage consumers to invest in renewable energy or reduce their energy consumption, the US Congress created a Federal Investment Tax Credit (ITC) for Consumer Energy Efficiency that allows for a 30% credit on federal income tax returns. Applicable to solar energy systems, the credit is based on the full cost for the installation, not just the incremental cost after accounting for rebates from the PA Sunshine Solar Program. rebates (see Section 5.4 State Incentives in Pennsylvania). However there is still some uncertainty whether the Sunshine Program rebates are considered taxable income, which would affect the cost basis to apply the 30% ITC against. The tax credit can be combined with other energy improvements, such as the purchase of energy star appliances. Presently there is not a maximum limit on the total amount of the credit. More detail about the tax credit is available at www.energystar.gov/taxcredits.

State Incentives in Pennsylvania

Through passage of the Pennsylvania Alternative Energy Investment Fund, the State established the PA Sunshine Solar Program fostering solar power to create jobs, promote business development and stimulate energy independence, as well as reduce the environmental impacts from electricity generation and fossil fuel usage. The Pennsylvania Alternative Energy Investment Fund provides the following funding for our solar energy future:

  • $100 million through the PA Sunshine Solar Program to provide loans, grants and rebates that cover up to 35 percent of the costs residential consumers and small businesses incur from installing solar energy technology. It is important to note that these rebate levels are established by DEP and will change over time.
  • $80 million in grants and loans for economic development projects in the solar sector. These solar grants are administered by the Commonwealth Finance Authority.

PA DEP recommends also using the US DOE DSIRE website (www.dsireusa.org) to gain access to the Solar Sunshine Program information as installers/property owners can learn about other rebates and incentives besides the Solar Sunshine Program.

According to the PA Governors Solar Working Group, incentives offered through the Pennsylvania Sunshine Solar Program will reduce the purchase cost of a PV system by a maximum of 35%17. The program has several steps of rebate levels for both the residential and small commercial systems which decline in their amounts based on aggregated capacity levels approved. Originally, the Step 1 rebate level for residential systems was $2.25/watt for PV systems 10 kW or less; however it has dropped into the Step 2 by March 2010, with the rebate level of $1.75/watt. (Note: At the time of publication, all Sunshine program funding for the small commercial has been reserved.) Visit the PA Sunshine Solar website to see current rebate levels available.

The PA DEP maintains the "Guide to Energy/Green Technologies Funding Programs In/For PA." This list should be reviewed to determine funding sources that are best suited for specific projects.

As noted above, the rebate levels in the PA Sunshine Program will decline over time based on the accumulated blocks of solar PV capacity installed; refer to the PA Sunshine Program website (www.depweb.state.pa.us/pasunshine) for further information or current status of the rebate level.

It is worth noting that the price for solar PV modules has dropped by about 20% or more during 2009 which will make solar PV systems more cost effective.

City of Philadelphia Incentives

Philadelphia has committed to purchasing green power to supply 20% of its electricity by 2015, Target 4 of Greenworks Philadelphia. Philadelphia’s goal includes 57.7 megawatts (MW) of solar power by 2021.

In addition to purchasing green power for city owned buildings, Philadelphia has developed several incentives to encourage property owners to invest in green power. Currently Philadelphia offers four types of incentives:

  • Reduction of permit fees: The City is reducing its permit fees to $25 per $1000 of labor (rather than per $1000 of equipment and labor). Given that the majority of solar installations costs are for equipment and materials, basing the fee on labor costs is a noticeable incentive that further reduces the overall project cost.
  • Development of streamlined permit process for small systems: The Department of License and Inspections has developed a streamlined process for small systems (meeting criteria in Section 4), that eliminates the need for an unnecessary and lengthy plan review process. As such, contractors should be able to obtain permits on the day they submit their application, providing the application is complete. Contractors should use the checklists provided in Appendices C, D and E to assure that all necessary information is submitted.
  • Potential financing through the Greenworks Loan Fund: Businesses may obtain reduced rate loans for energy efficiency improvements, including PV installations. This loan is further detailed in Section 5.6: Financing Alternatives.
  • 10 yr tax abatement : A 10 year tax abatement on property value increases resulting from solar improvements can be obtained through the City of Philadelphia, Bureau of Revision of Taxes (BRT).
Financing Alternatives

Property owners may be able to obtain public and/or private financing to help with alternative energy improvements or additions to new construction. New programs or updated information on existing programs is maintained by the Database of State Incentives for Renewables and Efficiency. Programs that are currently available in the Philadelphia area are identified below:

Keystone Home Energy Loan Program. Pennsylvania homeowners who own and are making qualifying improvements to their primary residence located in Pennsylvania and whose combined annual household income is $150,000 or less are eligible to apply for a loan or rebate under the Keystone HELP program. These low-interest loans are funded by Pennsylvania Treasury Department for home efficiency projects and the installation of alternative systems. This program is managed by AFC First, a private lender.

Improvements must be made to 1 to 2 unit owner-occupied dwellings. Work under the secured ―Whole House Improvement Loan‖ or Renovate and Repair Loan programs must be done on a 1-2 unit owner occupied, deeded property.

Applicants also agree to:

  • Complete or provide data on energy usage for completion of the Energy Star Home Energy Yardstick or equivalent;
  • Grant access to utility and fuel consumption data to the Department of Environmental Protection or its designees for 12 months from the date of the rebate or loan (not applicable for Renovate and Repair Energy Star Loan); and
  • Complete a follow up survey in approximately 12 months from the date of the loan or rebate.

More information on the Keystone Help program can be obtained at www.keystonehelp.com.

The Sustainable Development Fund. The Pennsylvania Public Utility Commission created the Sustainable Development Fund (SDF) in the Commission’s 1998 final order of the PECO Energy electric utility restructuring proceeding. The Reinvestment Fund, Inc. (TRF), which was formed in 1985 to build wealth and opportunity for low-wealth communities and low- and moderate-income individuals, administers the SDF.

SDF later received additional funding and responsibilities as a result of the PECO Energy/Unicom merger settlement. That settlement added funding for new wind development, for solar photovoltaics and for renewable energy education, as well as a lumpsum payment and an increase in SDF’s core fund. In total, SDF has received approximately $31.8 million in income from PECO. In addition to the PECO funding, TRF is receiving an additional $21.3 million in federal Recovery Act funding for a revolving loan fund to finance energy conservation improvements in commercial buildings. Between 2003 and 2009, the SDF Solar PV Grant Program provided funding to offset the installation cost for over 225 solar PV systems, totaling over 800 kW of PV capacity mostly in the five county area around Philadelphia. This included over 70 solar PV systems, totaling over 170 kW of PV capacity in Philadelphia alone.

The Reinvestment Fund (TRF) is committed to building a clean and sustainable energy future for our region. TRF provides a variety of financial products and services for businesses, nonprofit organizations, and housing developers to implement energy conservation and efficiency measures and the use of renewable energy and other advanced clean energy technologies. (www.trfund.com/energy)

Greenworks Program Loan Fund. Philadelphia created two sources of green funding for small businesses:

  • $9 million in Greenworks Loans available in amounts from $100,000 to $1 million, and
  • $500,000 in Greenworks Rebates available in amounts up to $10,000.

The funding is a blend of Recovery funds from the Energy Efficiency and Conservation Block Grant and private capital from The Reinvestment Fund.

Applications for both Greenworks Loans and Greenworks Rebates are available now through the City’s Business Services Center.

Private Lenders. Currently only a few private lenders offer loans for alternative energy improvements. In Philadelphia, they can be obtained at several banks including PNC, Beneficial Bank and Sovereign Bank.

Net Metering

Net metering allows the electric customers who generate their own electricity to receive value for the power that the PV system generates but is not used on the property. Currently by Pennsylvania law, investor-owned utilities (such as PECO) must offer net metering to customers that generate electricity.

The Public Utility Commission regulates the terms and rates that utilities provide for net metering. For PECO, residential customers purchase agreements are currently capped at 50 kW; while non-residential customers are capped at 3 MW. Net metering must also be offered to customers with systems greater than 3 MW, but no more than 5 MW, who make their systems available to the grid during emergencies, or where a microgrid is in place in order to maintain critical infrastructure.

If a PV system generates more than the building consumed, then the extra electricity generated (―Net Excess Generation‖) is carried over to the next month as a credit to the customer’s bill at the full retail rate. At the end of the year, the customer is compensated for any net excess generation that is on a customer’s bill at the ―Price To Compare‖ which is determined at the end of the PJM year which is May 31. The price to compare is most likely less than the true worth of the solar generated kWh, so sizing your system to the building usage is best.

Pennsylvania net metering law also allows for Virtual Net Meter Aggregation – whereby a single electric account holder with several accounts (meters) within a 2 mile radius, can take full credit from surplus generation from a PV system interconnected at just one of those accounts. This is a great application for multiple homes, farms, campuses, apartment complexes, townships, and possibly the City of Philadelphia itself.

For the complete Terms and Conditions for Interconnection, visit PECO’s website for Net Metering and Interconnection Requirements.

Solar Renewable Energy Credits

Another benefit of installing a solar PV system is that there is a monetary value associated with its positive impact on the environment as a source of clean energy. In Pennsylvania, this value (or attribute) is known as a Solar Alternative Energy Credit (Solar AEC or SAEC). (Note: This value is known throughout the country under different terms such as Solar Renewable Energy Credit (Solar RECs); however generally speaking they have the same meaning. Renewable Energy Credits (RECs) is a commonly used term throughout the country for credits that are generated from renewable energy sources including solar, wind, small hydro and biomass. RECs are widely used to meet various state renewable portfolio standards and are traded in both compliance and voluntary programs in wholesale and retail markets across the U.S.) A Solar AEC represents 1 MWh generated from a certified source of solar electricity (similarly Solar RECs also typically represent 1 MWh generated by a certified solar electricity source). It is measured through either estimated or actual metered production.

Pennsylvania has an Alternative Energy Portfolio Standard (AEPS) which requires an annually increasing percentage of electricity sold to retail customers in Pennsylvania to be generated from renewable and alternative energy sources. The legislation, Acts 213 and 129, which implemented the AEPS named the credits that qualify for the program, Alternative Energy Credits (AECs). It is important to note that AECs in Pennsylvania are not exclusively derived from renewable energy resources but also include other Pennsylvania-specific alternative resources (such as landfill gas). Goals of the AEPS are accomplished by Electric Distribution Companies (EDCs) and Electric Generation Supplies (EGSs such as Hess, Exelon, etc.) who are required to purchase a certain amount of credits in order to meet their obligation.

As an economic mechanism of Pennsylvania’s Alternative Energy Portfolio Standard (AEPS), EDCs and EGSs can buy and sell Solar AECs within the Pennsylvania Compliance Market in order to fulfill their solar share requirements stipulated under the AEPS. This provides incentives for renewable energy marketers, private businesses and individuals to invest in the development of the solar energy industry in Pennsylvania. This compliance market for solar credits makes it easier for individuals and businesses to finance and invest in clean, emission free solar power.

If a solar PV system is installed at a home or business, the owner can apply for the system to be certified in the PA AEPS program. It is important to note that an owner cannot earn Solar AECs until they submit their application to the PA AEPS program (any electricity generated by the system before an application is submitted will not earn SAECs). Once the system receives a certification number the owner can start tracking and reporting the solar production in order to earn Solar AECs. As mentioned earlier, Solar AECs are issued for every 1MWh of solar electricity through either estimated or actual metered production. SAECs are sold separately from generated power, and can be sold and traded by individual entities, or they can be aggregated and sold through agreements with agents commonly known as ―aggregators.‖ Like any commodity, the price of SAECs is a function of supply and demand. More information about the PA AEPS program can be obtained at www.paaeps.com.

The State of Pennsylvania currently utilizes the PJM-EIS GATS credit registry to issue and track and SAECs/SRECs. Their website is www.gats.pjm-eis.com.