Solar: Does it really offer a golden opportunity?

Welcome to the new frontier. “The solar industry is in its infancy and it’s a tremendous opportunity for remodelers,” says Jeff Shubert, director of global marketing for Suntech Power, a solar panel manufacturer. Yet, despite a 20% to 25% price drop for solar panels and the passage of the American Recovery and Reinvestment Act (ARRA) with its tax credit incentives, demand has been low. Consumers are holding off, nervous about the still shaky economy. The hope is that as awareness of environmental issues grows along with interest in the “green” movement, the tax incentives will help push consumers into investing in sustainable and renewable energy.

What Qualifies

The ARRA creates investment tax credits for “residential energy efficient properties,” such as solar, wind, and fuel cell power generators, and geothermal heat pumps.

Taxpayers are eligible for a 30% tax credit on the cost of qualified solar systems (also called photovoltaic or PV systems) used to generate electricity for their primary residence in the U.S. (Solar pool heaters are not eligible.) There is no cap on the credit amount (as there was in earlier bills).

The “cost” to the consumer on which the credit is based includes site preparation, assembly, original installation, and piping and wiring that might connect the device to the home, as well as labor and markup. According to the April IRS notice 2009-41, “the credit applies to residential energy efficient property placed in service before January 1, 2017.”

While there’s no Energy Star–label equivalent for solar panels, they must have a UL or OSHA certification. Although there is no set standard for efficiency, currently the best panels have about 15% efficiency, i.e., 15% of the energy attracted from the sun is converted into electricity. To get the credit, consumers should keep a copy of a manufacturer’s certification in their files and fill out IRS form 5695 [PDF]. Tom Chiavetta, a CPA and director at Freed Maxick Battaglia based in western New York, who has been focusing on the ARRA, says that consumers should “show their accountants contractor backup support with regard to the work done and any paperwork they received from the manufacturer that shows the property meets the standards for the credit.”

Benefit for Remodelers

According to a recent Johns Manville–sponsored survey of 784 U.S. homeowners, 68% are aware of the energy-efficiency tax credits, and 46% of those homeowners intend to take advantage of them. But just 8% of those intending to take the credit say that they will use it for solar energy.

Credit: Scott Roberts

Yes, solar systems have come down in price, but it still could be considered an expensive endeavor for many homeowners. According to the Solar Electricity Global Benchmark Price Indices, in May 2009 a standard 2 kWh roof-mounted residential unit, installed, cost about $17,645. (In addition, the index breaks out prices for a sunny climate at 36.88 cents/kWh and a cloudy climate at 81.14 cents/kWh). “The average home,” says Ron Kenedi, vice president of Sharp Electronics’ solar energy solutions group, “requires about 4,000 watts [or 4 kW] in solar panels.”

“Most people cannot afford to install the amount of solar PV that they would need to offset their current energy bill,” says Bob Fleming, president of Classic Remodeling & Construction, in Johns Island, S.C., who is about to launch a new company focused on energy audits and upfits.

But price is not the only deciding factor. With all the paperwork as well as the learning curve for both consumer and remodeler, prospective clients will be looking for professionals who they feel confident in and who can offer them a hassle-free experience.

To install PV systems, you need to “look at the sun, the home’s electric bill, the size of the house,” Shubert says. “There’s a skill to designing the system that is right for the property without taking advantage of people.” Remodelers need to take care to hire out work to qualified installers.

Many distributors, such as SunWize Technologies, in Kingston, N.Y., train installers, and there are a few well-recognized independent groups offering training, including Boots on the Roof, Solar Energy International, and the nonprofit Solar Living. Installers are certified by the North American Board of Certified Energy Practitioners.

Many states offer training and incentives as well. For example, the New York State Energy Research and Development Authority (NYSERDA) provides training and certification through certified agencies. NYSERDA will reimburse a substantial portion of training and testing fees. (For more about PV in New York State go to www.powernaturally.org.)

“Installations and the tax credit processing is too much of a burden for a small contractor,” says John Berger, CEO of Standard Renewable Energy, an energy services company based in Houston. “Putting on a solar system is not as straightforward as you think.” SRE has a staff that deals with all the administration involved — permits, tax rebates, communications with local utilities, licenses, accreditations, manufacturer’s certifications, financing.

When utility companies offer rebates, there’s often a gap in payment that someone has to bridge. “Most remodelers couldn’t afford to carry the rebate,” Berger says. “It’s a big balance sheet issue, very capital-intensive.” SRE’s financing arm handles that. “Remodelers can be successful in solar by outsourcing the installation, just as they do plumbing or electrical,” he says.

Design/build remodeler Michael McCutcheon, in Berkeley, Calif., has been a “green” remodeler for many years, with several certified green professionals on his staff. Despite his knowledge (or perhaps because of it), McCutcheon uses trade partners — PV or electrical — for the PV systems he has placed on clients’ homes.

Although McCutcheon’s upscale clients are usually “true believers, not necessarily those who want to save money on an energy bill,” he does explain to them about federal and state tax credits and rebates and helps to gather the proper documents. But he turns the paperwork over to the vendors. “The homeowner has a lot of documents to sign, and we can’t change over the utility information; the owner has to do that.” The vendors, like SRE, are more equipped to handle the administrative tasks.

Although PV has been around for decades, the industry is still seen as relatively new, and it’s difficult for remodelers to learn everything they need to know about efficiency, mounting, the visibility of the array, and placement, not to mention the electrical expertise required. “We have to talk to a number of PV vendors to find the right one to use,” says McCutcheon, who keeps up by reading and asking questions. —Stacey Freed, senior editor, REMODELING.

BOTTOM LINE

Homeowners are eligible for a 30% tax credit on the cost of qualified solar systems for their primary residence. There is no cap on the credit amount (as there was in earlier bills). The “cost” to the consumer on which the credit is based includes site preparation, assembly, original installation, and piping and wiring that might connect the device to the home, as well as labor and markup. According to the April IRS notice 2009-41, the credit applies to residential energy-efficient systems placed in service before Jan. 1, 2017. While there’s no Energy Star–label equivalent for solar panels, they must have a UL or OSHA certification. To get the credit, consumers must keep a manufacturer’s certification for their records and fill out IRS form 5695.

Local Look: States Weigh In

CALIFORNIA: In addition to federal incentives, various states, municipalities, and local utility companies offer incentives. For example, Greg Buechler, owner of Solar Universe, a franchisor, is able to get a 15% rebate from utility company Pacific Gas & Electric on the $30,000 cost of the PV system installed on the roof of his Northern California home. “That’s $4,500, [which is] pretty much a down payment on the system,” Buechler says. “That leaves $25,500. The federal government says you can knock off $9,000 — this is the 30% tax credit, no cap. My $30,000 system just had $13,500 knocked off it. Now the system is $16,500. I’m paying 55% of the original cost. That’s a nice incentive program.”

While California may be in the forefront, and Hawaii has reached “grid parity” — the point at which the price of electricity is so high and the cost of solar so low that it’s break-even — other states are enticing consumers to switch to solar. Maryland has exempted solar energy systems from sales and use taxes. Massachusetts has several loan and grant programs as well as the “Commonwealth Solar” rebate program, which offers $1 to $4.40 per watt for grid-tied systems. (For more information on individual states, check the Database of State Incentives for Renewables and Efficiency website.) —Stacey Freed