Tax Credits and Incentives for Businesses
In Oregon, financial incentives are available through many electric utilities to help make commercial solar more affordable if you decide to own your own solar system. In fact, utility incentives, combined with the federal tax credits and accelerated depreciation, often covers 65-80% of the total costs to install and own solar.
There are different incentives available for businesses that affect the average cost and payback period of installing solar. The main incentives are the Federal tax credit, federal accelerated depreciation, and utility rebates. Unlike residential solar, there is no Oregon state tax credit for commercial solar.
Federal Tax Credit and Federal Accelerated Depreciation
Both Oregonian and Washington businesses are eligible to receive Federal tax credits, which is 30% of total system costs (minus any utility incentive). These tax credits can be taken in the year the system is operational or can be carried forward if the credits exceed tax liability. Self-installed systems qualify, but need to be verified by a tax credit-certified technician. Both grid-tied and off-grid solar systems are eligible to receive the Federal tax credit. NOTE: The Federal tax credit for commercial solar is scheduled to reduce from 30% of installed cost to 10% of installed cost after December 31st, 2016.
Federal Accelerated Depreciation: Businesses may depreciate the cost of a solar electric system following the five-year Modified Accelerated Cost Recovery System. Claiming accelerated depreciation can provide a tax deduction benefit that offsets up to 25 percent of the cost of the installation. The five-year depreciation schedule can be found in the most recent version of IRS Publication 946.
Oregon Utility Cash Incentives
If you’re solar system is grid-tied (most solar systems), there is a good chance your utility provides a cash incentive to support you going solar. These utility cash incentives vary from utility to utility:
Is your utility Pacific Power or Portland General Electric?
The largest provider of renewable energy incentives in this state is the Energy Trust of Oregon. They receive funds from four privately owned utilities (Portland General Electric, Pacific Power, NW Natural Gas and Cascade Natural Gas) through a public purpose charge on rate payer monthly bills. This money is paid out to qualifying renewable energy and energy efficiency projects. Commercial customers of Portland General Electric and Pacific Power qualify for cash incentives to reduce the upfront cost of installing a solar electric system.
The terms and incentive amounts are adjusted periodically based on Energy Trust revenue and territory. Currently rates vary between utility and the size of the solar electric system:
In Pacific Power territory:
- Systems between 0 and 15 kW receive $1.00/watt
- Systems between 16-300 kW receive $1.00-$0.40/watt*
- Maximum amount is $120,000
In Portland General Electric (PGE) territory:
- Systems between 0 and 15 kW receive $1.10/watt
- Systems between 16-300 kW receive $1.10-$0.60/watt*
- Maximum amount is 150,000/
*NOTE: Energy Trust uses a non-linear incentive rate calculation. Use their “Estimate Your Incentive” tool to determine the rate.
These Energy Trust cash incentive are generally paid directly to the solar contractor. They act as a coupon on the total solar system cost, decreasing the amount you pay the contractor.
The application for Energy Trust Incentives must be made prior to construction. To be eligible to for Energy Trust incentives, the solar installation must meet the following four requirements:
- Have a solar resource (TSRF) of 75% or higher
- 10 years of roof life
- Be installed by a certified Trade Ally of Energy Trust of Oregon
- Be a grid-tied system in Pacific Power or Portland General Electric territory
Have an Oregon electric utility other than Pacific Power or Portland General Electric?
Many of the other electric utilities in Oregon (PUDs, co-ops, municipal utilities) also provide incentives to their customers to install solar PV systems. The Database of State Incentives for Renewables and Efficiency (DSIRE) has a comprehensive list of utility incentives across Oregon. (When on the DSIRE site, we recommend using the filter tool and selecting “Solar Technologies” Technology category and “Rebate Program” in the Program Type category.)