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"Oregon trims tax credits for residential solar panels"

Oregon solar installers say a rule quietly enacted by a state agency July 1 -- and announced late Wednesday -- cuts a crucial tax credit, boosting costs of rooftop residential energy production.

"Oregon trims tax credits for residential solar panels"

Solar Oregon

Richard Reed
The Oregonian
>>click here for original article

 

>>click here for update on ODOE rule change

 

Gone are the days when you could pay $650 for a $13,000 solar system installed on your roof.

Oregon solar installers say a rule quietly enacted by a state agency July 1 -- and announced late Wednesday -- cuts a crucial tax credit, boosting costs of rooftop residential energy production.

A 2,000-watt solar system that once cost a homeowner about $650, after credits and a rebate, will now cost about $3,325, Oregon Energy Department officials confirm.

That could still strike some customers as a sunny deal -- and hit subsidy opponents as a blinding giveaway. But installers say the price hike will kill projects.

"This rule change is going to create a screeching halt to solar on homes," said Jeff Friedman, vice president of LiveLight Energy, a Beaverton-based installer. "I don't think anybody in government really realized the impact of this change."

Yet the Energy Department had a clear objective in issuing its sudden temporary rules: saving taxpayer money.

"The state is currently predicting a more than half billion dollar budget shortfall for the current biennium," the Energy Department says on its website.

"The proposed temporary rules will decrease the residential-energy-tax-credit program's impact on the state's General Fund. The rule changes must be implemented immediately to have the maximum ability to reduce the effect."

The rule changes are effective for 180 days. The agency plans a public hearing later this year to decide whether to make this and other changes permanent.

"This is a step we don't believe we'll end up reversing," said Robert Underwood, an Energy Department senior policy analyst. "We're saying people should be contributing more to the cost of the system."

As tax-credit applications pour in, it's hard to estimate how much the state will save. On an individual level, the previous equation worked this way, for someone installing a 2,000-watt solar system:

  • Of the total $13,000 cost, the customer received $3,500 ($1.75 a watt) from the Energy Trust of Oregon, reducing the price to $9,500.
  • The customer received a 30 percent federal tax credit, lowering the tab to $6,650.
  • Then, over the course of four years, the customer subtracted a $6,000 state tax credit ($3 multiplied by 2,000 watts) for a net cost of $650.

The new system works the same way until the state tax credit is applied. Instead of receiving the $6,000 credit at the end, the customer can subtract only half the $6,650 tab remaining after the federal credit.

Half of $6,650 is $3,325 -- which becomes the final cost of the system.

"When people find out about this, if they're on the fence of considering solar, they're gone," Friedman said.

The change, which does not apply to commercial work, will affect some large community projects.

Friedman is holding deposits from 57 Pendleton residents who expect to participate in a community solar installation program under terms of the old system. On Thursday, Friedman was writing a bid for a similar program in Salem.

"It's going to totally impact all those people thinking of doing solar in Salem," Friedman said. "I don't think they're going to be able to justify it."

But other installers were more optimistic. Installer Andrew Koyaanisqatsi, of Solar Energy Solutions Inc. in Portland, said the old system shoehorned homeowners into 2,000-watt systems to maximize benefits of the state tax credit. The new regulation could increase the sweet spot to larger systems, he said.

That's true, said Underwood. Invest more in a bigger system, and the full $6,000 state tax credit can still apply.

Behind this week's rule change, Underwood said, is the fact that solar prices have been falling. The $13,000 system in the example might once have cost $20,000, he said, producing a net cost to the homeowner far above $650.

Underwood said Energy Department officials decided that a public hearing prior to the changes would have "advertised the flaws before we fixed them." He said the agency would make exceptions for installers and customers who entered contracts between July 1 and 14, when the new program was implemented but not announced.

Koyaanisqatsi's beef, however, is with the frequent changes introduced by government with little or no notice. The rule change follows introduction of an alternate pilot program, which filled with initial applicants in just 15 minutes, enabling homeowners to be paid a premium for solar energy they generate and consume.

"What hurts the solar industry is the landscape constantly shifting around us," Koyaanisqatsi said. "It's hard to form good marketing and business plans around all the changes."

 
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