The Race Is On | As a cash incentive for solar installations expires at the end of the year, businesses rush to get projects done in time
Photo/Edd Cote
CAPTURING ENERGY: Michael Kane, owner of 126 Self Storage in Ashland, acted quickly to install a solar system in order to take advantage of a federal grant program.
This summer, Michael Kane, who owns 126 Self Storage in Ashland, contacted a solar consultant to investigate placing electricity-producing panels on the 57,000 square feet of roof space at his facility.
“Being that it’s cleared of trees and it’s a huge flat roof area, it’s ideal for solar,” he thought.
Kane learned that he could build a $2.2-million system that would make enough power for more than 400 homes a year.
But there was a catch: He had to act quickly.
That’s because in order to qualify for a federal grant program that provides owners of solar projects a 30-percent cash grant, the project would have to completed by the end of the year.
Such grants — which in Kane’s case equated to about $660,000 — are often the only way to make renewable energy projects work financially.
Business owners around the state and country are racing against the clock to get projects qualified for the cash incentive before the beginning of 2011.
And, those in the solar industry, with memories of the federal Cash for Clunkers car program and the first-time homebuyer tax credit, are worried about a hangover effect dampening the solar installation market after the cash grant expires in January.
Program 1603 from the U.S. Treasury Department, as the solar incentive is officially named, is an uncapped amount of funding from the American Recovery and Reinvestment Act to encourage renewable energy generation.
Massachusetts businesses have already received $13.5 million in cash grants from the program, which is the seventh highest amount of any state. Nationwide, $387 million has been doled out, according to the Solar Energy Industries Association, a Washington, D.C.-based trade group that has been tracking the incentive. For a similar wind energy program, $4.6 billion has been allocated around the country, but only $1.4 million in Massachusetts.
While the cash grant is expiring at the end of the year, the program is not completely going away.
After the new year, companies can still apply for a tax credit worth up to 30 percent of the cost of the project. But a tax credit is not nearly as desirable as a direct cash reimbursement for a portion of the project’s cost.
“It’s going to make it a lot harder for a lot of businesses to pursue these projects without that cash grant,” said Matthew Arner, president of SolarFlair Energy Inc. of Framingham. Arner worked with Kane in Ashland on his solar panel installation.
Unlike the cash grant that is sent to business owners within 60 days of project completion, businesses will not get the benefit of the tax credit until the next tax season, Arner explained. The credit can be carried forward up to 20 years, however.
Looking Ahead
There is one way for a project to squeak into compliance. If 5 percent of the cost of a solar project is spent before the end of the year deadline, a company can apply for a “safe harbor” provision, which would allow the project to still qualify for the 30-percent cash grant. Businesses have to file a request with the federal government before the end of the year and each application is considered on a case-by-case basis.
“It’s going to be a busy next couple of months,” said Ed Whitaker, owner of SunDial LLC in Hopedale, which recently completed a solar project at Dan’s Jeep, a Westborough car dealership. The project qualified for a cash grant worth $150,291 from the federal government.
“It’s a great program. The government doesn’t normally hand out money. It’s usually the other way around,” he said. “The race is on.”
Gerry Case, electrical project manager for J.F. White Contracting Co. in Framingham, which contracts with businesses to install solar projects, is expecting a busy end of the year as well.
“Obviously cash in hand is a lot better than an investment tax credit that companies may not be able to use for a couple years down the road,” he said. Case is unsure of what to think about the market after the New Year, but wouldn’t be surprised if work slows.
Other installers are not as concerned.
A tax credit is just as good as a cash grant for profitable companies, according to James Walker, director of solar photovoltaic projects at Ameresco Inc., also based in Framingham. Where it may have an impact, he believes, is on projects small businesses may pursue.
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