By Ryan Hamilton
Whether you are considering installing solar panels on your residential home, a wind turbine at your commercial manufacturing facility, or a biodigester on your farm, one of the biggest hurdles is often developing a plan for financing your renewable energy project. An attorney, accountant, or specialized consultant can help you develop this plan. To jump-start planning, this post outlines three major financial resources available for renewable energy projects in Pennsylvania, including: tax incentives, loan programs, and grant programs.
Federal Tax Incentives
Federal tax incentives for both residential and commercial renewable energy projects are currently very favorable. The Residential Renewable Energy Tax Credit allows qualifying taxpayers to claim a 30% credit on qualified expenditures for a renewable energy system installed and operating at the taxpayer’s residence. Qualifying projects include solar electric (PV), solar water-heating, geothermal heat pumps, small wind energy development, and fuel cells. This tax credit was set to expire at the end of 2016, but the Consolidated Appropriations Act, signed in December 2015, extended the expiration date for PV and solar thermal technologies. The current version provides a 30% credit for systems placed in service before the end of 2019. The credit for all other technologies is still set to expire at the end of 2016. Notably, there is also a similar commercial tax credit, the Business Energy Investment Tax Credit, which provides a 30% credit for businesses installing qualifying technologies such as solar, fuel cells, and small wind.
USDA Loans and Grants for Farms and Rural Businesses
The United States Department of Agriculture (USDA) runs the Rural Energy for America Program (REAP) which provides both improvement loans and grants for renewable energy systems and energy efficiency projects implemented by agricultural producers and rural small businesses. To qualify for participation in the REAP program you must be, 1) an agricultural producer with at least 50% of your gross income derived from agriculture operations, or 2) a small business in areas (generally with a population of < 50,000) designated by the REAP Program. Loans are available for up to 75% of project costs and grants are available for up to 25% of costs. Loans and grants can also be combined for eligible applicants. Eligible renewable energy projects include biomass, geothermal, and small and large scale wind generation. Eligible energy efficiency projects include updates to insulation, lighting, cooling or refrigeration units, doors and windows, and switching from a diesel to an electric irrigation motor. Applications for the REAP program are accepted year-round. If you have questions about the REAP program specifically, contact the PA State Rural Development Energy Coordinator, Amanda Hope, at (717) 237-2289. For more information on renewable energy projects for Pennsylvania farms, check out my webinar on the topic, hosted in partnership with the Pennsylvania Association for Sustainable Agriculture.
Regional Sustainable Energy Fund Loans and Grants
Finally, one often overlooked funding resource is Pennsylvania’s Regional Sustainable Energy Funds. These funds were developed through the restructuring of five electric companies across the state. “The funds are designed to promote the development of sustainable and renewable energy programs and clean-air technologies on both a regional and statewide basis… [and] have provided more than $20 million in loans and $1.8 million in grants to over 100 projects.” To qualify, projects must improve the environment within the relevant companies’ service territory. Grants are most often reserved for nonprofit organizations (usually up to $25,000) and for-profit organizations are eligible for low interest loans (usually $100,000 to $ 1 million). Pennsylvania’s regional sustainable energy funds include: the Metropolitan Edison Company / Penelect Company Sustainable Energy Fund, the PPL Sustainable Energy Fund, and the West Penn Power Sustainable Energy Fund.