 |
|
Policy BenefitsResidential homeowners in Arizona are able to avail themselves of several policies and programs that will substantially reduce the cost of installing a solar PV system. For the exemplar, a 1 kilowatt panel will be installed on a home in the Phoenix area. The estimated cost of this system is $7,000. For this scenario, the homeowner will pay the installation costs and be reimbursed as discussed below. Three distinct policies and programs influence the decision for an investment in a solar system.1) The State of Arizona has a tax credit on the purchase of such a system. This allows for a tax credit of 25% of the installation price to a maximum of a $1,000 credit. Given the $7,000 price, the homeowner will receive the full $1,000 tax credit to be applied during the tax year when the system goes into service. If the total tax due for the year is less than the credit, the balance may be carried forward to the next year. 2) The State of Arizona has an ongoing Environmental Portfolio Standard (EPS), which requires the electricity providers, APS in the scenario, to have a certain percentage of the electricity sold produced by renewable energy means. At this writing the EPS is a 1.0% requirement for 2005. In an effort to meet the EPS, APS offers an EPS Credit Purchase Program. Under this program APS will reimburse the homeowner $4 a watt up to a maximum of 50% of the installed costs if the house is grid-connected. In the exemplar, the homeowner will receive a $3,500 payment from APS (.50 X 7,000). Under the agreement APS is “purchasing” the right to claim the electricity produced by the panel as an addition to the amount of renewable energy produced to meet the EPS requirement. As is explained below, the homeowner owns the electricity. APS is simply purchasing the ability to “count” it. The homeowner still owns the panel itself. The EPS is currently undergoing substantial redesign. The final rules are likely to be announced during the fall of 2005 and implemented during 2006. The gross change will be a drastic increase in the required percentages of renewable energy production to a maximum of 15% by 2025. The detailed changes are still being considered. Under the existing rules and the foretold rule, the solar system for the scenario qualifies: “Customer-Owned, Customer-Sited Distributed Renewable Energy Systems” are eligible renewable energy systems located on the customer premises and owned by the customer. Eligible systems shall be those systems which are designed primarily to provide electricity or to replace either electricity or fossil fuel uses for the customer. Any net production of electricity or energy for re-sale shall be nominal compared to the electricity or energy from the renewable energy system used by the customer. Eligible technologies shall include solar electric generators; small-scale wind generators (1 MW or less); solar water heaters that replace electricity or fossil fuels; non-residential solar day lighting devices; solar space heaters; solar air conditioners; small new hydropower generators (5 MW or less); fuel cells that only use renewable fuels; customer-owned, customer-sited biomass and biogas electricity generators; and industrial solar heat processing. Since the EPS is being expanded and the requirement for distributed systems is likely to increase, the affected utilities are likely to substantially increase their credit programs. As such, the utilities will be very interested in having homeowners participate in the program. 3) The new federal energy bill also includes an important component for the current discussion. Beginning in 2006, residential solar systems are eligible for a 30% tax credit to a maximum of a $2,000 credit. The tax credit is allowable on the installation price less the state tax credit. So in this case, the allowable credit is $1,800 based on the $6,000 net after the state tax credit ($7,000 – 1,000 = $6,000 X .30 = $1,800). Table
1: Net cost of a 1kW system
|
