Total installation cost for a 50kw commercial solar energy system averages approximately $150,000. Before you think that incorporating solar energy into your farming operation would be too expensive, however, review the wide range of financial assistance available. There are many sources of financial assistance for agricultural solar energy projects from all levels of government and the private sector.
State Financing Assistance
Increasing the amount of renewable energy is one of Maryland’s key policy goals, which is good news for folks looking for state financing assistance for installing commercial solar projects. The Maryland Energy Administration (MEA) administers the state financing assistance programs for the agricultural sector which include grants and loans and tax credits. I will highlight a few of the major programs in this post and more details can be found on MEA’s website and on the Database of State Incentives for Renewables and Efficiency. Although financial assistance for commercial projects on the local or county level is rare, it is available in Harford County and worth inquiring with your county finance office.
Maryland’s Clean Energy grant provides funds for solar energy equipment based on the installed capacity range of the system. The maximum available Clean Energy grant for a commercial project is $6,000. Maryland also offers a Clean Energy Incentive Tax Credit, a state income tax credit of .85 cents per kW hour and .50 cents per kW hour for electricity generated from co-firing a qualified resource with coal. The credits can be claimed over a 5-year period and are available to individuals and corporations who build and generate electricity on or after January 1, 2006 but before January 1, 2016. Those interested in the Clean Energy tax credit must apply for an Initial Credit Certificate with MEA.
The Jane E. Lawton Loan Program is a state-administered revolving loan program which provides borrowers with low interest loans (2% in FY 15) for the costs associated with energy efficiency investments. The minimum request for funding is $50,000; the maximum is $500,000. The MEA will consider larger loan requests on a case-by-case basis, based on energy savings.
The 2015 Kathleen A. P. Mathias Agriculture Energy Efficiency Program, administered by MEA, provides grants to farms and businesses in the agriculture sector to cover up to 50% of the cost of energy efficiency and/or renewable energy upgrades after all other incentives have been applied. Applications must be submitted by Friday, January 30, 2015. MEA will hold two informational webinars on this grant program on January 7, 2015 and on January 22, 2015.
Another source of funding to offset the cost of solar energy is Solar Renewable Energy Credits (SRECs). SRECs are credits (equivalent to 1 Megawatt/hour) based on the amount of energy a solar energy system produces on the open market. Under Maryland’s Renewable Energy Portfolio Standard, companies which sell power in Maryland are required by law to source a certain percentage of their electricity generation from solar power and other renewable energy systems. To comply with this law, generators may purchase renewable energy credits from residents and businesses generating their own renewable electricity. SRECs may represent a significant source of revenue for owners of qualifying solar energy systems. To begin producing SRECs, a solar energy generator must apply for certification as a qualifying generator from the Maryland Public Service Commission (PSC).
Federal Financing Assistance
The Federal Government offers a Business Energy Investment Tax Credit of 30% of the eligible system cost against income taxes due the IRS. This tax credit can only be taken by the owner of the solar energy system. The U.S. Department of Agriculture (USDA) through the Rural Energy for America Program also offers grant funding to agricultural producers for solar projects of up for up to 25% of the eligible costs. USDA and the Small Business Administration are sources for low interest loan funding for solar energy projects.
Qualifying solar energy equipment may also be included as tangible property on a business depreciation schedule for tax purposes for a period of 5 years. This reduces tax liability and accelerates the rate of return on a solar investment. However, for equipment on which the Investment Tax Credit is claimed, the project’s depreciable basis should be reduced by one-half of the value of the 30% tax credit.
Utility Financial Assistance
Some electricity providers, such as Delmarva Power and BG&E, provide financing assistance for farmers to install solar energy projects. Landowners should contact their utility provider to inquire about available financial assistance.
The Maryland Agricultural Resource Based Industry and Development Corporation (MARBIDCO) through its Rural Business Energy Efficiency Improvement Loan Fund provides farmers low interest loans to help finance the cost of purchasing and equipment or technology related to solar energy production. Loan amounts can range from $2,500 to $30,000 with repayment terms tied to the anticipated energy savings of the project.
A comprehensive chart listing the various sources of financial assistance and incentives for commercial agricultural solar energy projects in Maryland can be found on MEA’s website.