The highly competitive marketing climate offers an abundance of choices from many companies engaged in the solar industry. Along with the many opportunities to benefit financially, consumers must also be cautious to prevent being victimized by the questionable sales tactics of a few.
While there is little doubt of the wisdom and viability of “going green,” being aware of certain basic facts can keep consumers from making imprudent choices.
The renewable energy credits offered by both the federal and state tax authorities are the heart of the attractiveness and viability of solar energy. For both solar water heating and photovoltaic (PV) installations, the 30 percent federal credit and 35 percent state credit will offset up to 65 percent of the gross cost. The federal credit is unlimited, while the state of Hawaii caps the credit at $2,250 for water heaters and $5,000 per PV system.
The state Department of Taxation has issued a directive defining what constitutes a PV “system” to determine how many credits can be legitimately claimed by the taxpayer.
Unfortunately, some firms have engaged in schemes to mislead potential customers into claiming extra credits. In one proposal, 33 PV panels were wired through five central inverters to justify claiming credits for five systems. This was accomplished by dividing the array of collectors into three seven-panel and two six-panel “strings.”
This flies in the face of logic as most systems using micro-inverters limit the maximum number of PV modules to 13, 15 or 17 per “string.”
If the tax department challenges the five-system claim, it’s the taxpayer who is ultimately liable for taxes incurred on the disallowed amount — not the solar company. Even if accepted by the state, the net cost after tax credits is more than $21,100, exceeding that of other designs by $4,000-6,000 or more.
PV systems are popularly described by over-zealous promoters as being “your own utility company.” The truth is that this is a misleading overstatement of the facts. The net-metering agreement with HECO does not provide for residential systems to “sell” any excess power generated to them.
“Selling” power to the utility company remains with commercial PV systems. This involves a different arrangement with HECO.
Power Purchase Agreement
A Power Purchase Agreement, or PPA, is a leasing plan under which you substitute the solar company for the utility company as the provider of your energy needs. The premise is that payments are somewhat lower than what the utility company would charge you and that payment increases would be manageable. Up-front costs could be “zero down” (with escalating monthly payments), “some money down” (e.g. $5,000, with lower non-escalating payments), or a “pre-paid lease” (e.g. $23,000 paid up-front, with no monthly payments).
They operate similarly to automobile leases, but for a longer term of 20 years. The structure and terms are dependent on interest rate concessions and the application of rebates. The energy tax credits are the major component as the solar company keeps the credits. They claim the consumer is then freed from concerns that our taxing authorities might modify or eliminate the credits, but you can be sure that the leasing deals would be adversely affected and markedly different should that ever occur. In addition, a minimum FICO score of 700 is required for standard leasing programs.
In general terms, leasing is better than “doing nothing” and remaining a “hostage” to the power company. But, based on the figures provided to me, purchasing your own PV system is an even better option. Consider that many systems have a “pay-back” period on the net cost of about five years. In those cases, there would be no payments to the utility company from years six to 20 beyond the minimum “connection” charge. In the standard leasing plans, monthly payments continue to the end of the 20-year term, at which time you can either buy the system, or have the solar company remove it. You’d then be back with the utility company.
For additional information, contact Hi-Power Solar at 342-0802.