Solar Storage and the 30% Federal Tax Credit (ITC)
The 30% federal tax credit, also known as the Investment Tax Credit (ITC) is perhaps the best-known incentive for making the decision to invest in a solar photovoltaic system for your home or business. Since its introduction in 2005, the ITC has been an important driver in helping solar energy grow and evolve into the thriving industry we see in the US today.
The solar storage market continues to grow
The latest trend in the industry is towards the addition of batteries to store solar energy. Of course, for the off-grid customer solar storage has always been an essential component of the solar photovoltaic system design. Now we are also seeing a growing number of residential gird tied customers adding batteries to their solar design. Energy storage provides backup that can power essential circuits in the event that the grid goes down for a period of time.
Businesses are getting in on the act too. Commercial entities looking to control escalating energy costs, especially those in markets with high kilowatt demand charges, such as those we have here in Colorado, are starting to see that there is value in using a solar charged storage system to shave the peaks of high demand that add so much expense to the monthly utility bill.
When is energy storage eligible for the 30% ITC? *
Maximising incentives to offset the significant capital investment in solar energy systems is an important strategy for achieving a reasonable time frame for Return on Investment. And when it comes to applying the 30% ITC to the costs of energy storage, there are some nuances to the rules, depending on the system design.
The ITC applies to storage charged from solar, so off grid systems that do not interact with the central utility grid are able to fully monetise all of the 30% ITC. However, it gets a little more complicated when a battery storage system can be charged by both the solar photovoltaic panels and also by the utility grid.
In order to be eligible for the ITC, the storage aspect of the solar system must be charged by the solar PV panels at a minimum of 75% of the time. Any less than 75% and the cost of the storage components cannot be claimed as a tax credit. For systems that charge from solar 75% – 100% of the time, the ITC is available but only at the level of solar charging.
For example, a system charged by solar energy 80% of the time is eligible for the 30% ITC multiplied by 80% – which is equal to 24% ITC instead of 30%. Bear in mind that the tax credit is vested over 5 years so if the percentage level of solar charging drops in unvested years recapture can apply.
Limiting batteries from charging more than 25% from the grid
Fortunately, there is some level of control available to prevent solar charging of the batteries from dropping below the desired level. How that happens depends on whether your solar-plus-storage system is AC coupled or DC coupled. In AC coupled systems both the PV and the storage have their own DC/AC converters so a programmable master controller is used to govern when and how fast the batteries are charging in relation to the solar power production. With a DC coupled system control happens within the inverter itself which regulates the flow of power directly from the solar modules to the storage device.
If you are ready to consider a solar plus storage option, whether for an off grid location, a grid-tied residential application or to control energy costs at your place of business, contact a Sunsense Solar consultant at 970 963-1420 or email Sunsense@SunsenseSolar.com
If you know of anyone who you think would like to go solar, fill out our Referral form. If the referral leads to a signed contract, you will receive $250! It pays to go solar!
Commercial Sales Manager
*Sunsense Solar, and its employees, does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.