Solar Energy Company Financing
Solar energy projects in the U.S. have been largely financed by tax equity investors for the past decade. Because most of these projects come from companies much too small to pay income tax, they have relied on very large companies to finance them. These companies benefit from the Federal tax credits that come along with financing renewable energy. But just like with most things, the recession has severely changed the renewable energy business.
Section 1603 Grants
The Government developed the Section 1603 cash grant program to build incentive for investment, especially in solar energy, when tax equity began to suffer – essentially, turning the tax credits into money. But the Section 1603 program expired in 2011, and now the solar energy industry is being transformed as the search for new investing continues.
1. Solar Energy is Growing
While tax credits for wind energy are set to expire in 2012, tax credits for solar are set at 30 percent through at least 2016. It is estimated that solar energy will create nearly 500,000 jobs in that time and create over $3 billion in tax equity. Solar projects are a big draw for investors for many reasons. Between tax credits and financing from local venues, the cost of installation can basically cover itself. In addition, the long-lasting equipment and huge savings on electrical costs for commercial buildings can mean a smart business investment – the returns on solar projects are typically very high.
2. Prices are Falling
While interest rates are continually under threat of increase, solar energy remains a relatively low-interest industry. And with the use of solar power expected to increase 75 percent by the time the tax credits expire, the price of solar panels, heater, and other equipment is becoming increasingly competitive. Many stalled and abandoned solar projects from before the 2008 recession are finding new life under these circumstances. And many smaller projects are benefiting from consolidation and collaboration – pooling their resources to become more profitable to large investors and qualify for the full tax credit.
3. New Resources Available for Solar Energy Companies
There are an increasing number of companies and services dedicated to connecting small business owners with investors, consolidating commercial projects, and even financing solar energy for residential housing. There are many clean energy companies themselves who are raising funds to invest in tax equity, as well as collaborating with the funds raised by giant corporations like Chevron and Google. If you are developing a solar energy plan for your business, there is money out there, it may simply be a matter of getting the help you need to find it.
There’s no question that the solar industry has faced enormous obstacles in the past few years, just like many industries in the light of the extremely weakened economy. But with the economy in slow recovery and the cash incentive for renewable energy expired, it’s inevitable that tax equity financing is making a comeback. The fact remains that renewable energy is our greatest solution to the energy crisis as we know it, and more and more big name corporations want to be a part of investing in the future.
See Also:
- Oil Prices < $40/Barrel?
- So Long, US Dollar As World’s Reserve Currency
- Energy Inflation
- Inflation Adjusted Oil Price Chart
- Gasoline Inflation
- Small Steps to Big Savings on Home Energy Prices
- Appliances That Bump Up Your Electricity Bill
- Tips to Keep Your Electric Bill Within Budget
Susan Shelley writes for several financial advice blogs. Tax equity finance experts at Zintro.com can give you the advice you need about taxes.
Photo credit: Tim Fuller on Flickr
