2023 Commercial Solar Incentives & Rebates in North Carolina
Curious about commercial solar in North Carolina and the available incentives/rebates? As businesses in North Carolina look for ways to reduce their energy costs and become more sustainable, many are turning to solar energy as a solution. Fortunately, there are a number of incentives available to help businesses in the state that finance and install commercial solar systems.
State and Federal Tax Credits
One of the most significant incentives for commercial solar in North Carolina is the federal solar tax credit, also known as the Investment Tax Credit (ITC). This credit allows businesses to claim a credit for 30% of the cost of their solar system on their federal income taxes. In addition, North Carolina offers a 35% state tax credit for the installation of solar energy systems. These credits can significantly reduce the upfront cost of a commercial solar project.
Commercial businesses are allowed to “safe harbor” the Federal Solar ITC. Safe harboring allows commercial project owners are able to preserve the current tax credit value (at 30%) even if they don’t complete the project in the year 2022.
There are a few different options for safe harboring, but the most common is the “Five Percent Safe Harbor Test”. Under this option, solar projects can confirm they have started construction on their project to qualify for the 30% tax credit by paying/incurring five percent or more of the total cost of the solar project. This is again time to restate that we are not tax professionals but that if you want to explore this option we can connect you with a CPA that specializes in tax issues related to solar projects to help build a plan that works for your situation.
Net metering is another important incentive for commercial solar in North Carolina. Under net metering, businesses with solar panels can sell excess electricity back to the grid at the same rate they pay for electricity from the grid. This allows businesses to offset the cost of their electricity usage with the income they receive from selling excess solar energy and accelerate ROI. This is especially useful to roll over excess electricity credits when solar production is high in the summer and less in the winter months.
North Carolina Renewable Energy Portfolio Standard (REPS)
The North Carolina Renewable Energy Portfolio Standard (REPS) requires utility companies to provide a certain percentage of their electricity from renewable sources, including solar. This helps create a market for solar energy and provides an additional financial incentive for businesses to install solar panels.
Commercial solar systems are eligible for 100% first year bonus depreciation. Most assets like a building or company vehicle are depreciated over a long period of time, but by allowing depreciation of the entire solar system in the first year, business owners can minimize their tax liability.
The value of depreciation depends on the business’ effective tax rate. For example, a $100,000 system gets taxed at 20%. Bonus depreciation impact is $20,000 less taxes paid. If a business is taxed at 35%, the impact would be $35,000 less taxes paid. So depending on the business’ effective tax rate, this incentive could be even more valuable than the Federal Tax Credit for Solar, taking another 20-35% off the cost of the system in the first year.
More information about bonus depreciation can be found at DSIRE: MACRS Depreciation.
USDA REAP Grant
The USDA Rural Energy for America Program (REAP) Grant provides grants and loans to farmers and businesses for renewable energy projects across the US including North Carolina. They also include funds for energy efficiency upgrades, and energy audits. NC farms and businesses can apply for a grant worth 25% of the project cost (up to $500,000), with a minimum grant of $2500.
To qualify for the USDA REAP Grant, you must be a Agricultural Producer or Rural Small Business. You can check eligibility at usda.gov. Grants are awarded twice per year in the spring and fall. Applications are due to the USDA on April 30th and Oct 30th each year.
Other Incentives & Rebates
In addition to the incentives listed above, there are several other programs and incentives available to businesses in North Carolina looking to go solar. For example, the North Carolina Green Business Fund offers grants to businesses that implement energy efficiency measures, including solar panel installations. The North Carolina Solar Center also provides resources and assistance to businesses interested in going solar.
There are many incentives available to help businesses in North Carolina finance and install commercial solar systems. From tax credits to net metering and the REPS program, these incentives can significantly reduce the upfront cost of a solar project and help businesses save on energy costs in the long run. With Solar One, a nationwide commercial solar company, we are able to apply our Energy Savings Program with federal and NC incentives that combine the best of both worlds.
- Investment Tax Credit (ITC) for Solar Energy (energy.gov) https://www.energy.gov/savings/investment-tax-credit-itc-solar-energy
- Solar Energy Tax Credit (North Carolina Department of Revenue) https://www.dornc.com/taxes/solar-energy-tax-credit
- Net Metering (North Carolina Clean Energy Technology Center) https://nccleantech.ncsu.edu/net-metering/
- Renewable Energy Portfolio Standard (REPS) (North Carolina Clean Energy Technology Center) https://nccleantech.ncsu.edu/renewable-energy-portfolio-standard-reps/
- North Carolina Green Business Fund (North Carolina Department of Environmental Quality) https://deq.nc.gov/about/divisions/energy-mineral-and-land-resources/sustainable-energy/north-carolina-green-business-fund
- North Carolina Solar Center (NC State University) https://www.ncsc.ncsu.edu/