Renewable energy is generated from self-replenishing sources like wind, solar, geothermal, and low-impact hydroelectric. These sources are environmentally friendly, thus preferable to fossil fuels. There are several solar energy regulations in the USA that act as incentives to go solar.
Before putting in place most of the solar regulations, this resource was virtually unaffordable for most people. Addressing concerns such as utility rate structures, transmission, interconnection, and environmental permits reduces costs. Below are notable regulations supporting solar energy use.
Federal and State Policies Supporting Solar Energy
Installation of solar panels varies across all states. Mostly, this reflects individual states’ policies and regulations on renewable energy. Sometimes resources and technical potential are also a hindrance. The following are some of the laws in place regarding solar include:
a) Federal Investment Tax Credit
ITC law has been one of the most impactful regulations in encouraging the deployment of solar energy. Once you install a solar energy system, you receive a tax credit applied to personal income tax.
In utility-scale or commercial projects, the business that owns the solar project claims the tax credit. The capital required to put up the project determines the tax credit received. The project gives a provision for dollar to dollar reduction in the expected income tax for individuals or businesses.
If you begin a solar project before the end of 2020, you will receive a 26% tax credit. However, from next year, the incentive will be at 22%.
b) Modified Accelerated Cost Recovery System (MACRS)
Another federal tax benefit that covers solar energy owners is MACRS. It is a common way of assessing the depreciation of your solar energy system. It is a non-cash expense recognizing that the equipment is prone to wear and tear with time necessitating replacement in the end. Therefore, this policy factors in the depreciation expense reducing the income subject subjected to federal income tax.
Equipment used for solar energy generation is eligible for a five-year fast-tracked depreciation schedule under section 168 tax code. The higher your tax rate gets, the more value you derive from MACRS.
c) The Public Utilities Regulatory Act of 1978 (PURPA)
PURPA is a federal policy aiming to conserve electricity as it improves utility energy efficiency. Its aim is also to promote equitable electricity rates. It has helped in the solar industry’s growth because it requires utility companies to buy energy from producers who have qualifying facilities. Such facilities are characterized by:
- Small power production facilities: Such have 80 MW in production or less of renewable energy such as solar, wind, or geothermal.
- Cogeneration facilities: Such has two simultaneous productions in electricity or thermal.
d) Renewable Portfolio Standard (RPS)
This policy requires utility providers to have a certain percentage of their energy produced from renewable sources. Among the options presented to them is solar energy. The RPS policy has increased renewable energy generation as well as its capacity.
The specifics of this policy vary from one state to another. However, it expects electricity utility suppliers to have a certain percentage of energy sourced from renewable energy. The rate is determined over a given duration.
The company needs to measure the energy as the total demand percentage or part of the total energy produced in MWh. One way utility can meet this requirement is by building power plants. They can also source power from third parties. Acquiring Renewable Energy Certificates (RECs) is also an option.
e) Net-metering
Net-metering is instrumental in making solar power economical for consumers. Without this option, many consumers would struggle to generate enough savings, which can justify the investment. There are about 40 states that have net-metering guidelines. Some states have a variation of this rule, which helps safeguard solar investments.
Under this policy, residential and commercial consumers enjoy benefits in credits for the electricity they generate.
The net-metering rule mandates electric utility companies to track the electricity used and given back correctly. The Interstate Renewable Energy Council (IREC) provides guidelines for net-metering, which include:
- System size caps: The policy has a provision on the maximum allowable size. The size is in terms of kilowatts or daily percentages.
- Eligible Technologies: The regulation stipulates clean energy sources such as wind, solar, biomass, and many others.
- Type of customer: It specifies whether residential or commercial customers will be eligible.
- RECs ownership: The policy can allow the customers to retain the RECs ownership depending on the system’s output.
f) Feed-in Tariffs
Ideally, this regulation encourages the adoption of renewable energy by making it mandatory for utility companies to compensate customers for supplying power into the grid with pre-established above-markets rates.
The tariffs may vary depending on the preferred renewable energy source. However, they provide customers with a constant source of income. California, Hawaii, Washington, and Vermont were the first states to adopt this policy in the US.
g) Solar Financing Policies
Solar financing policies are also crucial to the growth of solar. One such financing policy is Property Assessed Clean Energy or PACE. Under this regulation, the obligation of solar energy installation repayment is on the property other than the individual borrower.
Other financial incentives and policies include low-interest loans and grants. Additionally, a homeowner can access solar leases or power purchase agreements depending on the state.
Other financial incentives and policies include low-interest loans and grants. Additionally, a homeowner can access solar leases or power purchase agreements depending on the state.
Solar energy regulations are vital to the growth of the industry. Both federal and state governments are aware of this fact. They have set in place laws and regulations protecting homeowners and businesses that install solar panels.
The laws have established standard procedures to be followed, thus reducing renewable energy use uncertainty. Policies such as net-metering have facilitated solar energy adoption for many users. It cushions solar system investment; the net-metering program guarantees the owners compensation when they supply to the grid.
Dynamic Slr is a solar energy regulations compliant company that will not put your project under any threat. We take you through all the requirements to help you get the permits and benefit from the incentives available. Fill the free solar quote and get all the answers you have about solar energy installation in Texas.
