Solar energy is competitive and cost-effective way to generate electricity.
The price of silicon PV cells has dropped from $76 per watt in 1977 to a fraction of a dollar in recent
years.
The levelized cost of utility-scale PV is $36 to $46 per megawatt, making it competitive in many locations
with combined cycle gas ($35-$81 per megawatt) and far cheaper than new nuclear power ($109-$191
per megawatt), according to the investment firm Lazard.
Now is the time to benefit from building solar projects which typically lock in a guaranteed price from an
off taker with modest price escalators lower than historical average utility company price increases.
These agreements are often called Power Purchase Agreements. Customers can save on their monthly
electricity bill immediately and even more over the long term while carbon emissions are reduced.
Investors benefit from long term “mail box” money and the 30% ITC tax credit, going to 26% for projects
started in 2020.
In 2018, rooftop arrays, solar parking canopies, and other “distributed” solar systems supplied
approximately 30 billion kilowatt-hours of electricity – little more than 0.7% of total U.S. power
generation. Other countries generate a far greater percentage of their electricity from solar than the
U.S. The U.S. is headed in that direction. PV capacity is expected to more than double over the next five
years – by 2024, more than 15 GW of PV capacity will be installed annually.
Growth in demand for utility scale projects is being driven in part by state mandates for increasing
percentages of renewable energy from its regulated utilities. Some states have specific “carve outs” for
solar energy as part of this mandate, including seven of the top ten states with utility scale projects in
the pipeline, including Arizona, California, Colorado, Florida, Maryland, Nevada, New Mexico, New York,
North Carolina and Texas. Also driving this market are municipal owned utilities where local
governments are responding to ratepayers calls for more renewable energy.
Another driver for the growth in utility scale solar installations is the federal ITC tax credit that is
providing a major source of capital for these solar projects. The ITC tax credit is 30% in 2019 but will
drop to 26% in 2020 for projects started in that year.
The new Opportunity Zone legislation applies to renewable energy projects providing further tax
benefits in census tracts identified as areas of economic need. Millions of acres of land in urban and
rural areas qualify under this program. Opportunity Zones allow investors to delay the paying of capital
gains for up to ten years, and if an investor holds on to the investment for a number of years there are
milestone step-ups in cost basis providing further tax savings. Unlike a 1031 real estate exchange where
you have to trade “like for like” assets, the new Opportunity Zone legislation allows any asset capital
gains to be used for these projects, including stocks, bonds, other real estate, and even art, gold and
coins. There is $6.1 trillion in assets locked up in potential capital gains in the U.S.
Now is the time to get your project started.
We help you identify optimal locations for utility scale solar projects, find the necessary funding to get it
started, and help with the licensing and approvals needed.
You can contact us 480-482-1660 to find out more! Ask for Brad or Ron.
This article is not intended to provide legal or tax advice. Contact your legal and tax advisors for
appropriate information and guidance.