Financing a Commercial Solar PV System in Oregon

Oregon Business Energy Tax Credit (BETC)

The Oregon Business Energy Tax Credit (BETC), commonly called the “betsy”, is up to 50% of the eligible system cost. This figure may vary depending on the system’s location within the state. It includes a pass-through option, which allows the system purchaser to “pass” the tax credit to a partner with a tax credit appetite. The Oregon BETC requires an application fee of 00.75% of the eligible system cost.

Federal Business Energy Tax Credit

The Federal BETC contains a straight 30% tax credit. This is designed to be taken in the tax year of system start-up. Unlike the Oregon BETC, which runs over 5 years, this is a single, one-time deduction. Also unlike the Oregon BETC, the pass-through option is not available; the credit must be used by the system owner.

Accelerated Depreciation - MACRS

Under the Modified Accelerated Cost-Recovery System (MACRS), businesses can recover investments in solar, wind and geothermal property through depreciation deductions. The MACRS establishes a set of class lives for various types of property, ranging from three to 50 years, over which the property may be depreciated. For solar, wind and geothermal property placed in service after 1986, the current MACRS property class is five years. The basis calculation is reduced by half the amount of the federal tax credit or 15%. In other words, 85% of the purchase price would be the depreciation calculation basis.

The financial incentives vary between utilities. To learn more, choose your electric utility:

Portland General Electric

The Energy Trust of Oregon offers a rebate of $1.50 per watt of rated DC capacity for the first 30kW and $1.25 per watt for the next 20kW in the Portland General Electric service area. The maximum rebate a system can receive is $70,000. Given the energy system components and cost quoted above, 25kW x $1.50 = $37,500. Your system must be approved for the rebate before beginning the project. It’s also important to note that the ETO requires that roof mounted systems be on a roof certified with at least 15 years of remaining life. We’re responsible for the majority of this paperwork. It includes such things as expected annual electricity production, sun charts, technical specifications, and an equipment list. This rebate is taxable.

Pacific Power and Light

The Energy Trust of Oregon offers a rebate of $1.25 per watt of rated DC capacity for the first 30kW and $1.00 per watt for the second 20kW in the Pacific Power service area. The maximum rebate for a system is $57,500. Given the energy system components and cost quoted above, 25kW x $1.25 = $31,250. Your system must be approved for the rebate before beginning the project. It’s also important to note that the ETO requires that roof mounted systems be on a roof certified with at least 15 years of remaining life. We’re responsible for the majority of this paperwork. It includes such things as expected annual electricity production, sun charts, technical specifications, and an equipment list. This rebate is taxable.

Bonneville Power Administration-supplied Utilities: Rural Electric Co-operatives, Peoples Utility Districts and Municipally-owned Utilities

Under Conservation & Renewables Discount / Conservation Rate Credit program the BPA offers a rebate of up to $500 per kilowatt of rated capacity to the local BPA-supplied utility. However, based on current demand for these funds it’s very likely that the actual rebate will be less. Pass-through of this rebate is determined by the local utility board and management. Most likely, this rebate is taxable.

Financial Models for Oregon Commercial PV systems:

Standard Design/Build

This is the approach most for-profit entities will use. In this model, the system is purchased by your firm on a turn-key basis from Tanner Creek Energy. We are responsible for the entire design and installation cycle including assistance and tracking of all tax and rebate paperwork. The system is owned by the host company and all energy and financial benefits flow to that firm. For larger systems, generally those above 250kW is size, there are other options.

Power Purchase Agreement (PPA)

Also referred to as the third party ownership model. This model can also work well for government, education and other non-profit organizations for which the tax incentives are not available. Using this model, your organization would “host” the system on your site with the system owned by an outside third party. A long term power purchase agreement is negotiated between the owner and host. The owner retains the financial incentives while the host takes advantage of a stable, long-term, renewable energy supply. It is important to note that these are non-trivial financial transactions. Economies of scale and transaction costs will generally dictate system sizes above 250kW.
While Tanner Creek Energy does not finance these types of systems directly we have partnerships with several entities that specialize in this approach. Please contact us for more information on this approach.

Qualifying Facility (QF)

Also referred to as Utility Scale. For even larger systems, those above 1MW is size, there is a third option. A Qualifying Facility (QF) is a renewable energy generation facility – solar, wind, micro-hydro, bio-fuel, geothermal – that is designed to sell power directly to a utility customer. This approach requires deep knowledge of the Oregon utility legal and regulatory environment – it is an expensive and long term process. However, as Oregon’s Renewable Energy Standard [link] becomes law there will be markets for large scale solar or solar-hybrid projects which combine solar with other renewable energy sources. These projects require large amounts of land, easy access to transmission and good solar resource. With these factors, it’s likely that they will be located in Southern Oregon or east of the Cascade Mountains. Tanner Creek Energy can assemble the financial, utility, legal and regulatory team for utility scale systems.
 

For More Information

The following web sites offer further information on these incentives:

Oregon Department of Energy:

Energy Trust of Oregon:

Database of State Incentives for Renewable Energy (DSIRE)

Tax Incentives Assistance Project

Green Tags – Bonneville Environmental Foundation