Businesses Get More Time to Cash in on Solar-Energy Tax Breaks

By Lee Stratton, The Columbus Dispatch, Ohio

Jan. 1–Solar energy will shine on, but windows, furnaces and insulation will be left out in the cold under legislation President Bush signed into law last week.

The Tax Relief and Health Care Act of 2006 extends some energy-related tax credits through 2008. Enacted in 2005, the credits were scheduled to expire in 2007.

Tax credits and other financial incentives are essential to encourage business owners to install solar-energy systems, said Alan Frasz, vice president of Dovetail Solar and Wind, an Ohio company that sells alternativeenergy systems to home and business owners.

“The big thing is, the industry is in its infancy. I tell people it’s like the computer industry in the mid-’70s.”

Without the extension, some businesses that are just starting to plan for solar-energy systems would not be finished in time to qualify for the credits in 2007, Frasz said.

“It was important to get at least another year. It keeps the momentum going. Otherwise, it would have really stalled things quite a bit.”

Solar-energy systems are in great demand in other areas, including California and Europe, said William Spratley, executive director of Green Energy Ohio, a nonprofit energy-conservation group. There is no surplus of solar equipment for local buyers because most of the solar panels manufactured in Ohio are sold overseas, he said.

The extended tax credits include:

— A $1,000 credit for contractors who build or remodel homes to meet federal standards for conserving energy with the use of approved components such as high-efficiency windows, insulation, furnaces and water heaters.

— A 30 percent credit (to a maximum of $2,000) for homeowners who invest in a solar-energy system for generating electricity or heating water.

— A 30 percent credit (with no cap) for businesses that invest in solarenergy systems.

Through 2007, consumers can continue to apply for federal-income-tax credits of up to $500 for the cost of insulation, windows, furnaces and other products to improve the energy efficiency of their homes.

The one-year extension is a step in the right direction, but it falls short of what is needed, alternative-energy and conservation advocates say.

Businesses, for example, need more time to plan for and adopt the use of solar energy, said Kateri Callahan, president of the Alliance to Save Energy, a coalition of businesses, government agencies and consumer groups.

The alliance and alternative-energyindustry groups expect the new Congress to consider additional tax benefits, perhaps extending tax credits for the more common energy-saving techniques.

A state grant program coupled with the federal tax credits and accelerated depreciation allowances make solarenergy systems financially attractive to business owners, Frasz said.

An 11-kilowatt system that costs $92,000, would qualify for a $37,200 state energy grant, $27,600 in federal tax credits, and accelerated depreciation allowances of $31,182. A federal tax on the state grant would cost the company $13,020. The actual cost of the system, after those incentives, would be $9,038, Frasz said.

That cost would be recovered through reduced electricity bills within seven years. The company would continue to benefit from the solar-generated electricity for 40 or more years, the expected life span of the solar panels, he said.

The typical residential solar-energy system costs between $20,000 and $30,000. Homeowners can receive the Ohio energy grants, but their federal tax credits are capped at $2,000 and they receive no depreciation allowance. With a grant and tax credit, the total cost is about 55 percent of the purchase price, and the payback period is 18 to 20 years.

lstratton@dispatch.com

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Copyright (c) 2007, The Columbus Dispatch, Ohio

Distributed by McClatchy-Tribune Business News.

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