Solar by State | Understanding Rhode Island Incentives

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While solar continues to grow on a national (and global) scale, solar policies in the US are largely determined by individual states. This means that the solar climate in one state can be very different from the state next door, depending on how receptive each government is to progressive solar policy.

Historically, Rhode Island has been slower on the solar uptake than Massachusetts, but recent developments in Ocean State solar policies are changing this (so much so that Solect recently announced our own expansion into the state). This week on our blog we explore Rhode Island’s solar scene, and how pending legislation could revolutionize the state’s renewable energy future.

Existing Incentives

Rhode Island’s solar program is currently structured around two main incentive programs; the Renewable Energy Growth (REG) program, and the Renewable Energy Fund (REF).

The Renewable Energy Growth program, offered by the state’s electric utility National Grid, allows solar customers to enter into a 20-year feed-in tariff agreement with the utility, which offers compensation to solar array owners for the electricity produced from their system(s) which is fed directly into the grid. Under this program, all solar electricity generated from a system enters the grid upon production, and the array owners are compensated at a fixed rate for kilowatt hours (kWh) produced, based on system size. In addition, solar array owners are able to take advantage of the 30% federal income tax credit and five-year accelerated depreciation. However, if participating in the REG program, solar owners are not able to take advantage of any Renewable Energy Certificates (RECs) generated by their array.

The state-sponsored Renewable Energy Fund provides grants and loans to Rhode Island property owners who are looking to go solar. Interested array owners can apply to have their project partially financed through this fund. Under the REF program, awards are given based on the technical and financial feasibility of a project, cost per kilowatt hour (kWh) of energy produced, anticipated amount of renewable energy related benefits (job creation, environmental benefits, etc.), and the experience of the solar provider’s project team. This program also allows array owners to take advantage of all federal tax incentives, including the ITC, accelerated depreciation on the system cost, net metering for excess energy, and Renewable Energy Credits.

Rhode Island recently voted to extend funding for these incentives through 2022, as well as extend net metering policy to allow for third-party financed solar projects in both public and private markets, opening up the possibility for Rhode Island property owners to participate in on-site Power Purchase Agreements.

In addition to the REG and REF programs, Rhode Islanders also benefit from a suite of standard solar policies;

Net Metering allows excess energy produced by a “behind the meter” solar array to be credited at retail value to the producer in subsequent months. When solar system owners generate more electricity than they consume in a given month, their electric meter turns backwards and the utility credits the owner’s account for the excess electricity generated. In Rhode Island, net metering regulations vary for public and private entities. A private entity can only receive credit for solar energy generated on-site. A public entity can receive both on-site and off-site net metering credits, up to a maximum of 5 MW AC. Solar customers taking advantage of the REG program, however, are not eligible for net metering, as REG arrays are located “in front of the meter”, and all of the energy produced enters the grid immediately, instead of first being used on-site.

C-PACE Program: Rhode Island recently passed a Commercial Property Assessed Clean Energy (C-PACE) program , sponsored by the Rhode Island Infrastructure Bank (RIIB), that is applicable for solar energy installations in the state. C-PACE is a voluntary tax assessment-based, private financing program designed to finance energy efficiency and renewable energy projects for commercial and residential properties. Solar array owners can choose to finance their project with C-PACE, repaying the project costs over a period of up to 20 years through an additional charge (“assessment”) on thier property tax or other municipal bill. Because project savings typically outweigh the annual assessment payment, solar arrays financed through C-PACE remain cash flow positive. Benefits of C-PACE include 100% financing, with no personal guarantees or personal credit checks, and the rentention of all tax incentives and utility rebates. This program can also be used for renewable building improvements as well, such as roof repairs or energy efficiency measures, in conjunction with solar or not. This program should be widely available in May of 2016.

Renewable Energy Certificates (RECs): In Rhode Island, solar energy systems are allocated one Renewable Energy Certificate (REC) per 1,000 kWh of electricity generated. Similar to SRECs in Massachusetts, these RECs have value in the marketplace, and can be sold for additional revenue, which can help recuperate the cost of a solar investment. Again, solar customers taking advantage of the REG program are not eligible for RECs.

The Investment Tax Credit (ITC) is a 30% tax credit for solar systems installed by December 31, 2019. The tax credit will then reduce incrementally each year until settling at 10% in 2022 and for future years.

Accelerated Depreciation: Solar energy systems are eligible under the Modified Accelerated Cost Recovery System (MACRS) to depreciate 85% of cost basis over a five-year period, with 50% bonus depreciation in the first year of service. Combined with the ITC, this provides array owners with nearly 50% of their solar installation cost offset by tax benefits in the first year!

What Comes Next? Proposed Legislation

Luckily, it appears as though Rhode Island’s solar incentive programs are about to be re-upped. The state benefits from a pro-renewable governor and a reasonable legislature. The RI Senate passed three pieces of positive solar legislation last week alone, renewing the REG and the REF for 10 years, and more than doubling the state’s Renewable Energy Standards (RES), which mandates what percentage of the state’s energy must come from renewable sources. The House is expected to follow suit in passing the bills.

Thanks to positive legislative action and a solar-friendly government, it seems the sun is ready to shine on the burgeoning Rhode Island solar industry.

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