Solar power electrifies businesses around NH
Solar benefits companies’ bottom line by improving their financial performance and increasing their environmental and social impact
More and more, New Hampshire businesses are harnessing the power of the sun to diversify their energy needs, and Granite State solar companies are ready to help. But what are some of the most important elements that businesses should consider when looking at solar power and their overall energy needs? NH Business Review reached out to some experts to tap their knowledge about this important topic.
Our panel: Diana Wood, Director of Marketing & Outreach, Norwich Solar; Steve Scott, Vice President, Commercial Lending, BankProv; Susan Geiger, Attorney, Orr&Reno; and Viggo Fish, Attorney, McLane Middleton, PA.
Steve Scott, Vice President, Commercial Lending, BankProv
Q: Why is now a great time to add solar energy to your business in New Hampshire?
A: There really is not a bad time to add solar to your business, as electrical prices seem to trend toward increases year over year. A recent study (March 2023) placed New Hampshire as the fourth costliest state (behind Hawaii, Connecticut and Massachusetts) for per kilowatt cost of electricity. All of the New England states have the dubious distinction of being within the top 10 states for costliest electricity.
A business owner that installs a solar array on their business location’s property will temper the electrical costs by allowing the array to generate electricity for business use. Once the array is constructed, the generation of energy is fairly passive, meaning that the array generates electricity with little involvement from the business owner.
The Inflation Reduction Act that was recently passed increased the tax benefits and reset the tax credit on projects back to 30 percent. However, depending on the attributes of the project, the benefits could be higher than that.
Q: What financial incentives are there in New Hampshire for businesses to invest in solar energy?
A: Commercial incentives in New Hampshire include USDA grants, which are available depending on where the property is located. The Federal Tax Code allows for a 30 percent tax credit (minimum). This tax credit applies to both commercial and consumer projects. BankProv offers commercial loans for businesses looking to add solar energy to their facilities.
Q: How can you help me finance my business solar energy system? (Is there someone who can help me with this, specifically?)
A: As a commercial bank, BankProv has the industry expertise and understands the financing of solar energy projects. The Bank has financed dozens of commercial solar projects and understands the benefits of solar energy. Our consultative team approach and agility enables our clients to focus on growing their business by getting a solution in place that is tailored to their needs.
Q: What are some of the unique elements about financing a renewable energy project?
A: There are definitely some interesting elements to renewable energy projects depending on the size of it. If someone installs a project on their property in New Hampshire, aside from getting the benefit of the electricity that is generated, the owner of the array will receive RECs (Renewable Energy Certificates) based on the amount of electricity that is generated. RECs have cash value and are regularly traded on the open market through REC brokers.
For commercial projects, the tax code allows for the write-off of the depreciation of the project, which offsets taxable income, while the Federal Tax Code allows for tax credits. The convergence of these two elements provides the business owner with a potential source of capital, as there are investors that will acquire some, or all, of the tax benefits. (i.e., depreciation and tax credits in exchange for a cash payment. Given the intricacies, this tax equity investment process should be guided by the involvement of a CPA and legal advisor).
Diana Wood, Director of Marketing and Outreach, Norwich Solar
Q: Are there other important benefits to adding solar?
A: Yes, solar can and will save your business money which will help your bottom line, but there’s more than just dollars and cents when it comes to solar.
Solar benefits companies’ Triple Bottom Line by improving their financial performance and increasing their environmental and social impact. Triple Bottom Line thinking is usually associated with the 3 P’s: people, planet and profit. This sustainability framework emphasizes corporate social responsibility and environmental impact just as much as profit in business.
In terms of financial stability, solar power provides more predictable monthly energy costs and reduces your reliance on power generated by fossil fuels that are subject to sudden increases. And then there’s the environmental sustainability part. As businesses transition from a “shareholder” focus to a more comprehensive “stakeholder” mentality, the benefits of adding solar become even more apparent. Locally generated power benefits the communities they’re built in. Every kilowatt of clean energy added to the grid reduces your carbon emissions, because there’s less need for power generated from New England Energy Mix, which includes fossil fuels. Solar power is renewable and supports public health by removing carbon emissions.
We also should acknowledge the fact that consumers are expecting more from the companies they buy from. Many of the businesses we work with tell us that their customers are looking to buy from companies that are doing more to address climate change. Renewable solar power aligns with the values of your customers and your employees, too.
Let’s look at some numbers. One 200 kW AC project we completed in 2020 for a manufacturing facility has been generating, on average, 270,250 kWh per year. That renewable power offset the equivalent CO2 emissions as taking 192 cars off the road each year. A similar 146 kW AC array for a dairy producer provided the host with over $4,000/year in energy savings with absolutely no upfront costs through a Net Metering Agreement. From the perspective of Triple Bottom Line, the benefits of solar have universal appeal and are becoming harder for businesses to pass up.
Maybe you’re looking for more benefits. If you have a large enough roof or land, leasing space for a large solar array might be an option. In that instance, the company hosts the array and has little to no upfront costs, but can still benefit from the renewable power generated on-site. The lease agreement brings in reliable income for the next 25 years, and that’s combined with all the other benefits mentioned above. That’s a win-win-win scenario.
Susan Geiger, Attorney, Orr & Reno
Q: Why should a business consider incorporating solar energy, beyond saving overhead?
A: Beyond using solar for business tax credits and reducing energy costs, the reasons for exploring solar — as well as other forms of renewable energy — usually center on the desire for using a sustainable and environmentally friendly energy source. Businesses that currently buy power from their local electric distribution company are receiving electricity produced by a mix of generating resources, including those that use fossil fuels.
Because customers are becoming more aware of and concerned about the environmental impact of their own energy consumption, the demand for solar power is growing. This demand, coupled with advanced solar technology, has made independence from fossil fuels possible for more business and residential electric customers. And while the question of whether to move away from traditional energy sources typically involves a financial cost-benefit analysis, when environmental benefits are examined, solar is becoming a popular energy source despite upfront installation or purchase costs.
Q: What federal programs can help businesses cover the cost of adding an array of solar panels?
A: The federal tax credit available to businesses installing a solar array is the investment tax credit (ITC), which reduces a business’s federal income tax liability as a percentage of the total installation in a single tax year.
The Inflation Reduction Act of 2022 (IRA) updated and expanded the ITC for solar and battery storage projects. The ITC — which was previously set at a 26 percent credit for 2023 and a 10 percent credit for every year after that — was updated and raised to cover 30 percent of the eligible project installation costs through 2032. The IRA also expanded the ITC in three ways:
• Nonprofits with no tax liability can now apply for direct pay reimbursement equal to the value of the tax credit.
• Storage-only projects are now eligible for the ITC.
• The ITC now includes several “bonus credits,” which can significantly increase savings for projects serving low-income and underserved communities.
The United States Department of Agriculture (USDA), through its Rural Energy for America Program (REAP), helps agricultural producers and rural small businesses reduce their energy costs and consumption by providing loan financing and grant funding to purchase and install renewable energy systems. Eligible participants in the REAP program are agricultural producers, with at least 50 percent of their gross income coming from agricultural operations and small businesses in eligible rural areas.
Q: Are there state programs that incentivize solar projects for businesses?
A: The New Hampshire Department of Energy administers the Commercial & Industrial Solar Incentive Program, which provides financial assistance to commercial and industrial electric customers for non-residential structures with a commercial electric meter located in New Hampshire. Incentives are limited to the lesser of 25 percent of the total project cost or $10,000.
Eversource customers — both commercial and residential — can be compensated for sharing solar energy storage with the utility during high-demand hours.
Q: Is there any policy-making activity necessary to facilitate the use of solar power in New Hampshire?
A: There have been several bills introduced in recent legislative sessions with the aim of expanding the development of solar power and other forms of renewable energy in New Hampshire. One key issue being discussed is increasing the cap — from 1 MW to 5 MW (AC) — on solar projects eligible for net metering by a commercial, industrial or institutional entity. Currently, commercial businesses are capped at 1 MW.
Viggo Fish, Attorney, McLane Middleton, PA
Q: Why should a business consider incorporating solar or renewable energy beyond the cost savings?
A: Growing concern for the effects of climate change and the related world-wide necessity for sustainable building and development is shifting investment and customer decision-making increasingly toward environmental, social and governance (ESG) business practices and evaluation of investment risk factors.
Federal regulatory changes requiring ESG-related accounting and reporting are also causing companies to integrate and prioritize ESG considerations into their core business objectives and operations.
On March 21, 2022, the U.S. Securities and Exchange Commission (SEC) proposed changes to its climate change disclosure requirements that, if adopted, will require regulated companies (and to some extent those with whom they do business) to publicly disclose specific information about their greenhouse gas (GHG) emissions, their climate change risks, impacts and opportunities likely to have a material impact on their business, as well as other ESG-related information.
Ultimately, companies that proactively set clear and achievable ESG objectives and implement practices to track goal advancement, will be better positioned when regulations concerning climate change and other ESG disclosure requirements take effect in the coming months.
The “E” in ESG — environmental criteria — includes evaluation of a company’s energy use, the natural resources it consumes, GHG emissions and its overall contributions to climate change. It also includes all of the company’s efforts to mitigate climate change, conserve resources and promote sustainable operations.
Investing in cleaner sources of electricity, such as solar power, is one way that companies can reach their ESG goals while also benefiting from lower and more consistent and predictable electricity costs. Generating or purchasing electricity from cleaner energy sources allows companies to reduce their GHG emissions and their reliance on fossil fuels and other natural resources — both factors that investors consider when evaluating a company’s investment risks and customers consider when evaluating a company’s overall reputation including its commitment to corporate social responsibility.
The reality is that ESG is entering the mainstream in domestic and international corporate governance. With investors keenly focused on corporate ESG practices, and consumers demanding more environmentally and socially responsible corporate leadership, corporate boards will need to carefully consider ESG strategy and implementation.
Depending on a company’s specific ESG goals, investing in solar power, or other sources of renewable energy, is a straightforward and cost-effective way to demonstrate a commitment to the “E” in ESG.