Indiana: Commercial Solar Financing + Government Incentives 0

Exploring commercial solar financing and government incentives in Indiana can be a game-changer for businesses looking to invest in renewable energy. With a range of enticing tax credits and tailored financing solutions, the opportunities available can significantly reduce costs and boost the practicality of solar projects.

This guide will cover the main commercial solar financing options and government incentives available in Indiana, providing business owners with the crucial information needed to make well-informed decisions and maximize the benefits of solar energy. Whether you manage a small business or oversee extensive commercial properties, understanding these programs can help you achieve sustainability, secure long-term energy savings, and contribute to a greener future.

Commercial Solar Financing Lenders in Indiana

Solar Lease

A solar lease functions similarly to renting, where a business pays a predetermined monthly fee to utilize a solar energy system installed by a third-party provider. The payment amount is fixed regardless of the energy generated, and the provider takes care of the system’s maintenance.

C&I Projects a Solar Lease Is Good For

Solar leases are well-suited for medium-sized commercial properties such as retail stores, small manufacturing facilities, or multi-tenant buildings. These businesses can benefit from solar energy without the need for an upfront investment or maintenance responsibilities.

Solar Loan

A solar loan is a financing option where a business borrows money to purchase and install a solar energy system. The business owns the system and can take advantage of various tax credits and incentives, with the loan repaid over time, usually with interest.

C&I Projects a Solar Loan Is Good For

Solar loans are ideal for businesses that prefer ownership to leverage tax benefits like the Investment Tax Credit (ITC) or Production Tax Credit (PTC). They are suitable for commercial entities with strong credit profiles, such as corporate offices, hotels, or hospitals, planning to stay on the property long-term.

Energy Service Agreements (ESA)

An Energy Service Agreement (ESA) involves a service provider installing and maintaining an energy system on a property with no upfront cost to the property owner. The property owner pays for the energy consumed at a rate typically lower than the local utility rate. ESAs may include performance guarantees, linking payments to energy savings compared to a predetermined baseline.

C&I Projects a ESAs Are Good For

ESAs are suitable for energy-intensive businesses like data centers, large supermarkets, or industrial facilities that aim to reduce energy costs without upfront investment or maintenance hassles. These agreements help stabilize energy expenses, allowing businesses to focus on core operations.

Commercial Property Assessed Clean Energy (C-PACE)

C-PACE financing allows commercial property owners to fund energy efficiency and clean energy improvements through a voluntary property tax assessment. State or local governments provide the funding, which is repaid over an extended period, usually aligned with the system’s lifespan.

C&I Projects C-PACE Is Good For

C-PACE financing is great for commercial properties undergoing major renovations or upgrades, including sustainability enhancements. This is applicable to shopping centers, older office buildings, or hospitality venues aiming to boost energy efficiency and property values through sustainable improvements.

Commercial Solar Financing Companies and Organizations in Indiana

Mosaic 

Mosaic provides financing options for commercial solar projects, offering loans that enable businesses to invest in renewable energy and achieve long-term savings.

EnerBank USA 

EnerBank USA provides specialized solar loans for commercial projects, offering flexible terms and competitive rates to support businesses in their solar investments.  

Green Bridge Energy (US-Wide)

Green Bridge Energy offers specialized financing solutions for commercial solar projects, tailoring financial products to fit the unique requirements of various businesses across the United States.

Sustainable Capital Finance (US-Wide)

Sustainable Capital Finance provides takeout financing for commercial and non-profit solar installations over 100 kW throughout the country. Their services have enabled solar projects for municipalities, tribal groups, non-profit organizations, religious institutions, and schools.

Greentech Renewables (US-Wide)

Greentech Renewables delivers dependable financial solutions for commercial solar ventures across the nation. Their team handles the acquisition of products and materials, manages loan origination and servicing, and maintains robust communication with financial partners.

SunRenu (US-Wide)

SunRenu supports businesses with financing options for installing solar energy systems, offering solutions for both partial and full funding needs. Their commercial solar financing helps clients transition to solar energy with little to no upfront costs.

Indiana Solar Incentives

Net Metering

Net metering is a system that allows businesses with solar energy installations to feed excess electricity back into the grid and receive credits on their utility bills. 

Here’s how businesses in Indiana can benefit from and participate in net metering:

Benefits of Net Metering for Businesses

  1. Cost Savings

Businesses can reduce their overall energy costs by earning credits for the excess electricity they generate and export to the grid. These credits can offset future energy consumption, effectively lowering utility bills.

  1. Enhanced Return on Investment (ROI)

By reducing electricity bills and potentially achieving net-zero energy costs, net metering enhances the ROI on solar energy systems. This makes solar investments more financially attractive.

  1. Energy Independence

Net metering allows businesses to produce their own energy, reducing dependence on utility companies and protecting against rising energy costs.

  1. Environmental Impact

Participating in net metering contributes to the adoption of renewable energy sources, reducing carbon footprints and supporting environmental sustainability.

Participation Process for Businesses

  1. Install a Solar Energy System

Businesses must install a solar energy system capable of generating excess electricity. The system should be designed to meet the business’s energy needs and produce surplus energy during peak production times.

  1. Apply for Net Metering

Contact the local utility company to apply for net metering. The application process typically involves providing details about the solar energy system and its expected output.

  1. System Inspection and Approval

The utility company will inspect the solar energy system to ensure it meets all technical requirements and safety standards. Once approved, the system can be connected to the grid.

  1. Monitor Energy Production and Consumption

After the system is operational, businesses should monitor their energy production and consumption. Net metering credits will be applied to their utility bills based on the amount of excess electricity fed back into the grid.

  1. Utilize Credits

The credits earned through net metering can be used to offset future electricity bills, reducing overall energy costs. If the system consistently generates more electricity than consumed, excess credits can be carried over to future billing cycles.

Key Points from Indiana Utility Regulatory Commission (IURC)

  • Eligibility: To participate in net metering, businesses must have a qualifying renewable energy system, such as solar, wind, or hydroelectric, connected to the utility grid.
  • Capacity Limits: There are specific capacity limits for systems eligible for net metering, typically up to 1 megawatt (MW) for commercial installations.
  • Billing and Credits: The credits for excess energy are calculated based on the retail rate of electricity, providing substantial savings on energy costs.

For detailed information and guidelines on participating in net metering, businesses can visit the official Net Metering Resource Page on the Indiana Utility Regulatory Commission website.

Renewable Energy Property Tax Exemption

Indiana offers a Renewable Energy Property Tax Exemption that allows businesses that install qualifying renewable energy systems, including solar, to exclude the added value of these systems from their property tax assessments. This financial incentive is designed to encourage the adoption of renewable energy technologies without increasing the property tax burden on businesses.

Steps to Apply for the Renewable Energy Property Tax Exemption

  1. Determine Eligibility: Verify that your renewable energy system (solar, wind, geothermal, or hydroelectric) qualifies for the exemption.
  2. Complete Application: Obtain and fill out the necessary application forms from the Indiana Department of Local Government Finance (DLGF).
  3. Gather Documentation: Collect any required documentation, such as proof of installation and system specifications.
  4. Submit Application: Submit the completed application and documentation to your local county auditor’s office.
  5. Follow Up: Ensure your application is processed and approved by following up with the local authorities.

Solar Sales Tax Exemption

Businesses can use the General Sales Tax Exemption Certificate, Form ST-105, on the Indiana Department of Revenue Sales Tax Forms page to claim exemptions for equipment used in the production of renewable electricity. The exemption applies to equipment directly used in the production of electricity, such as solar panels and related components, provided they meet certain criteria.

NIPSCO Feed-In Tariff

Businesses can benefit from the NIPSCO Feed-In Tariff (FIT) program. This program allows renewable energy generators, including businesses, to sell the electricity they generate back to NIPSCO at predetermined rates. The program supports solar, wind, and biomass projects ranging from 3 kW to 1 MW. 

Businesses need to meet specific requirements, such as interconnection standards and Renewable Power Purchase Agreements, to participate. The FIT program offers a financial incentive by providing payments for the energy produced.

Free Commercial Solar Financing Indiana

Transitioning to solar energy can be a significant investment for businesses, but there are several financing options in Indiana designed to alleviate the financial burden. These options include programs and services that offer low or no upfront costs, making solar energy more accessible. 

Here are some key free commercial solar financing options available in Indiana:

C-PACE (Commercial Property Assessed Clean Energy)

C-PACE financing allows commercial property owners to fund energy efficiency and renewable energy improvements through a voluntary property tax assessment. This program provides the capital for solar projects with no upfront costs, and the repayment is made over time through property tax bills. 

The unique structure of C-PACE means the financing is tied to the property, not the owner, making it an attractive option for businesses looking to improve energy efficiency without immediate financial outlay.

Benefits of C-PACE

  • No upfront capital required
  • Long-term financing, often up to 20-30 years
  • Financing is tied to the property, not the owner
  • Can be used for a wide range of energy efficiency projects

Federal Solar Tax Credits for Commercial Projects in Indiana

Businesses in Indiana can also take advantage of federal solar tax credits to reduce the financial burden of solar energy installations: Investment Tax Credit (ITC) or Production Tax Credit (PTC).

Generally, project owners can’t simultaneously claim both the Investment Tax Credit (ITC) and the Production Tax Credit (PTC) for a single property. However, there might be exceptions allowing different credits for systems that are co-located, such as a combined solar and storage setup, subject to specific IRS guidelines.

Investment Tax Credit (ITC)

The ITC allows businesses to deduct a percentage of the cost of installing a solar energy system from their federal taxes. This credit significantly lowers the overall cost of solar installations, promoting the adoption of renewable energy.

Key Features

  • Percentage of Deduction: 30% tax credit for solar systems installed from 2022 through 2032.
  • Eligibility: Applies to both residential and commercial solar systems.
  • Cost Coverage: Can be applied to various installation costs, including equipment, labor, and system design.
  • Carryover Provisions: If the tax credit exceeds the business’s tax liability, it can be carried forward to future years.

Example of Savings from the ITC

  • Total Installation Cost: $500,000
  • ITC Savings: $150,000 (30% of $500,000)
  • Net Cost: $350,000

Production Tax Credit (PTC)

The PTC provides a per kilowatt-hour (kWh) tax credit for electricity generated by qualified energy resources, including solar systems, for the first ten years of operation.

Key Features

  • Per kWh Credit: 2.75 cents per kWh for qualifying solar systems.
  • Duration: Applies to the first ten years of operation.
  • Inflation Adjustment: Credit amount is adjusted annually for inflation.
  • Eligibility: Systems must meet specific labor and wage requirements set by the Treasury Department.

Example of Savings from the PTC

  • Total Installation Cost: $1,000,000
  • Annual Energy Generation: 1,500,000 kWh
  • Annual PTC Amount: $41,250 (1,500,000 kWh x $0.0275)
  • Total PTC Savings Over 10 Years: $412,500

By leveraging these financing options and federal tax credits, Indiana businesses can make solar energy installations more affordable and accessible, driving sustainability and long-term energy savings.

Leveraging MACRS to Lower Taxes for Solar System Installations

The Modified Accelerated Cost Recovery System (MACRS) is a tax depreciation mechanism in the United States that allows businesses to recover the costs of certain capital investments over a designated period through annual deductions. By using MACRS, businesses that install solar energy systems can significantly reduce their tax liabilities.

How MACRS Works

Depreciation Schedule 

Solar energy systems qualify for a five-year depreciation schedule under MACRS. This enables businesses to depreciate the cost of their solar installations over a five-year period, offering substantial tax benefits in the initial years following the installation.

Bonus Depreciation 

In addition to the regular MACRS depreciation, the Tax Cuts and Jobs Act of 2017 introduced a provision for 100% bonus depreciation for eligible properties placed in service between September 27, 2017, and December 31, 2022. This allows businesses to deduct the entire cost of the solar system in the first year itself, providing an immediate tax advantage.

Qualifying Expenditures 

Expenses that are eligible for depreciation under MACRS include the total installed cost of the solar energy system. This covers all costs associated with equipment, labor, and installation.

By leveraging MACRS, businesses can effectively lower their initial tax burdens, making the investment in solar energy systems more financially attractive.

C-PACE (Commercial Property Assessed Clean Energy) in Indiana

Commercial Property Assessed Clean Energy (C-PACE) is a financing mechanism available in Indiana that allows commercial property owners to finance energy efficiency and renewable energy improvements through a property tax assessment. Here’s an overview of how C-PACE works in Indiana:

Key Features of C-PACE in Indiana

  1. Funding Energy Projects

C-PACE provides upfront funding for various energy-related improvements, including solar installations, energy-efficient HVAC systems, lighting upgrades, and water conservation projects. This funding covers 100% of the project costs, eliminating the need for initial out-of-pocket expenses.

  1. Repayment via Property Tax Bill

The financing is repaid through a voluntary assessment on the property tax bill over an extended period, typically matching the useful life of the improvements, which can be up to 20-30 years. This long-term repayment structure aligns the financial benefits of reduced energy costs with the payment schedule.

  1. Transferable with Property

One of the unique aspects of C-PACE is that the repayment obligation is tied to the property, not the property owner. If the property is sold, the assessment and the remaining repayment obligation transfer to the new owner. This feature can alleviate concerns about investing in long-term energy projects if ownership might change.

  1. Eligibility Criteria

To qualify for C-PACE financing, properties must meet certain criteria, including being located in a participating municipality within Indiana. Eligible properties typically include commercial, industrial, agricultural, and non-profit properties.

  1. Project Approval and Implementation

Property owners work with C-PACE program administrators to get their projects approved. This process includes an energy audit to identify suitable improvements, followed by the arrangement of financing and implementation of the projects. The improvements must comply with local, state, and federal regulations.

  1. Benefits

The primary benefits of C-PACE include improved energy efficiency, reduced operating costs, enhanced property value, and a positive environmental impact. Additionally, because the financing does not appear as traditional debt, it does not affect the property owner’s credit capacity.

How Does C-PACE Payment Work?

In Indiana, the payment process for C-PACE financing works as follows:

  1. Upfront Funding

C-PACE provides 100% upfront financing for eligible energy improvements. This means that property owners do not need to make any initial out-of-pocket payments for the project.

  1. Property Tax Assessment

The financing is repaid through a special assessment added to the property tax bill. This assessment is voluntary and agreed upon by the property owner as part of the C-PACE financing agreement.

  1. Repayment Term

The repayment term typically matches the useful life of the improvements, often ranging from 10 to 30 years. This extended repayment period helps align the annual savings from reduced energy costs with the annual payment obligations.

  1. Fixed Payments

The annual payments are fixed and included in the property tax bill. This structure provides predictability and stability in the repayment schedule, making it easier for property owners to manage their finances.

  1. Transferability

One of the key features of C-PACE is that the repayment obligation is attached to the property rather than the property owner. If the property is sold, the C-PACE assessment transfers to the new owner, ensuring continuity in repayment without burdening the original owner.

  1. Non-Acceleration Clause

In case of default, only the overdue payments can be collected, not the entire remaining balance. This provides additional security to property owners by preventing the entire loan from becoming immediately due.

  1. Administrative Process

The C-PACE program is administered through local government or designated program administrators. Property owners work with these administrators to get their projects approved, financed, and implemented.

Example

A commercial building owner in Indiana decides to install a new energy-efficient HVAC system costing $200,000. Through the C-PACE program, they receive 100% financing for the project. This amount is then added as a special assessment on their property tax bill, to be repaid over 20 years. 

If the annual payment is $10,000, it is included in their property tax bill each year. If the building is sold after 5 years, the remaining assessment transfers to the new owner.

C-PACE Providers in Indiana

Nuveen Green Capital offers C-PACE financing for energy efficiency, water conservation, and renewable energy projects, allowing property owners to obtain long-term, low-cost financing.

PACENation is a nonprofit organization that advocates for PACE financing and supports the growth and success of PACE programs across the United States.

CounterpointeSRE offers C-PACE financing for a variety of energy efficiency and renewable energy improvements, focusing on making sustainable energy solutions accessible to commercial property owners.

C-PACE Alliance is dedicated to increasing the volume of quality C-PACE projects by promoting economic development and private investment in commercial properties through energy efficiency and renewable energy improvements.

Petros PACE Finance provides C-PACE financing solutions tailored to the needs of commercial property owners, focusing on energy efficiency and renewable energy projects.

Best Commercial Solar Financing Indiana

When considering the best commercial solar financing options in Indiana, it’s important to evaluate several factors to determine the most suitable choice for your specific project. 

Here are some general guidelines to help you make an informed decision:

Key Factors to Consider

  1. Project Size and Scope

The size and complexity of your solar project play a significant role in determining the best financing option. Larger projects may benefit from long-term financing options, while smaller projects might find simpler loans more suitable.

  1. Upfront Costs

Evaluate the initial capital required for the project. Financing options like C-PACE allow for 100% upfront funding, which can be advantageous if you prefer not to make an initial cash outlay.

  1. Repayment Terms

Consider the length and flexibility of the repayment terms. Long-term financing options, such as those offered by C-PACE, can provide extended repayment periods that align with the lifespan of the solar system, ensuring manageable annual payments.

  1. Tax Incentives and Benefits

Take into account the availability of tax credits and incentives, such as the Investment Tax Credit (ITC). Some financing options allow you to take full advantage of these benefits, which can significantly reduce the overall cost of the project.

  1. Ownership and Control

Decide whether you prefer to own the solar energy system outright or have a third-party manage the installation and maintenance. Ownership can provide long-term financial benefits and greater control over the system.

  1. Interest Rates

Compare the interest rates offered by different financing providers. Lower interest rates can reduce the overall cost of the project over time, making the financing option more attractive.

  1. Eligibility Requirements

Ensure that your project meets the eligibility criteria for the chosen financing option. Some programs may have specific requirements related to property type, location, or project size.

Conclusion

Indiana offers a range of commercial solar financing options and government incentives designed to make solar energy more accessible and cost-effective for businesses. From valuable tax credits like the Investment Tax Credit (ITC) to innovative financing mechanisms such as C-PACE, businesses have multiple avenues to reduce upfront costs and enhance the financial feasibility of solar installations. These incentives also boost the return on investment by offering long-term savings through lower energy costs and favorable tax treatments.

By utilizing these financial tools and incentives, commercial property owners in Indiana can reap significant benefits from transitioning to solar energy. These measures not only lead to considerable cost savings and improved sustainability but also support the state’s broader goals of advancing renewable energy and reducing carbon emissions. Adopting solar energy contributes to a greener future and positions businesses as leaders in environmental stewardship and economic efficiency.

Melissa brings over 20 years of communications and marketing experience, consistently delivering impactful contributions that strengthen organizational relationships, optimize operational efficiency, and increase sales. With a deep-rooted interest in environmental solutions, she loves applying her skills to increase the adoption of solar technology globally.
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