Massachusetts: Commercial Solar Financing + Government Incentives  0

Exploring commercial solar financing and government incentives in Massachusetts can be a game-changer for businesses looking to invest in renewable energy. From tax credits and rebate programs to specialized financing solutions, the opportunities available can significantly reduce the cost and increase the feasibility of solar projects. 

This guide will cover the various commercial solar financing options and government incentives available in Massachusetts, providing business owners with the knowledge they need to make informed decisions and capitalize on the benefits of solar energy. Whether you’re a small business owner or manage large commercial properties, understanding these programs can help you enhance sustainability, achieve long-term energy savings, and contribute to a greener future.

Main Commercial Solar Financing Options in Massachusetts

Solar Power Purchase Agreement (PPA) 

A Solar Power Purchase Agreement (PPA) is a contract where a third-party developer installs, owns, and maintains a solar energy system on a commercial property. The property owner then buys the electricity generated at a set, often reduced, rate. This arrangement enables businesses to access solar power with no initial investment and limited financial risk.

Types of C&I Projects a Solar PPA Is Good For

Solar PPAs are particularly beneficial for large-scale projects like manufacturing plants or expansive office complexes. In Massachusetts, businesses can avoid upfront costs and enjoy lower energy rates, making this an appealing choice for those aiming to minimize the financial risks tied to solar investments.

Solar Lease 

A solar lease is similar to renting a property where a business pays a fixed monthly fee to use a solar energy system installed by a third-party provider. The monthly payment remains constant regardless of energy production, and the provider is responsible for all system maintenance.

Types of C&I Projects a Solar Lease Is Good For

Solar leases are ideal for medium-sized commercial properties, such as retail stores, smaller manufacturing units, or multi-tenant buildings. These businesses can leverage solar energy without the need for capital investment in system purchases and without the burden of maintenance duties.

Solar Loan 

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

Types of C&I Projects a Solar Loan Is Good For

Solar loans are best for businesses that prefer ownership and wish to benefit from tax advantages like the Investment Tax Credit (ITC). They suit commercial entities with strong credit profiles, such as corporate offices, hotels, or hospitals that plan to remain in their properties long-term.

Commercial Property Assessed Clean Energy (C-PACE) 

C-PACE is a financing mechanism that allows commercial property owners to fund energy efficiency and clean energy improvements through a voluntary property tax assessment. The financing is provided by state or local governments and repaid over a long period, usually aligning with the lifespan of the installed system.

Types of C&I Projects C-PACE Is Good For

C-PACE financing is ideal for commercial properties undergoing major renovations or retrofits that include sustainability upgrades such as shopping centers, older office buildings, or hospitality venues aiming to boost energy efficiency and property values through green improvements.

Energy Service Agreements (ESA) 

An Energy Service Agreement (ESA) involves a service provider installing and maintaining an energy system on a property at no upfront cost to the property owner. Instead, 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 against a predetermined baseline.

Types of C&I Projects an ESA Is Good For

ESAs are well-suited for energy-intensive businesses like data centers, large supermarkets, or industrial facilities seeking to cut energy costs without upfront investments or maintenance responsibilities. These agreements help stabilize energy expenses, allowing businesses to focus on their core operations.

C&I Solar Financing Companies in Massachusetts

Pope Energy

Pope Energy specializes in commercial solar financing and offers a range of options, including Power Purchase Agreements (PPAs) and Commercial Property Assessed Clean Energy (C-PACE) loans. They provide financing solutions tailored to maximize tax incentives and utility rebates. 

Solaris Renewables

Solaris Renewables offers comprehensive commercial solar solutions, including financing options like solar loans and solar lease for small and medium-sized businesses across Massachusetts.

Sunlight Financial 

They specialize in solar loans for commercial and residential projects, offering low or zero-interest rates. Their flexible financing terms and quick approval process make it easy for businesses to transition to solar energy efficiently.

Sustainable Capital Finance (US-Wide)

They provide Power Purchase Agreements (PPAs) and takeout financing solutions for commercial and non-profit solar projects of 100 kW or larger across the US. Their services have supported the installation of solar systems for municipalities, tribal organizations, non-profits, religious institutions, and educational facilities. 

Greentech Renewables (US-Wide)

Their team oversees dependable funding solutions for commercial solar projects across the country. They coordinate the acquisition of products and materials, manage loan procurement and maintenance, and ensure seamless communication with lending partners.

SunRenu (US-Wide)

SunRenu offers financing solutions for businesses looking to fund their solar energy systems, either partially or fully. Their commercial solar financing options allow clients to integrate solar energy with little to no upfront costs. The company provides commercial customers with a non-recourse solar loan, fully amortized over up to 20 years, with no prepayment penalties, available in all 50 states.

Solar Power Purchase Agreement Massachusetts

Commercial property owners and business owners can experience these benefits of solar Power Purchase Agreements in Massachusetts

  • No Upfront Costs: The third-party developer handles the installation, ownership, and maintenance of the solar energy system, eliminating the need for initial capital investment.
  • Predictable Energy Costs: Fixed energy rates over the agreement term help in accurate budgeting and financial planning.
  • Reduced Energy Bills: Purchase the generated electricity at a predetermined, often reduced rate, leading to immediate savings on energy expenses.
  • Protection Against Energy Price Volatility: Lock in lower energy rates, providing a hedge against future increases in utility costs.
  • Hassle-Free Maintenance: The developer is responsible for system upkeep and performance, allowing you to focus on your core business operations.
  • Sustainability and Reputation: Adopting solar energy supports sustainability goals, enhances your corporate image, and aligns with Massachusetts’ renewable energy targets.

UVcell Solar Hassle-Free PPA Solution for Massachusetts’s C&I Projects

Businesses can get a commercial solar system at zero cost as a Solar Power Purchase Agreement (PPA) partner and secure lower electricity rates for 20 years. 

Solar equipment provided

  • High-quality Tier 1 solar panels
  • Inverter
  • Battery energy storage system (BESS)

Contact us to see if you qualify for solar PPA.

Does Massachusetts Offer Incentives for Solar Panels?

These incentives make it financially advantageous for commercial property owners and businesses in Massachusetts to invest in solar energy, promoting the growth of renewable energy and helping to achieve the state’s sustainability goals.

Solar Massachusetts Renewable Target (SMART) Program

  • Overview: A performance-based incentive program that provides fixed payments to solar system owners for each kilowatt-hour (kWh) of solar energy produced.
  • Benefits: Offers financial incentives over a 10 to 20-year period, making solar investments more attractive and financially viable.

Renewable Energy Property Tax Exemption

  • Overview: Provides property tax exemptions for the added value of a solar energy system to a property.
  • Benefits: Reduces the property tax burden for businesses that install solar panels, encouraging more investments in renewable energy.

Renewable Energy Equipment Sales Tax Exemption

  • Overview: Exempts the sale of solar energy equipment from state sales tax.
  • Benefits: Lowers the upfront cost of purchasing solar equipment, making solar installations more affordable for businesses.

Net Metering

  • Overview: Allows commercial solar system owners to sell excess electricity back to the grid at retail rates.
  • Benefits: Provides a way to earn credits on electricity bills, improving the return on investment for solar energy systems.

Massachusetts Clean Energy Center (MassCEC) Grants

  • Overview: Offers various grants and rebates for clean energy projects, including solar installations.
  • Benefits: Provides additional financial support to offset the costs of installing solar energy systems.

Federal Solar Tax Credits for Massachusetts Commercial Property Owners

There are two primary tax credits are available for businesses, nonprofits, and other entities like local and tribal governments:

  1. Investment Tax Credit (ITC)
    • The ITC allows businesses to reduce their federal income tax liability by a percentage of the cost of installing a solar energy system. For solar systems placed in service from 2022 onward and beginning construction before 2033, the ITC is set at 30%.
    • Benefits: This substantial tax credit makes the initial investment in solar energy more affordable by directly reducing the amount of tax owed. Commercial property owners can leverage this to lower their upfront costs and improve the return on investment for solar projects.
  2. Production Tax Credit (PTC)
    • Overview: The PTC provides a per kilowatt-hour (kWh) tax credit for electricity generated by solar systems and other qualifying technologies for the first 10 years of operation. For solar systems meeting certain labor requirements or under 1 megawatt (MW) in size, the PTC is 2.75 ¢/kWh, adjusted annually for inflation.
    • Benefits: This ongoing credit incentivizes the production of solar energy, offering a steady reduction in federal income tax liability based on the amount of electricity generated. It encourages sustained energy production and efficiency improvements over the long term.

Choosing Between ITC and PTC

Generally, project owners cannot claim both the ITC and PTC for the same property. However, they may be able to claim different credits for co-located systems, such as solar panels paired with storage solutions, depending on IRS guidance.

How Commercial Property Owners Benefit

  • Reduced Initial Costs: The ITC lowers the initial financial barrier, making solar installations more financially feasible.
  • Long-Term Savings: The PTC rewards ongoing energy production, offering savings over the first decade of the system’s operation.
  • Enhanced ROI: Both credits improve the financial return on solar investments, making it a more attractive option for commercial property owners.

By taking advantage of these federal tax credits, commercial property owners in Massachusetts can significantly reduce their costs, enhance the sustainability of their operations, and contribute to a cleaner energy future.

Examples of Savings from ITC

Let’s consider a warehouse in Massachusetts planning to install a solar energy system. The total cost of the solar installation is $500,000. The warehouse can take advantage of the Federal Investment Tax Credit (ITC), which allows them to deduct 30% of the cost of installing a solar energy system from their federal taxes.

Calculation of ITC Savings

  1. Total Cost of Solar Installation: $500,000
  2. ITC Percentage: 30%
  3. ITC Amount ($500,000×0.30): $150,000. So, the warehouse can reduce its federal tax liability by $150,000.
  4. Net cost of solar installation ($500,000-$125,000): $350,000

This example illustrates how the ITC, combined with energy savings, can make solar energy an economically viable and attractive option for commercial property owners in Massachusetts.

Examples of Savings from PTC

Let’s say a hotel in Massachusetts is planning to install a solar energy system. The total cost of the solar installation is $1,000,000, and the system is expected to generate 1,200,000 kWh of electricity annually. The hotel can take advantage of the Federal Production Tax Credit (PTC), which provides a per kilowatt-hour (kWh) tax credit for electricity generated by the solar system for the first 10 years of operation. The current PTC rate for solar is 2.75¢ per kWh.

Calculation of PTC Savings

  1. Annual Energy Generation: 1,200,000 kWh
  2. PTC Rate: 2.75¢ per kWh
  3. Annual PTC Amount (1,200,000kWh × $0.0275): $33,000

The hotel can reduce its federal tax liability by $33,000 each year for the first 10 years of the system’s operation. The total PTC savings over 10 years is $330,000 ($33,000 x 10).

This example demonstrates how the PTC, combined with significant energy savings, can make solar energy a financially attractive and sustainable option for commercial properties like hotels in Massachusetts.

Using MACRS to Reduce Taxes for Solar System Installations

The Modified Accelerated Cost Recovery System (MACRS) is a tax depreciation system in the United States that allows businesses to recover the cost of certain capital expenditures over a specified period through annual deductions. When businesses install a solar energy system, they can utilize MACRS to significantly reduce their tax liabilities. 

How MACRS Works

Depreciation Schedule

Under MACRS, solar energy systems qualify for a five-year depreciation schedule. This means that the cost of the solar system can be depreciated over five years, providing a substantial tax benefit in the initial years after installation.

Bonus Depreciation

In addition to the regular MACRS depreciation, the Tax Cuts and Jobs Act of 2017 introduced a 100% bonus depreciation for qualifying property 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.

Eligible Costs

The costs eligible for depreciation under MACRS include the total installed cost of the solar energy system, which encompasses equipment, labor, and installation expenses.

Solar Loan Massachusetts

Solar loans are a popular financing option for businesses looking to install solar energy systems in Massachusetts. A solar loan allows a business to borrow money specifically to pay for the purchase and installation of a solar energy system. Once the loan is repaid, the business owns the system outright and can benefit from all associated tax credits and incentives.

Why Choose a Solar Loan in Massachusetts?

  1. Ownership and Control: With a solar loan, you own the solar energy system once the loan is paid off. This means you can take full advantage of tax incentives like the Federal Investment Tax Credit (ITC), which can significantly reduce the cost of your solar installation.
  2. Fixed Payments: Solar loans typically offer fixed monthly payments, which can help with budgeting and financial planning. Unlike variable energy costs, your loan payments remain consistent throughout the term.
  3. Increased Property Value: Owning a solar energy system can increase the value of your commercial property. Potential buyers are often attracted to properties with lower energy costs and sustainable energy sources.
  4. Energy Savings: Even with loan payments, many businesses find that their overall energy costs are lower with a solar energy system. Once the loan is repaid, the energy savings can be even more substantial.

Massachusetts Commercial Property Assessed Clean Energy (C-PACE) Financing

C-PACE financing is a unique and innovative financial tool that allows commercial property owners in Massachusetts to fund energy efficiency, renewable energy, and water conservation projects. With C-PACE, property owners can secure long-term, low-cost financing that is repaid through a voluntary property tax assessment. This financing method makes it easier for businesses to undertake significant energy upgrades without the burden of upfront costs.

Benefits of C-PACE Financing in Massachusetts

  1. Enhanced Property Value: Energy-efficient improvements can increase the value of commercial properties by reducing operating costs and enhancing sustainability credentials.
  2. Energy Savings: Businesses can achieve significant energy savings through C-PACE funded projects, such as installing solar panels, upgrading HVAC systems, or improving insulation.
  3. Sustainability and Compliance: C-PACE financing supports Massachusetts’ goals for reducing carbon emissions and promoting renewable energy. It helps businesses comply with local energy efficiency regulations and contribute to environmental sustainability.
  4. Flexible Project Scope: C-PACE can be used for a wide range of projects, including renewable energy installations, energy efficiency upgrades, water conservation measures, and more. This flexibility allows businesses to tailor projects to their specific needs.

How Is C-PACE Repaid?

C-PACE (Commercial Property Assessed Clean Energy) financing offers a unique repayment structure that differs from traditional loans. 

Here’s how it works:

  1. Property Tax Assessment: The repayment of a C-PACE loan is facilitated through a special assessment added to the property tax bill. This means the repayment is not made directly to the lender but through your property taxes.
  2. Annual Payments: The C-PACE assessment is typically collected annually, along with your regular property tax payments. This can simplify budgeting and financial planning for property owners.
  3. Long-Term Financing: C-PACE financing terms can extend from 10 to 20 years, aligning with the expected life of the energy improvements. This extended repayment period ensures that the cost savings from the improvements can cover or exceed the annual repayment amount.
  4. Transferability: One of the significant advantages of C-PACE is that the assessment is tied to the property, not the owner. If the property is sold, the repayment obligation transfers to the new owner, allowing for flexible ownership changes without disrupting the financing.
  5. Non-Debt Financing: Since C-PACE financing is structured as a property tax assessment, it is considered a non-debt obligation on the business’s balance sheet. This can help maintain favorable financial ratios and credit ratings.

Example of C-PACE Repayment Process

  • A business owner decides to install a solar energy system and uses C-PACE financing to cover the $100,000 cost.
  • The local government adds a special assessment of $10,000 per year (plus interest) to the property tax bill for the next 10 years.
  • The business owner pays this assessment annually along with their property taxes.
  • The energy savings from the solar system reduce the business’s utility bills, often offsetting the annual C-PACE payments.
  • If the business sells the property before the 10 years are up, the new owner takes over the remaining C-PACE assessment payments.

This repayment method makes C-PACE a practical and manageable financing option for commercial property owners looking to invest in energy efficiency and renewable energy projects.

Main C-PACE Providers in Massachusetts

MassDevelopment is the primary entity managing the C-PACE program in Massachusetts. They provide a structured framework for property owners to access financing for energy improvements through a property tax assessment.

Nuveen Green Capital is a national leader in C-PACE financing and was involved in Massachusetts’ first C-PACE project. They specialize in providing capital for energy performance-enhancing projects in commercial, multifamily, and nonprofit real estate sectors.

Greenworks Lending is an affiliate of Nuveen Green Capital, Greenworks Lending focuses on offering C-PACE financing for a variety of energy efficiency and renewable energy projects.

PACE Loan Group specializes in offering C-PACE financing across various states, including Massachusetts. They provide affordable financing options for energy-efficient upgrades.

C-PACE.COM provides long-term, fixed-rate financing for energy efficiency, water conservation, and renewable energy projects. They are known for offering comprehensive C-PACE financing solutions.

What Is the Best Commercial Solar Financing in Massachusetts?

There is no one-size-fits-all answer to the best commercial solar financing in Massachusetts. The best choice depends on your financial situation, project size, long-term goals, and preferences for ownership and maintenance. Consulting with a solar financing expert can also help you navigate the available options and make an informed decision.

Evaluate each financing option based on these criteria below to determine the best fit for your specific needs:

Upfront Costs

  • If you prefer to avoid high initial expenditures, consider options like Power Purchase Agreements (PPAs) or Solar Leases, which typically require little to no upfront costs.
  • For those who have capital available and wish to invest directly, Solar Loans or self-financing might be more appropriate.

Ownership and Control

  • If owning the solar energy system is important to you, solar loans or direct purchases will give you full ownership and control over the system, allowing you to benefit from tax incentives like the Investment Tax Credit (ITC) or the Production Tax Credit (PTC).
  • If you prefer a third party to own and maintain the system, a PPA or Solar Lease can be a better fit.

Financial Stability and Credit

  • Businesses with strong credit profiles might find solar loans more accessible and beneficial due to potentially lower interest rates and the ability to leverage tax benefits.
  • For those with limited credit or financial constraints, PPAs and solar leases provide alternatives without the need for high creditworthiness.

Maintenance Responsibilities

  • If you want to avoid the responsibility of maintaining the solar system, PPAs and solar leases typically include maintenance services provided by the third-party owner.
  • For businesses comfortable with handling maintenance, owning the system through a solar loan or direct purchase can offer long-term cost savings.

Long-Term Financial Planning

  • PPAs and solar leases often come with fixed or predictable payments, which can simplify budgeting and provide protection against fluctuating energy prices.
  • Solar loans offer the advantage of owning the system outright once the loan is paid off, leading to long-term savings and potential increases in property value.

Project Size and Scope

  • Large-scale projects, such as those for manufacturing plants or corporate campuses, might benefit from the cost savings and scalability of PPAs.
  • Smaller projects, like those for retail stores or small office buildings, might find Solar Leases or smaller solar loans more suitable.

Conclusion

Investing in solar energy is not only an environmentally responsible choice but also a financially sound decision for commercial property owners in Massachusetts. In addition to commercial solar financing from private sources and federal tax incentives, the state offers a comprehensive suite of financing options and government incentives designed to make solar energy projects more accessible and cost-effective. By leveraging these incentives, businesses can achieve substantial savings on their energy bills, increase their property value, and contribute to the state’s ambitious renewable energy goals.

Massachusetts is committed to supporting businesses in their transition to clean energy, providing not only financial assistance but also comprehensive support through programs administered by the Massachusetts Clean Energy Center (MassCEC) and other state agencies. As Massachusetts continues to lead in renewable energy adoption, commercial property owners who invest in solar energy will find themselves at the forefront of this green revolution, reaping the economic and environmental rewards.

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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