The Investment Tax Credit & the Growth of the Solar Farm Industry

Over the past decade, the Investment Tax Credit has facilitated the rapid expansion of solar energy across the United States.

Since the Investment Tax Credit was put in place in 2005, the growth of solar installations has expanded by over 1,600 percent, which amounts to a compound annual growth rate of 76 percent. With the Omnibus Appropriations Act now extending the ITC through 2021, it is expected that the 27 gigawatts of solar energy installed in the U.S. at the end of 2015 will expand to nearly 100GW by the end of 2020. Additionally, it is also expected that by the end of the extension, the total number of Americans employed in solar will double to approximately 420,000.

With the help of the ITC and other state-specific rebates and incentives, renewable energy sources like solar farms have become a viable business prospect for developers.

How to Qualify for the Federal Solar Tax Credit

Qualifying for the Solar Investment Tax Credit is simple: as long as you own your solar energy system, you are eligible for the federal rebate. Even if you don’t have enough tax liability to claim the entire offered credit, this remaining federal solar tax credit can be carried over into future years.

However, if a business or resident signs a lease or a Purchase Power Agreement (PPA) with a solar installer, then they are no longer the owner of the system and cannot receive the solar investment tax credit.

Claiming the Solar Investment Tax Credit

Claiming your Solar Tax Credit will essentially come down between the owner of the solar energy system and their respective accountant or tax person. There are no other necessary steps to claiming your solar tax credit; however, if you are applying for state-specific solar energy rebates or tax incentives, then you will need to file the respective paperwork according to your state’s regulations.

The Race for Solar Energy

Why is solar energy being developed at a historic rate? A simple federal solar tax credit incentive can’t be the only reason why so many developers, businesses, and investors are taking the plunge into solar energy. The simple truth is that solar energy can be a profitable business opportunity to those with the capital to get a project underway, and the plunging cost of producing solar power has finally made it competitive with fossil fuel energy in the wholesale energy market.

But what about fossil fuels?

Fossil fuels have driven the American economy ever since the Industrial Revolution, and while fossil fuels do have some distinct advantages over renewable energy sources like solar, fossil fuels still carry the relatively high cost of the fuel itself.

Take for instance certain industries such as dairies and food processing plants. These sorts of businesses have been operating with the high cost of fuel to perform simple tasks such as heating water since their inception; however, if these sorts of businesses could essentially zero out their fuel costs with the investment in a renewable energy project, then the long-term savings that a solar farm can provide will more than justify their original investment.

For developers and investors, a solar farm with a production cost of $2 million that produces just 500 KW of energy can expect to earn somewhere around $20,000 a month or more. Over the long-term, given the low maintenance cost of such a system and the tax incentives provided by federal and state governments, solar farms can become quite profitable over a short period.

Overcoming the Investment Cost of Renewable Energy

In the renewable energy industry, the sooner a project can get up and running, the sooner the developers can start to see a return on their investment and take advantage of the solar investment tax credit.

While the renewable energy business has expanded by leaps and bounds over the past ten years, many developers still find it difficult to get past the heavy upfront investment required to get their project off the ground, even with the renewable energy tax credit providing tax relief.

For the construction of a renewable energy source such as a solar farm, developers are looking at an expenditure of around $500,000 per acre, with a typical site requiring approximately five acres to produce a single megawatt of usable energy. While the solar investment tax credit provides developers with a 30% tax credit on the construction of solar farm itself, the ITC does not provide a tax credit for the purchase of the land.

This means that the developers will need to have the capital for both the solar equipment and for the purchase of the site as well. This sort of dynamic can force developers to stretch their budgets in an unreasonable fashion to get their projects started, and in some cases, many of these renewable projects get canceled altogether due to budget constraints.

When budget becomes an issue, the time that it takes to get such a project off the ground will inevitably be affected. In a world where the demand for solar energy is expected to increase over the coming years, these sorts of issues are something developers simply cannot afford to have.

Landmark Dividend’s Role in the Quest for Renewable Energy

While the cost of land is an issue for all renewable energy developers, there are financial options that can help mitigate these upfront investments.

Since purchasing land is capital intensive, Landmark Dividend offers an avenue to developers who are looking to alleviate some of the financial strain that they may be experiencing.

If you are a developer who is looking for a solution to the problem of managing the cost of acquiring land, Landmark Dividend can help by purchasing the land needed for the renewable energy project, and afterward, a lease can be established for the property.

This sort of transaction allows developers to better manage their project budgets by removing the burden of land acquisition from the equation. By allowing developers to focus solely on getting their renewable energy project off the ground, the project can become profitable in a much shorter amount of time, which is great for everyone.

Contact Landmark Dividend Today

In just the fourth quarter of 2015 alone, Landmark Dividend completed 12 transactions worth approximately 238 MW of renewable energy, and since 2010, Landmark Dividend has been one of the nation’s largest and most successful ground lease acquisition companies.

From cell tower leases to solar farm leases, Landmark Dividend has the experience and know-how to make the right kinds of deals that can benefit landowners and lease owners alike.

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