A New Round of Rebate Funding for the Virginia Department of Mines, Minerals and Energy

The Virginia Energy Efficiency Rebate Program was originally launched in late October 2009 by Governor Kane. Utilizing a portion of the stimulus dollars that Virginia received to support the purchase of energy efficient products and upgrades for Virginia homeowners and commercial businesses. Energy efficiency improvements under the program included upgrading heating and air conditioning equipment, adding insulation, replacing leaky windows, and other improvements to reduce energy consumption. Homeowners were eligible for rebates for up to 20 % of the costs of qualifying products and projects, up to a maximum of $2,000.

The first round of funding totaling about $10 million was reserved in less than three weeks when the program opened. In late March 2010, Governor Bob McDonnell announced that approximately $6.5 million was available for a second round of the rebate program to make existing homes and businesses more energy efficient. Funds for the second and final round of the Energy Efficiency Rebate Program were exhausted on March 26, 2010. Over 3,000 applicants were wait-listed, and eventually approved for rebates when much of the rebate reservations were not used. The Energy Efficiency Rebate Program was closed out on April 29, 2011 after paying out $10.4 million to Virginia homeowners and businesses.

Once more, unclaimed funds remain and are now being made available to other homeowners. Approximately $5 million will be available for a new Virginia Home Efficiency Rebate Program to make existing homes more energy efficient. Energy efficiency improvements include upgrading heating equipment, adding insulation, replacing windows, and making other improvements to existing homes that reduce energy consumption and utility costs. Under this new program, homeowners will be eligible to reserve funds for rebates for up to 20 % of the costs of qualifying products or services, up to $595 whichever is less. Also a rebate is available for energy audits for the cost of the audit or $250 which ever is less. The Virginia Department of Mines, Minerals and Energy opened up the reservation process at noon of June 20th 2011 and the money is likely to be gone quickly, but sign up on the waiting list. Any money not used within the time limit will become available to those on the wait list. The $5 million is simply unclaimed funds from other rounds. https://epm.virginiainteractive.org/HERebate/

Qualified energy efficient items and improvements purchased and installed on or after March 26, 2010 are eligible for the rebate if they meet all the other eligibility requirements. So if you were shut out of the last round of rebates and have an the required documentation, and used a Virginia business to purchase or perform the work you can apply. Items covered under the program are: oil furnace, gas, propane or oil hot water boiler, Insulation and air sealing, replacement windows and exterior doors, storm doors. Funding is available for homeowners to reserve funds for geothermal heat pump systems under our new Geothermal Heat Pump Rebate Program. The geothermal rebate is 20% of the cost or $2,000 which ever is less. http://www.dmme.virginia.gov/DE/ARRA-Public/GeothermalHeatPump.shtml

These rebates are for Virginia homeowners only, not commercial facilities and the energy efficiency products and systems must be purchased from a Virginia company. In addition, these items qualify under the Federal Home Energy Efficiency Improvement Tax Credit Program The tax credit amount was reduced to 10% of cost up to $500 on qualifying items installed in 2011 and additional restrictions were added. More information on the federal tax credits, which were extended until December 31, 2011, is available at the Department of Energy web site. http://www.energystar.gov/

One of my most successful home improvement projects was my home insulation project. Following the recommendations by the Oak Ridge National Laboratory the attic, crawl spaces, eves, ductwork, underside of a large portion of the main level floor were insulated with cellulose. The pipes, end caps, knee wall, sump pumps and all identified areas were sealed, the garage was insulated and an insulated garage door installed. My total electricity bills for the following 12 months were 27% less than I paid in the 12 months before I added the additional insulation to the house, and the winter liquid propane usage (as measured in volume used December through March for both years) was reduced by 25%. I was very surprised at the energy savings for what was a well insulated home. The payback on this project was under 4 years, and I did not get any rebates because I completed the project in 2007.

The Cost of My Solar Panels

One of my choices when I purchased my solar panels was to choose the Enphase micro inverter system. Though this system was more expensive than a single power inverter, it does two things for which I was willing to pay. The first is that the power cables running down the side of my house, albeit inside a pipe, are 120 current instead of 240. The second advantage to the micro inverters is that the energy production of each individual panel can be checked on the internet. If there should be a problem with the system, I can easily identify which panel needs to be attended to. However, my installation web page allows me to see the current energy produced by each of my 32 panels every minute, every hour, daily, weekly, monthly and the cumulative total power output. After two months of checking several times a day, I only spot check the solar panel midday to make sure all the panels are performing optimally. Though each panel is rated at 230 watts the rated PTC output per panel is 203 watts. The micro converter efficiency is rated at 95% so theoretically maximum actual production per panel is around 193 watts. I regularly see that watt output or slightly above at midday if a cloud is not floating by. Just by viewing the Enphase web page I can verify the proper functioning of my system.

For the first month of full operation (the panels were actually installed on the first day of my billing cycle) I checked the use of electricity on the solar on demand digital meter, added my recorded solar electricity production and compared it to my overage daily summer use of electricity twice a day. We use air conditioning. I am old enough to remember a time before air conditioning was common, but it is not a time I want to return to, not here in Virginia. A few weeks ago when my electric bill actually came, our power usage was slightly more than half of what it had been for the same period last year. My husband has taken to telling the neighbors who ask how much power we have that we have more solar power than Ed Begley, Jr., which is true. I believe we also use more power than the Begley household does. My husband explains this as a reference like saying a place is a little bigger than the state of New Jersey.

The energy produced by the solar panels has gone a long way in erasing the memory of my misadventures in solar that were topped off by actually finding a roof leak. I finally discovered the leak when the water began dripping in my first floor office during a thunder storm. Fortunately, rain storms make finding a leak easy. The solar installation company was actually a subsidiary of a roof and gutter company and was able to verify the location of the leak (and a few other nail pops) and dispatch a roofing repair crew (with full safety equipment) in the rain. The last few thunder storms have confirmed the integrity of the repair. Last week the wall board damage from the installation and leak were finally repaired and painted. The house looks good as new (or at least good as before the solar panels were installed). I just need the final bill from the contractor for the interior repairs to my home to deduct from the retainage and make the final payment to the solar installation company and we are done. Both the solar installation company and I are looking forward to that moment. Though it has been a bumpy road, they have always been responsive to problems and nice.

So, what did the solar project cost? The answer to that question is not simple.
To purchase and install a 7.36 KW solar array consisting of 32 Sharp 230 watt solar panels, 32 Enphase micro-inverters and mounts was $57,040. For the engineering and permits I paid $1,500 for a grand total of $58,540 out of pocket. Now it gets complicated. The 7.36 KW are equivalent to 6.2 KW PTC. I reserved 6 KW PTC Renewable Energy Rebate from Virginia and on completion of installation, inspection by the county, and sign-off by my power company, NOVC, I filled out all my paperwork, provided copies of permits, signed off inspections, invoices, technical information, contractor information and pictures of the installation, and meter and promptly (within 4 weeks) received my renewable energy rebate of $12,000 from Virginia. This payment may or not be taxable income. When I file my federal tax returns at the end of the year, I will have to provide copies of all the documentation for my federal tax returns as well as evidence that Virginia paid my Renewable Energy Rebate to obtain my 30% tax credit of $17,562. Thus, from the original installation cost of $58,540 I subtract the Virginia Renewable Energy Rebate of $12,000 and the 30% tax credit of $17,562 and my total out of pocket cost for my solar system after the first year is $28,978. A rough estimate using the DOE model of my savings on electricity (I have an air heat exchanger) is $1,400 per year. That is an under 5% return on my investment each year.

However, that’s not the final cost. The cost and return on a solar power system is based entirely on regulated incentives and there are more. The final incentive is the Solar Renewable Energy Credit or SREC. Each SREC is a credit for each megawatt of electricity that is produced. In the first two months of operation, my system has produced 1.9 megawatt hours. SRECs have value only because some states have Renewable Portfolio Standards, RPS, which require that a portion of energy produced by a utility be produced by renewable power. Utilities in the state buy SRECs from solar installation producers. It is a way for states to ensure that the upfront cost of solar power is recovered from utility companies (and ultimately from the consumers). Some states, like New Jersey and Maryland, require their utilities to buy SRECs only from residents of their states creating a closed market where the price is very high. Other states, like Virginia, have no current RPS requirement. Still other states, like Pennsylvania allow their utilities to buy their RPS from any resident within the PJM regional transmission organization.

Within the PJM (where my house is located) I can currently sell my SRECs to utilities in Pennsylvania and Washington, DC. I need to have my solar system certified by both Pennsylvania and Washington so that I can sell my SRECs in their states. Once the system is certified, I can sell my solar power by estimate on the spot market or I can shop for a long-term SREC contract. The discount for a long term contract is huge. The value of SRECs will go up and down depending on the supply and demand as determined by the number of solar installations, states requiring RPS, and states allowing sale within the PJM regional transmission organizations. RPS requirements are currently set to increase over time, but regulations can change. SRECs in Pennsylvania have ranged from $200-$300 per megawatt hour. So after having my system qualified in Pennsylvania, I could earn an additional $2,000-$3,000 a year for 15 years or as long as the demand for RPS lasts which ever is less.

The bottom line is that I paid $58,540 for a photovoltaic system of 7.36 KW and we the American tax payer, and PJM power buyer will pay hopefully $29,562 in the first year for my solar system and maybe pay up to another $30,000 (or so) over the next 15 years.

My Solar Photovoltaic Project Update

The renewable energy rebate in Virginia was limited by the $15 million in stimulus funds that the Commonwealth of Virginia allocated to the program. Applications to the Solar and Wind Incentive Program closed on November 18 because all the funds were allocated to projects. Though, I personally reserved only the 6 kilowatts that I estimated would fit on the main portion of my roof and my available funding (and ultimately went into contract for), I am sure that plenty of individuals signed up for the full 10 kilowatts and not all the rebate reservations will be used. There might be a second opportunity to sign up for rebates, so keep your eye on the Department of Mines, Minerals and Energy website for updates.

I signed up for the renewable energy rebates two days before the cut-off, I did not complete my due diligence and select my contractor, sign the contract and make a good faith deposit until after Christmas having been delayed by the mid-December snow. My selected contractor is a local company employing local residents and is affiliated with a Virginia roofing company. I obtained three bids, reviewed references, checked the contractor licenses for complaints for both the solar company and the roofing company, and decided to go with American made solar photovoltaic panels. As the winter snow storms hammered northern Virginia over the winter my selected contractor struggled to prepare the engineering work and drawings necessary to obtain the permits. Weather delays and the usual contractor delays (always a couple of days later than the salesman promised) interfered with obtaining the completed engineering work and the permits.

You have 180 days to actually install the system and meet all the requirement of the program to obtain your rebate. Signing up only guarantees that there is still money available for your project not that you will receive the rebate, so the clock is ticking and there is 60 days left. The contractor has assured me that they are still on schedule to meet the deadline. I hope so since all the contractor’s projects need to be finished in virtually the same two week period, and the window grows tighter. I have received my HOA’s permission to continue with the project, so now I wait for the contractor.

We decided to go with Sharp Solar PV panels. Sharp has manufactured 25% of the world’s solar PV currently installed having been in the business for over 40 years. Sharp has continued to invest in the research and development of photovoltaic solar panels. Their newest panels put out almost 10% more wattage using the same square footage than many competitors and allowed me to fit the 6 kilowatt array on the main roof section avoiding any shadows from vents. The Sharp panel sold in the United States is manufactured in their Memphis Tennessee plant, which has produced over a million panels to date. The Sharp modules meet the intent for the “Buy American” provision in the stimulus bill. In addition, the plant has achieved Green Factory Status.

The standard warranty period for most PV solar panels is 25 years. Sharp has panels in operation since the 1960’s are still producing in most cases up to 85% of their original rating. When I viewed the various panels the Sharp panels had a more uniform appearance and finish. One of the reasons we choose our contractor was his use of Sharp panels.

Choosing Solar Power

Solar Photo Voltaic panels are one of the least cost-effective ways of reducing your use of non-renewable resources. The only way these systems get installed are by all of us subsidizing the cost. This is accomplished by tax credits, state rebates, and renewable energy credits. A tax credit is generally more valuable than an equivalent tax deduction because a tax credit reduces tax dollar-for-dollar, while a deduction only removes a percentage of the tax that is owed. The American Recovery and Reinvestment Act of 2009 extended the tax incentives under the Energy Policy Act of 2005 (EPACT) and eliminated the limit on the credit. Rebates from the state are an inefficient return of tax dollars paid because it requires administrative costs to funnel the dollars back from the stimulus package, but does ensure that the systems were actually installed. Finally, SRECs, solar renewable energy credits, are payments to the owner of a renewable energy system from a utility. They are currently greater than the value of the energy created. This is only possible because the utilities are required to have an ever increasing portion of their generation of power from renewable sources. To meet this requirement the utilities must buy the RECs and in turn charge all their customers a higher rate to cover the cost of the RECs. RECs paid in cash to the Solar PV system owner, increase the utilities' cost to operate, and thus, the cost they charge per kilowatt goes up making my solar system more valuable to me.

Though I want a solar system, I am concerned that my decision is based primarily on government incentives. Making an economic decision based on tax incentives, puts me at risk of capricious government action leaving me stuck with the economic reality of my decision if the tax incentives should be modified. Choosing solar now only makes sense based on the incentives and RECs. Then there is the problem of cash. In order to proceed with a 5 kilowatt project I would need to have about $40,000 in cash to pay for the Solar PV system, and then in turn I can reduce the taxes I pay the federal government next year and the years beyond by $12,000 (this is not a refundable tax credit) and can receive a rebate from the state from the state for about $7,700. The RECs will pay quarterly for at least four years and the power savings will be for the life of the system. Nonetheless, I will still have to pay (net assuming I navigate the rebate and tax credit requirements correctly) a bit more than $20,000 in cash. The estimated power savings of the system would be about $760 per year.

Solar PV systems and solar thermal systems for heating water will not save enough from electric (or gas) bills to make them financially viable in a homeowner's lifetime. There is an argument for installing solar panels but it is not an economic one. The various financial incentives provided by the government make the cost palatable. The incremental change in the use of fossil fuels because of the installation of solar panels will not prevent climate change, but the increased cost of power to consumers may reduce their use of power. These tax incentives seem geared to increase conservation of energy by increasing the cost of power. The reasoning presented is we are allowing the solar industry to develop better, more efficient products by encouraging and subsidizing the installation of Solar PV and thermal systems. The federal stimulus program is just “priming the pump” with a few billion dollars in federal money and an unknown amount in REC payments from utilities in order to make solar power economically feasible in total cost. In doing this we are burning the financial resources of the country in hopes of building a self sustaining solar industry. This makes me uneasy. The government incentives to home ownership ended up encouraging irresponsible behavior on the part of lenders and individuals and excesses that resulted in the real estate mess we are in now. I am trying to anticipate the types of problems that might result from my Solar PV system. Since I am looking only at the personal downside the analysis is much simpler.

The first thing is to make sure that I qualify for the federal tax credit, i.e. you would actually pay 30% of the total cost of the Solar PV system in taxes next year or beyond. Remember, you are going to have to pay the money upfront and reduce your withholdings or apply for a tax refund for the 2010 tax year in 2011. You might be out of pocket the money for the solar system for a year or more. There do not seem to be any more restrictions, no limits on income or the cost of a system. The state rebate in Virginia is limited by the $15 million in stimulus funds that the Commonwealth of Virginia has allocated to the program. In order to obtain a rebate, you first have to sign up and be accepted. This is a very simple procedure to ensure that some of the stimulus money is reserved for you. You can go to the website and sign up with little more than your name, address and type and size of system you intend to install- if you are serious about installing solar. Do not sign up until you have done enough research to be seriously considering the installation and only sign up for the size system you can afford or your home can support. Otherwise you will be tying up funds other people could use. Your request to conditionally reserve funds from the Virginia Renewable Energy Rebate Program will be immediately approved as long as funds are available. You then have 180 days to actually install the system and meet all the requirement of the program to obtain your rebate. Signing up only guarantees that there is still money available for your project not that you will receive the rebate. My reservation for funds has been conditionally approved. I am obtaining bids, reviewing references and checking contractor licenses for complaints, and looking for reviews of solar panels. The selected contractor will have to provide me with evidence of liability insurance, workman’s liability insurance (they will have people on my roof), and a bank reference. In these tough economic times, I can not afford a contractor to go bankrupt in the middle of my project. The delay could cost me the state rebate.