100% upfront ﬁnancing
Up to 30 year terms
Loan does not show up as debt on the business' balance sheet
Increases building value and net operating income
Assessments transfer with sale of property
What is CPACE?
CPACE stands for "Property Assessed Clean Energy", the C is for commercial.
The concept of creating a private / public sector partnership to fund clean energy projects originated in California in 2008, when the first legislation was enacted to allow municipalities to use their property tax assessment capability as means to repay loans for installing renewable energy by the private sector.
Since '08, 31 States have approved the legislation to create CPACE, and now 16 of those States have active programs, helping businesses to install over $280 Million dollars of renewable energy in 790 projects.
What are tax benefits?
Those owning solar power systems receive a 30% of the cost Tax credit against Federal taxes due, and can be taken against quarterly tax payments due for the fiscal quarter when the project is completed.
There is 10% of solar project cost corporate tax credit from the State of Utah up to $50,000 per meter. Therefore a building with more than one power meter might receive a much larger Utah State corporate tax credit with a solar power system divided among multiple meters.
Depreciation: Solar power systems are eligible for a 5 year straight line deprecation for 85% of the solar project's cost, therefore one fifth of that amount can be capital expensed annually against gross profits, resulting a net tax savings equal to the businesses corporate tax bracket. For those businesses with particularly large quarterly tax payments, solar power systems are also eligible for IRS Rule 179 one year capital expensing.
Electric cost reductions: Those kilowatt hours generated by solar are no longer purchased from the Utility, nor are the added sales and municipal franchise taxes added on, which can be another 7-8%. Neither will these solar generated kilowatt hours be subject to future rate increases. It is currently estimated that in the next 10 years, rates will rise by 60%, therefore for every $10,000 spent annually in 2016; it will cost $16,000 in 2026. This 60% increase in rate costs has been experienced since 2006, and RMP has stated in public comments that this pattern will continue into the future. RMP has also noted that rate increases may exceed past % increases to replace aging coal fired power plants and infrastructure.
It is very clear that electric power costs will continue to grow as a percentage of annual operating expense for business.
The end result for a business: The combination of tax benefits and reduced electricity costs will mean a reduction in annual power payments to the Utility measured in hundreds of thousands of dollars over the coming decades, funds that can be redirected to other business needs. The reductions will be immediate, and all positives for lowering future operating expenses without any upfront costs.
The CPACE financing process: Because of the parties involved including the Utah Governor's Office for Energy Development, the presiding municipality and the CPACE financing bank, there are some hoops to jump through. It will take some time, paperwork completion and as CPACE is so new, processes have yet to be streamlined. The long term rewards should be more than worth the effort.
CPACE financing for Utah commercial solar installations.
The best choice from many options, CPACE financing for businesses to adopt solar power has arrived in Utah.
Not a lease, not a power purchase agreement, using the CPACE financing program allows a business to adopt solar power with immediate full ownership, receive large reductions in annual power costs, receive large Federal and Utah State corporate tax credits, as well as getting accelerated depreciation, and when annual tax payments are large enough, use IRS Rule 179 to capital expense the solar project cost in one year.
With no upfront costs needed, so no budget required, using CPACE is a choice. Because there are no upfront costs, this is not about ROIs or years to full payback. Using the CPACE route will reduce future costs to the Utility by hundreds of thousands of dollars, for the same amount of power over the same amount of time. Reduced electricity costs begin in the first year, and will be present each and every year well into the future.
How does CPACE work?
There are 3 parties involved in doing a CPACE funded project.
First, the Co. adopting solar power will be the owner, get all the electric savings and tax benefits, and make a single payment annually towards the CPACE loan to the municipality ( City or County) as a voluntary 'special assessment property tax'.
Second, the CPACE funding source pays all (100%) of the solar project costs, and as opposed to a title or deed, accepts the bond from the municipality for the CPACE loan amount.
Third, the Municipality creates the special assessment property tax and bills the Co., the solar power owner, once a year likely shortly after the anniversary of the project's completion for the number of years agreed upon with the funding source, and sends the tax payment on to the funding source.
While CPACE financing can go out to 30 years, we have found the 20 year term to be most attractive.
How will Synergy Power help in the process?
Our role is to not only recommend the best Solar power system for the building, but also give as complete a look as possible at the financial benefits, both in terms of projected energy savings and all the tax benefits. Our CPACE cases presented are very detailed, cover year by year for the duration of the solar panel warranty of 25 years, and completely cover all aspects. We'll show where the business is now and where it will be as the years go by as a result of adopting solar energy.
To know what solar power can achieve for your business and get a detailed CPACE Case prepared, please contact Chris Lucas, our commercial project sales manager at 801 608 3180.