August 23, 2005 Newsday | Business | by Tom Incatalupo*
Sunny savings ahead? — Local, state and federal tax incentives are piquing renewed interest in solar power
As electricity and fuel prices rise, all levels of government are making it a little less expensive for homeowners to install solar-powered equipment to produce electricity and hot water.
Even with the incentives, however, the equipment has high up-front costs and long paybacks - at least 13 years for a system that makes electricity and at least six years for one that produces hot water, at current heating-oil prices, according to the utilities and installers.
The federal energy bill signed earlier this month by President George W. Bush will give homeowners a tax credit of 30 percent off the cost of solar electric and hot water systems installed after Jan. 1 and before Dec. 31 of 2007 - to a maximum of $2,000. As a credit rather than a deduction, it is subtracted from the tax, not the taxable income.
In New York, Gov. Pataki signed two solar bills passed in the last session of the State Legislature - both sponsored by Sen. Owen Johnson (R-West Babylon) and Assemb. Thomas DiNapoli (D-Thomaston).
One, effective Sept. 1, exempts most solar equipment from state sales tax. "I'm hoping now that these contractors get out there and start trying to sell this stuff," Johnson said.
The other Johnson-DiNapoli bill extends state tax credits to solar hot water equipment beginning Jan. 1. Previously the credits had been available only for solar electrical generating equipment. The credit only covers 25 percent of the systems' cost, but the maximum allowable tax credit will be increased as of Sept. 1 next year from $3,750 to $5,000.
Local governments were given the option of exempting the equipment from their own portion of sales taxes, and Suffolk County Executive Steve Levy said yesterday that the legislature is expected to do so today, effective Dec. 1. "We need these types of incentives to promote greater use of renewable energy in our county and throughout our nation," Levy told a news conference.
Nassau County's legislature is expected to follow Suffolk's lead in the next month or two, said Carole Trottere, press secretary for its Democratic majority. New York City's plans were unclear yesterday.
Still, the equipment will not be cheap. The Long Island Power Authority says that, even after its own 50 percent rebate and various governmental incentives, a system that generates enough electricity for a typical home will cost more than $20,000 and take 13 to 15 years to pay for itself. But that's at current electric rates. "The payback period looks to me like it has a lot more room to come in rather than go out," said Dan Zaweski, LIPA's director of energy efficiency and distributed generation programs.
A typical solar hot water system, providing 70 percent of the needs of a family of four, will cost about $6,600 installed, says longtime solar contractor Gary Minnick, principal of Go Solar Inc., in Riverhead. Another installer, Christopher Castro, owner of Solymar, a Brentwood company, says a system that provides nearly 100 percent of the hot water needs of a family of four will cost about $10,000, before the tax breaks.
Minnick says the $6,600 system will cost about $3,460 after various incentives.
The Oil Heat Institute of Long Island says the average homeowner uses about 196 gallons of oil (20 percent of the total) annually to produce hot water. At current average home heating oil prices - $2.54 a gallon on Long Island, $2.588 in the city, that would cost a homeowner $457 on the Island and $465 in the city.
Minnick’s solar system reduces those bills by 70 percent, or $319 and $325, on the island and in the city, respectively.
At that rate, it would take almost 11 years for the system to pay for itself.
But the payback time would get shorter if the price of oil increased. And Minnick claims that the oil institute’s figures are too low and that a payback time of about six years is more accurate.
Noah Kaye, spokesman for the Solar Energy Industries Association, based in Washington, D.C., thinks the new state incentives will stimulate consumer interest. “Once the incentives kick in, the sales of solar water heating systems will pick up,” he said.
* Staff writer Eldes Tran contributed to this story