The Arizona Corporation Commission (ACC) approved Tucson Electric Power (TEP) Company’s 2010 application for its renewable energy standard tariff (REST) implementation plan. The REST plan, which became effective February 1, 2010, will increase the utility rebates for businesses that install commercial solar electricity and/or small commercial solar hot water systems. The 2010 implementation plan will have a major impact on reducing the upfront cost of solar for small businesses. The commission has sent a strong message that they want to see more widespread adoption of distributed generation capacity in TEP's service territory.
In regard to commercial solar electricity, TEP is increasing the cap for system sizes that qualify for upfront utility rebates. Not only do these rebates help businesses dramatically reduce the upfront costs associated with implementing solar electricity, but the increased utility rebate provides a favorable option for small commercial customers who may not qualify for or choose not to go with solar leasing.
The cap for the commercial solar electricity rebates, previously set at 20 kW, will now include systems sizes up to 100 kW. The 30% federal tax grant and the Arizona state tax credit are also still available. Combining the newly increased utility rebate and tax credits often reduces the cost of a new system by 75%.
Commercial Solar Electric Example
A commercial customer with a $1,000 monthly utility bill would install a 60 kW system, which will cost approximately $330,000 before incentives. Now that TEP has increased the cap to include systems up to 100 kW, this 60 kW system receives a TEP rebate of $150,000, and the federal tax credit provides $99,000 sixty days after installation is complete. The out-of-pocket cost for this system is reduced to $81,000. In addition to the utility rebate and federal tax grant, after one year a $25,000 Arizona state tax credit is available.
All of the available incentives reduce the total system cost to less than $56,000, which translates into a savings of over $274,000. Moreover, the system will pay for itself in five years. Before TEP lifted the cap, commercial customers were paying $156,000 after all financial incentives were accounted for, which is $100,000 more than they will pay now with TEP’s cap increase.
Commercial Solar Hot Water Example
TEP’s new small commercial solar hot water program will reduce the upfront cost of these systems and save businesses 85% on the system’s total cost. This is ideal for businesses with consistent hot water needs throughout the year, such as restaurants, laundry, elderly care and hospitality facilities. A commercial customer with a $100 monthly gas bill from water heating, would install a hot water system with 8 solar collectors at a cost of approximately $32,000.
TEP’s rebate will cover $14,500 of the solar hot water system’s cost, and the federal tax grant will provide $9,600. Therefore, the out-of-pocket cost for this system will be reduced to $7,900. After a year, a $3,200 Arizona state tax credit can be taken in addition to the other incentives. When rebates, tax credits, and depreciation are taken into consideration, commercial customers can expect the solar hot water system to pay for itself in less than five years.
With more incentives available than ever before for businesses to go solar, Tucson will see an increase of financially savvy companies turning an eye to the sun in order to reduce operating costs and generate their own clean, renewable electricity.