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Financials Behind Renewable Energy

Posted by SEPCO on 1/17/12 9:30 AM

Renewable energy presents numerous exciting financial benefits to consumers, in addition to the obvious environmental merits. As fossil based energy reserves – natural gas, coal and petroleum – continue to dwindle, there is an increasingly growing drive to seek alternative sources that are more sustainable and eco-friendly.

From federal tax credits and bonus depreciation schemes to state incentives for efficient energy use, consumers stand to gain from adopting renewable energy alternatives. Additionally, a number of utilities offer rebates of up to $4000 for wind and solar installations. The most widely used forms of renewable energy in homes are wind and solar electric systems. Homeowners can either choose to power parts of their homes or meet their entire home power needs using a renewable source. Here’s how you can benefit from your renewable energy system:

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Federal tax credits

When you install a renewable energy system or purchase an energy efficient appliance, you automatically become eligible for some form of federal tax credit. Some existing tax credits run through 2011, while others run through 2016.

Products eligible through 2011, according to the Department of Energy:

• A $300 credit on biomass stoves rated with at least 75 percent thermal efficiency assessed using a lower heating value.

• Electric heat pumps and central air conditioning split and package systems also carry a credit of $300. For central air conditioning split systems, the requirements are that EER ≥13 (Energy Efficiency Ratio); SEER ≥16 (Seasonal Energy Efficiency Ratio), and the package system requires that EER ≥12; SEER ≥14. For electric heat pump split systems, requirements are that HSPF ≥8.5 (Heating Season Performance Factor); EER ≥12.5; SEER ≥15, while the package system requirements are HSPF ≥8; EER ≥12; SEER ≥15. Other eligible HVAC (Heating, Ventilation, and Air Conditioning) systems include $150 for furnaces and boilers, and $50 for an advanced main air circulating fan.

Products eligible through 2016:

• Geothermal heat pump systems carry a 30 percent credit without an upper limit. It applies both to new and existing homes as long as it is placed in service by December 31 2016.

• Solar electric systems carry a credit of 30 percent of cost without an upper limit. The requirements for a solar water heating system is that the qualifying property must generate at least 50 percent of the energy from the sun, as well as having a certification from the SRCC – Solar Rating and Certification Corporation. For photovoltaic solar systems, they must generate power for the home and must meet fire and electrical code regulations.

• Wind energy systems also carry a 30 percent credit without an upper limit. The requirement for small residential wind turbines is that the nameplate capacity should not exceed 100 kilowatts.

• Residential fuel cell systems with efficiency of at least 30 percent have a 30 percent credit but must have a capacity of 0.5kW minimum.

• Plug-in vehicles and other small electric cars also have tax credits of up to $7500, depending on battery capacity.

State and utility incentives

There are various state and utility incentives both for residential and commercial setups. Many states operate rebate programs through environmentally based non-governmental organizations. Other states allow consumers and utilities to directly enter into power selling arrangements, where a consumer can either sell excess power generated by their renewable energy system, or have their annual energy costs heavily slashed.

One of the most popular consumer-utility arrangements is the net-metering system, where the consumer benefits most. It’s no surprise that many utilities are hostile to this concept, and some have even opposed a number of proposed state policies that would have even made it easier for homeowners to use the concept.

The net-metering concept works under the Public Utilities Regulatory Policies Act (PURPA), which allows consumers who generate their own energy to connect to a utility grid and the utility must purchase any excess power generated.

Net-metering works for both wind and solar electric systems. Homeowners, for instance, can save between $10 and $40 a month with a 10-kilowatt wind electric system. But savings can be bigger depending on how much energy you produce.

In a net metering system, a meter will read backwards (credit) when there’s excess power generated. The value of that credit is normally calculated at the prevailing wholesale unit rate – for peak or off peak. When there’s less power generated from the system and the grid supplies the majority, the meter reads positive and the credit reduces. At the end of the year, if your meter has a net credit, the utility will pay you the equivalent in cash, calculated at the wholesale cost of a unit.

There are a number of other state specific incentives for renewable energy. It’s imperative to look for a particular scheme in your locality that you might be eligible for if you’re planning to install a renewable energy system.

This guest post was written by Couponing contributing writer, James Lander. Couponing is devoted to sharing couponing techniques and top retailer coupons.

Topics: Guest Post, Funding

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