INTRODUCTION: SOLAR ENERGY AND SAVINGS

As many retailers and shopping center owners have already discovered, there has never been a better time to “go green.”  In addition to serving as an enormous marketing asset and a smart geopolitical choice, an investment in solar equipment can translate into lucrative tax savings for a retail business or shopping center owner.  The following summarizes selected state and federal incentives that promote investments in solar energy in the retail sector.

In addition to the tax savings and cash incentives provided by government entities, a retailer or shopping center owner can save money on utility bills by using self-generated solar energy instead of utility-provided electricity.

The two most common forms of solar energy are photovoltaic (“PV”) systems and solar thermal systems.  Most conventional solar panels are composed of PV cells, which convert sunlight into direct current (“DC”) electricity.  An “inverter” inverts the DC energy into the alternating current (“AC”) energy that powers buildings and appliances.[1]  Solar thermal systems use heat from the sun to produce energy or hot water.  Because PV systems are most relevant to the bulk of commercial solar customers, references to “solar panels” or “solar equipment” in this memorandum indicate PV systems unless otherwise specified.

Throughout California and some other states, buildings with photovoltaic solar installations are interconnected with the regional, utility-run electricity grid.  Through a process known as “net metering,” solar equipment producing electricity in excess of what a building consumes transmits the surplus solar-generated electricity directly into the utility grid, and the building’s bi-directional energy meter (which measures the building’s net electricity usage and production) runs backward.  Customers are credited for the full retail value of the solar-generated energy that they transmit to the grid, which can reduce (or, hypothetically, even eliminate) their utility bills, depending on the net energy measurement.[2]