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Cutting energy costs with new solar incentives
Federal grant and tax credit dollars have significantly reduced the costs for farmers to install solar projects and power their businesses.
Jon LaPorte is a Farm Business Management Educator with Michigan State University Extension.
“These are for actual on-farm use to help reduce the cost of electricity, and those utility bills that farmers have in terms of growing and maintaining the production they raise every year,” he explains.
He tells Brownfield USDA’s Rural Energy for America Program (REAP) can cut installation costs up to 50 percent and the Inflation Reduction Act’s Investment Tax Credit gives businesses up to a 30 percent credit. And, he says there are bonus credits for farms.
“There’s an opportunity to go from that initial 30 percent just from having the new solar energy system to increasing that up to 50 percent of the total cost of what the actual system was,” he shares. “If you think about a system that costs maybe $30,000, if you can get tax credits for 50 percent of that purchase, that’s $15,000 that you could put towards your tax bill.”
Farms located in low-income communities are eligible for a 10 percent credit and installing American-sourced equipment takes the savings further.
Laporte estimates energy costs can make up about 15 percent or more of a farm’s annual expenses.
He gives the example of a 300-cow dairy farm spending about $6,000 annually on energy to operate.
“You think about the process of the milk parlor and trying to get that milk cooled and being able to ship it out eventually to the processor…you can actually utilize quite a lot of energy in that system,” he says.
LaPorte breaks down cost savings for corn, dairy, and fruit farms in a new bulletin series from MSU.
Nicol and Jon, that was a great interview. I appreciate you covering REAP and the text credits in such detail.
A couple of key incentives to still talk about are the energy community tax credit and depreciation. The Energy Community tax credit works like the area of distress credit giving you another 10% of ITC. It is based on your location and address but large portions of the thumb area and South Central Michigan are energy tax credit community.
Even with the grants and tax credits, Michigan producers can still depreciate 85% of a solar installation. Depreciation is taken on a five-year schedule. And bonus depreciation is also available.
I work for Harvest Solar, a leading solar installer in Michigan. And I’m happy to help any producers that wanna know more about installing installing solar farms.