By Sarah Wochos, Director of Policy and Business Development Midwest for Borrego Solar Systems
A solar energy boom is coming to Illinois and it’s bringing new opportunities for companies that want to save on energy costs. On June 1, 2017, a new law went into effect in Illinois that incentivizes solar development in the state. Businesses that have a large, unobstructed rooftop space or unshaded adjacent land can offset a significant portion of their energy costs.
Adjustable Block Program
The primary program that will drive the installation of new solar is the Illinois Adjustable Block Program (ABP). The ABP will open in late fall and is structured so that a new solar system receives a front loaded 15-year contract to sell Solar Renewable Energy Credits (SRECs) to the electric utility at a fixed, predetermined price.
The blocks are sized to allow for a large group of projects to qualify, however, there is an advantage to being in the first block, as the price for SRECs will decline 4% as blocks are filled. Below are the SREC prices for the first block (Group A is Ameren territory, Group B is ComEd territory):
This SREC contract revenue is critical to project economics. A typical 1,000 kW (1 MW DC) rooftop project in Northern Illinois will produce 17,000-18,000 MWh in the first 15 years, resulting in more than $750,000 in SREC value based on the prices above.
For projects to qualify for the program, they need to have an interconnection agreement with the utility and any discretionary local permits, both of which can take several months to obtain, so companies should begin the process as soon as possible.
Smart Inverter Rebate
Once a solar project reaches operation, the system owner is eligible for a one-time $250 per kilowatt lump sum rebate from the utility if the system has a smart inverter. In the example above, the 1 MW DC system would receive another $250,000 through the rebate, which further impacts the payback of the system.
Federal Tax Credit
Commercially owned systems are also eligible for a federal tax credit worth 30% of the system cost for systems constructed through 2019. The credit, called the Investment Tax Credit, can be used for all costs except interconnection costs, and can be carried back one year and forward 20 years on eligible federal tax liability. The Investment Tax Credit steps down starting in 2020, so early movers will get a bigger credit.
Depreciation
Prior to the passage of the new federal tax law, companies using solar used MACRS to depreciate the asset. Now solar systems are now eligible for 100% bonus depreciation, which increases the return on investment in the project.
Financing Options
Power Purchase Agreement (PPA): Your company can choose to own the system and as a result will directly receive all the tax benefits and incentives listed above. Another option is a Power Purchase Agreement (PPA), where a third-party owns the system and sells the power to you over a 20 or 25-year contract. So there is no capital outlay for you, and the PPA rate is usually locked in at the start of the contract at a rate below current energy rates, which results in a considerable energy savings.
Property Assessed Clean Energy (PACE): PACE financing provides a mechanism for paying for a solar system via property tax. It functions like a loan, except it is not traditional debt and does not affect future borrowing capacity or credit score. It’s also paid back annually as part of the tax assessment on the property. Local municipalities and counties must sponsor a PACE program, so check with your county to see if this is available in your area.
Whichever financing path your company choses, rest assured that making the choice to go solar is a smart investment. But you’ll have to move fast. The programs above won’t last forever. If you haven’t already done so, ask for quotes from experienced solar developers and installers in your area.
For more information about commercial solar and energy storage for businesses, visit
The opinions expressed in this article are solely those of the author and do not necessarily represent the official policy or position of the Illinois Chamber of Commerce.