Solar energy provides us many benefits such as environmental saving, usage of a free source of energy, and being a savior from rising electricity costs. But there are some amazing solar panel grants or tax credits provided by the US government at all levels which help in saving on the total cost of the installation process also. In this article, we’ll go through the various types of solar panel grants offered by the US and state governments along with their eligibility criteria for different taxpayers. We will discuss how we can apply for these grants and what documents are required for them.
A. Explanation of solar energy grants
Solar panel grants are the grants offered by the US government under the Department of Energy (DOE). It is a type of reward given to homeowners, business owners, etc. to install or use solar panels at their places.
B. Importance of solar energy grants
The solar panel grants help us with cost-cutting or cost-sharing while installing the solar panels at our places or from the usage of solar energy. This will help in promoting the usage of a renewable source of energy and saves us from the emission of harmful gasses. We all want to reduce our taxable income every year and solar energy financial assistance also helps us with that. Therefore, it is important to have solar energy grants to promote the usage of solar panels in the minds of the people of the country.
C. Overview of the article
The main overview of this article is to learn what are the types of solar panel grants available in the US at all levels such as federal, state, or local. This will also help us know where we can apply for the grants at all levels, eligibility criteria, and much more.
II. Types of Solar Energy Grants
A. Federal Grants
1. Overview of Federal Grants
The federal grants in the US are supported by the Department of Energy (DOE) Solar Energy Technologies Office (SETO). They provide solar energy funding opportunities in PV solar panels, solar thermal power, solar system, technology, etc. These grants are distributed at the government level or at the industry level as well.
2. Types of Federal Grants
- For homeowners
The homeowners who have installed the solar panels on their property are entitled to get the federal residential solar energy tax credit or ITC in terms of a percentage of the total cost of the installation in a taxation year.
If we had installed the solar panel systems in 2020 and 2021, then we can get 26% as the tax credit. If we have installed it between 2022 and 2032, then we can get 30% as the tax credit. In 2033, it will reduce to 26%, and a further 22% in 2034. From 2035, there is no such tax credit available as of now.
- For business owners
The two types of tax credits available for business owners, nonprofits, and local governments are ITC (investment tax credit) and PTC (production tax credit). In ITC, the amount of taxes paid by the taxpayer in a year gets reduced by some specific percentage which is dependent on the total cost of solar panel installation. On the other hand, in PTC the owner will get tax credits for the kWh of electricity produced by the solar panels for the starting 10 years.
If we have installed the solar panel between 2022 and 2023, then we will get the 30% as the ITC. If we have installed a solar panel of 1 MW in size that produces electricity of 2.75 KWh, then we can claim the PTC. Though both tax credits cannot be claimed on one system, one can be claimed on solar panels and the other on batteries.
Other than that, here is the list of solar panel grants offered by different departments in the US:
- Department of Energy (DOE): The DOE provides solar funding to states for the below-the-level income houses under the Weatherization Assistance Program (WAP). They will perform the preliminary analysis to see which states or families need this.
- Department of Health and Human Services: This department aims to raise the usage of green energy in families that are not able to pay the electrical energy bills under the program named Low Income Home Energy Assistance Program (LIHEAP).
- Department of Housing and Urban Development (HUD): The first program which helps families to go solar is the Community Development Block Grant Program. The second program which helps homeowners to finance their solar installation with their FHA (Federal Housing Administration) insured mortgage is the Energy Efficient Mortgage program.
- Department of the Treasury: This department works on the regulations set for the submetering for the Low Income Housing Tax Credit (LIHTC) on the electricity utility they use and clarifies the division of cost between the homeowner and tenant.
- Department of Agriculture: This department supports the program named Rural Energy for America Program which provides small farmers grants for solar panels usage or installation. Another program called the Rural Energy Savings Program provides loans for energy-saving usage. The Energy Efficiency and Conservation Loan Program helps in financing solar projects in rural areas and the Rural Utilities Service Administers Programs help with improving the infrastructure of solar installation in low urban areas.
- Department of Transportation: This department works in the area of solar panel installation on highways spread all over the country.
3. How to Apply for Federal Grants
- For homeowners: After checking all the eligibility, the homeowners can apply for the tax credits by filling out the form IRS Form 5695 and then attaching it to the federal tax return Form 1040 or Form 1040NR.
- For business owners, nonprofits, and local governments: For ITC, the taxpayer has to fill out the IRS Form 3468 which needs to be attached to the tax return file, and for PTC it will be IRS Form 8962.
- The application process for the solar panel grants offered by the different departments is mentioned later in this article.
B. State Grants
1. Overview of State Grants
The state renewable energy grants come in the form of state tax credits offered by each of the state governments in the US. However, the amount of state tax credit is inclusive of the total percentage we can get under the federal tax credit. It means we can take the total credit from both sources in some pre-decided percentage only.
2. Types of State Grants
- For homeowners
The state solar energy rebates come in the form of an additional state tax credit if we haven’t applied for the federal tax credit. For example, if we have installed the solar panel in our house in 2022 at a total cost of $20,000, then the total state rebate will be given at a point in time, let’s say $2,000. This amount is deducted from the total amount of the federal tax credit we can get.
- For business owners
The green energy grants provided by a state government are taxable. If the state has provided a one-time rebate of $50,000, then the taxable amount on the solar panel installation will not get reduced. The ITC would be calculated on the installation amount and not after deducting the rebate.
3. How to Apply for State Grants
We can apply for state grants by visiting the respective solar tax websites and filling out the required form. This form will later need to be attached to the tax form while filing for the IRS at the end of the financial year.
C. Local Grants
1. Overview of Local Grants
The local grant is the grant offered by the electricity service provider in an area or the money earned from selling solar renewable energy certificates (SERCs).
2. Types of Local Grants
- For homeowners
The electricity service provider will provide solar energy incentives on installing the solar panel system which is actually non-taxable. But, the rebate received will be deducted from the total cost while claiming the tax credit. For example, if we have installed the solar panel in our house in 2022 at a total cost of $20,000, then the total utility rebate will be given at a point in time, let’s say $2,000. This amount will be deducted from the total cost of the solar panels to calculate the percentage of the federal tax credit we can get.
The second way is to sell the excess amount of electricity produced by the solar panels directly back to the grid and finally to the electricity service provider. This income received will not affect the amount of the federal tax credit we can get.
The third way is to sell the renewable energy certificates generated from the excess amount of electricity produced by the solar panels directly back to the grid and finally to another seller or to the electricity service provider. This amount received will not affect the amount of the federal tax credit we can get but will affect the gross income and amount of taxes payable.
- For business owners
The business owners are entitled to solar panel grants at the local level. Some of the grants available for business owners are income from the sale of the SERCs, income from the excessive amount of electricity produced, local tax credits, loans, and accelerated and bonus depreciation.
3. How to Apply for Local Grants
We can apply for local grants by visiting the website of the local electricity service provider or the website of the state government. One way to meter the excess amount of electricity produced by the solar panels is to install the net meter on our building’s electrical grid with the consent of the electricity service provider.
III. Eligibility Criteria for Solar Energy Grants
A. Residential eligibility criteria
The residential eligibility criteria for solar energy tax credits are as follows:
- The solar panel has to be installed between January 2017 to December 2034.
- The solar panel has to be installed at the place where we are the owner and the solar panel has to be purchased on cash or loan but not from lease or PPA.
- If we take part in the off-site community solar panel program, the amount of electricity we will be using does not need to be higher than our monthly or yearly energy consumption.
B. Commercial eligibility criteria
- The types of equipment that are eligible for Government solar grants are solar PV panels, inverters, racking, balance-of-system equipment, and sales and use taxes.
- The Concentrating Solar-Thermal Power (CSP) equipment has to be there to generate heat or cool electricity.
- Solar panel installation charges and indirect costs incurred by business owners.
- The step-up transformers, circuit breakers, and surge protection devices are also eligible.
- The battery storage devices have a minimum capacity of 5 kWh.
C. Non-profit eligibility criteria
The non-profits organization are not taxable under the eyes of the law but can take benefits of the tax credits under these two regimes:
- Direct pay option: Under this, non-profit organizations can receive a refund from the IRS on the solar panels installed after 2022. The one who will be starting the installation in 2023 of the minimum of 1 MW size of solar panels will receive a refund of 90% of the tax credits. In 2025, this percentage will come to 85% and after that, it will become nil. If the extra amount is requested more than the prescribed percentages, then there will be a penalty of 20%.
- Transfer of credit: The non-profit organization can choose to sell its tax credits to someone who doesn’t fall in this category. This amount should be received in cash only and if the excess is sold then there is a penalty of 20%.
D. Educational institution eligibility criteria
The educational institutions are also not taxable under the eyes of the law but can take benefits of the tax credits under the two regimes, as discussed earlier. They are direct pay options and transfer of credit which first provide the refund on the IRS and second provide the option to sell the tax credits.
IV. How to Apply for Solar Energy Grants
A. Steps to follow while applying for Solar Energy Grants
Here are the steps that we need to follow for getting the solar panel grants under the Funding Opportunity Announcement (FOA):
- Firstly, we have to check the open funding opportunities offered by the Solar Energy Technologies Office (SETO) on its website.
- In the second step, we have to download the FOA from Efficiency and Renewable Energy (EERE) which contains all the information about the application process and deadlines.
- In the third step, we have to register on websites such as EERE Funding Opportunity Exchange, Data Universal Numbering System (DUNS), System of Award Management (SAM), and Grants.gov.
- Then we have to submit the LOI, concept paper, and the full application within the next 30 days of approval.
- Next comes the merit review process which includes the technical review by independent experts and the interviews of the applicants.
- Then, there will be cost sharing amongst the winning applicants on the total cost of the solar panel project.
- In this step, we will be informed about the selection for the award negotiations through the EERE Program Information Center. We have to discuss the scope of the project and funding with other selected awardees.
- Along with that, we have to fill up the Data Management Plan (DMP) which includes how the work will be monitored.
- In the final step, the project will begin which is being reviewed from time to time by the EERE and the taxpayer will get a chance to save on taxes.
B. Documentation required while applying for Solar Energy Grants
Here is the list of documents that need to submit when applying for the solar energy assistance programs:
- Letter of Intent (LOI)
We have to submit the LOI to the EERE which should not contain any information related to our business and property. It has to be filled in within the guidelines mentioned in the FOA and information such as the type of business activity and the details of the solar panel project can be described.
- Concept Paper
The concept paper submission helps in saving our time in preparation for a fully detailed application which is most likely to get rejected. Once the concept paper is selected, then the EERE Program Information Center will inform us about the submission of the full application form.
The details that need to be mentioned in the concept paper are the ones that are there in the FOA. It has to cover minute details of the projects such as solar panel project title, technical details, all employee details, and confidential statements.
- Documents submitted at the time of full application
We have to submit the full application within 30 days of intimation received from the EERE Program Information Center. We have to fill in the details of the technical volumes, a one-page summary, etc. The documents that need to be submitted are the application for Federal Assistance (SF-424), statement of project objectives (SOPO), budget justification (EERE 335), disclosure of lobbying activities (SF-LLL), and summary slide.
V. Final Words
Therefore, whenever we think of applying for solar panel grants at the federal, state, or local levels we should always be aware of the eligibility and the documentation process. The wrong filing will sometimes lead to the rejection of the applications or sometimes attract penalties also. All we have to do is to update ourselves with open funding opportunities from the websites and the percentage of tax credits that we can get.
This article is better because it covers all types of grants at all levels. Also, the FAQs help in a clear and crisp understanding of the concepts that are there in the article.
VI. Frequently Asked Questions
What is a solar energy grant?
A solar energy grant is the predefined percentage of the total cost of a solar panel refunded by the federal government, state government, and electricity service provider in the form of tax credits, subsidies, and funding opportunities.
Who is eligible for solar energy grants?
The low-income families or residents, agricultural people, local governments, homeowners, business owners, non-profit organizations, educational institutions, etc. are eligible for solar energy grants in the US.
How much money can I get from a solar energy grant?
There is no limited amount that we can get as a solar energy grant because each type of grant works on a different basis. The federal tax credit is dependent on the total cost of solar panel installation while the production tax credit is dependent on the amount of electricity generated. Each type of grant offered by each department in the US follows a different basis to provide solar grants to low-income individuals and farmers.
How do I apply for a solar energy grant?
We can apply for the tax credits by filling up the certain form that needs to be attached at the time of filing the IRS. Other types of grants related to the local and state needs to be filled out on the respective websites of the service provider. Finally, to apply for the Funding Opportunity Announcement (FOA), we have to follow the detailed steps.
What are the different types of solar energy grants?
The different types of solar energy grants available in the US are federal solar tax credits, investment tax credits, production tax credits, grants offered by different departments, and the income from selling off the excess electricity and the SERCs to the local electricity service provider.
Can I apply for more than one solar energy grant?
Yes, we can apply for more than one solar energy grant but the one amount is subject to the total of the other which means we don’t have the liberty to get the higher total amount of grants from the different solar energy grants.
Are solar energy grants taxable?
Yes, solar energy grants are taxable and they are added to the gross income while calculating the tax at the end of the financial year. However, these grants are deducted from the total cost of solar panels while calculating the tax credits.
Meet the Authors
Dax Linwood is a knowledgeable and experienced writer in the field of renewable energy, with a core expertise in solar energy. With a passion for sustainability and a commitment to advancing the adoption of clean energy, Dax's writing is both informative and engaging. He has worked on numerous solar energy projects, including solar panel installation and maintenance, and has a deep understanding of the technology and its benefits. Dax's expertise and dedication to the renewable energy industry make him a valuable resource for those looking to learn more about solar energy and its impact on the environment.