Tax Credits and Other Incentives
Many projects funded by AERLP will be eligible for state and federal energy tax credits. Be advised that Montana tax credit criteria are not the same as loan criteria, so loan approval does not necessarily ensure tax credit eligibility. Always consult a qualified accountant or financial consultant at the outset of your project.
Wind, solar, geothermal, and other renewable energy projects will likely be eligible for the 30 percent federal investment tax credit (ITC) for the year the project is placed in service. There is no ceiling on the federal ITC, which remains in effect through 2016. Commercial ground-source heat pump projects are eligible for only a 10 percent credit.
The Montana credit may be claimed against the entire investment, but is capped at $500 per tax payer for the year the project is placed in service. Individual investors can have their property reappraised following a qualified installation.
Additional insulation, efficient windows, doors, and fixtures may be eligible for the Montana energy conservation tax credit, but the federal credits have been greatly reduced in recent years.
Tax forms are available through EnergizeMontana, a site that features information about Montana's tax credits and also offers information about renewable energy in general.
For more details about state and federal tax incentives see the Database of State Incentives for Renewable Energy (DSIRE).
Some utilities provide cash incentives for installed energy conservation or renewable energy projects. Always contact your local utility to see what incentives are available.
Net-metering is a type of installation that allows surplus electricity generated by the customer’s renewable system to go back on the utility electric system. The customer receives "credit" at retail rates for the electricity put back on the system, and generally has a year to use the credits. A net-meter runs backward when the system produces more electricity than the customer is using. If there is a surplus at the end of the year, the customer loses the credits.
Net-metering is required by law in NorthWestern Energy's and the Montana-Dakota Utilities' service areas. Renewable installations of less than 50 kW capacity are eligible for net-metering on the NWE and MDU systems. All electric co-ops in the state have voluntarily adopted net-metering policies. However, individual policies may differ. Be sure to check with your electricity provider before purchasing renewable energy equipment. Further information is available on the DEQ site for Net-Metering and Easements site.
Many regions of the state offer more than 300 cloud-free days per year, which is good for solar energy development. Unlike our major industrial wind farms erected in recent years, however, solar projects in Montana to date are small residential and commercial projects. Generally speaking, solar applications may be divided between photovoltaic systems that make electricity and thermal systems that heat fluids.
Photovoltaic (PV) panels generate electricity directly and are a popular choice for individuals and small-scale commercial applications. These installations may be stand-alone systems with battery storage. Perhaps more commonly, the installation is converted to alternating current and tied into the electrical grid through an agreement with the electricity provider. These meters literally run backward as the PV system generates more electricity than can be used on-site. The net-meter measures electricity entering the grid and credits the producer against ordinary electrical use (see Net-Metering above).
According to a study of almost 6,000 PV installations across the country, the average cost to bring an array online varies widely. The survey arrived at an average of $8.32 per watt, but prices have dropped significantly with some projects coming in well under $4.00 per watt. A 4 kW array could therefore conservatively run between $16,000 and $30,000, prior to rebates or tax incentives. NorthWestern Energy in Montana has offered cash rebates for PV installations in its service area up to 2 kW, which is somewhat less than the electrical requirement for most homes. Consequently, many individuals opt for a larger PV array or size the inverter system to accommodate additional panels in the future.
Product lines vary, of course, but a 4kW PV array may require 400 to 600 square feet of surface area or more. Solar modules historically constitute roughly half the cost of the system, but once again prices have been falling; the remaining investment is in the inverter, mounting, wiring, safety disconnects and system installation. A 4kW array might generate 5,000 kilowatt-hours (kWh) in a year. At 10 cents per kWh, the value of the electricity would be about $500.
The National Renewable Energy Laboratories in Golden, Colorado offer this calculator to estimate production from sites in our region. Simply enter the proposed size of array and the expected cost per kilowatt-hour of electricity to see expected production throughout a year.
Solar thermal applications are installed for domestic or commercial space heating and/or to provide hot water. This type of installation is somewhat less popular than PV systems. Some systems heat water directly in panels. Perhaps more common at our latitude is an anti-freeze type fluid heated in the solar panels. The fluid may be used to deliver space heat or the heat is exchanged in a tank for domestic hot water purposes. Both PV and thermal systems have been funded through the loan program.
Ground-Source Heat Pumps
The Earth is a spectacular reservoir of heat, with much contained deep within the planet's crust. But at a comparatively modest depth of about eight feet, temperatures stabilize at about 42 to 50 degrees Fahrenheit, making available a low-grade heat source. Geology keeps these sources at an almost constant temperature year-round. Heat can be withdrawn from geothermal sources and efficiently delivered to a living space or to assist in hot water production. Further, many systems can be reversed, using the geological source to provide summertime space cooling.
Heat-pump technology is somewhat akin to the workings of a home refrigerator, albiet in a backward fashion. Typically, a "closed loop" of piping containing a glycol (anti-freeze) solution is buried in long, deep trenches where it absorbs the ambient ground temperature. The solution is then pumped into a building where its low-grade heat interfaces with a closed-loop of refrigerant. Like a refrigerator operating in reverse, the heat of the glycol solution causes the refrigerant to evaporate. The gas form of the refrigerant is then compressed and the heat is drawn off as it condenses.
Some systems use wells and may dispense with the glycol solution. Withdrawn well water interfaces with the refrigerant as described above. The cooled water may then be reinjected into the same well, or more commonly into a separate well or drainage field. These systems and ones like it are called "open loop," since the water has an intake and a discharge. A great variety of horizontal (trench) and vertical (well) systems have emerged with ground-source technology.
Ground-source heat pumps can provide very efficient heat to residential and commercial buildings, but the initial price is quite high. Trenches must be dug around a structure (which often precludes retrofit applications), pipe must be laid, and the excavation refilled. Wells often must be drilled significantly deeper than is common for domestic use. Wells generally require permitting. Access to the heat exchange aspect of this technology and the additional cost of compressors and motors make for a significant up-front investment. However, the low cost to heat building spaces over the years is almost unrivaled among competing systems. According to industry sources, every kilowatt of electricity used to operate these systems yields four to five kilowatts worth of heat, depending on the source temperature.
One Montana incentive for ground-source heat pumps allows up to $1,500 for a primary residence, new or established (see form ENRG-A). The federal credit for residential applications remains at 30 percent of the investment, uncapped. Check with your electricity provider for other incentives to install ground-source heat technology.
Wind resources in Montana are considered superb to excellent along many corridors in the western part of the state and very good to excellent across wide swaths of the central and eastern plains. Development of this resource in the state has been aggressively pursued with more than 600 MW of industrial-scale wind generation added since 2000. Smaller wind projects for residential, commercial, and agricultural purposes have also sprouted over the past decade.
As with any small electrical generation system, wind energy can be used directly near the source of production or the electricity can be stored by batteries for use at a later time. Some investors will negotiate an agreement with their electrical providers to tie into the grid and be credited for the energy generated (see Net-Metering above). Note that a standard net-metering arrangement with NorthWestern Energy calls for wind systems to have a peak capacity of 50 kW or less. Wind systems for individual homeowners are more commonly 2 to 5 kW, but much larger sizes are seen, particularly in more rural settings.
The cost for small wind averages perhaps $5 to $6 per watt, or about $5,000 per kW installed. About 2,500 kilowatt-hours (kWh) of electricity might be produced per installed kilowatt per year, depending on the type of system, tower height, and the quality of the wind resource. At about 10 cents per kWh, roughly $250 worth of electricity would be produced per installed kilowatt per year. Larger systems enjoy an economy of scale, but once again, a great many variables come into play when projecting wind costs and benefits. Some utilities may offer rebates on certain wind components. And producers may be able to sell Renewable Energy Credits (RECs), also known as Green Tags, once the system is up and producing power. Investment tax credits can further offset the cost of a wind system and are discussed at the top of this web page.
For most of us in Montana, biomass is the heat source better known as wood
Modern wood stoves rated 75 percent efficient and higher may be eligible for the loan program. The unit must be used to heat a dwelling or to heat water for a dwelling. Installation costs that insure proper and safe functioning of the unit may be included as part of the loan application. The homeowner must posses a certification statement that the appliance meets the federal standard as a biomass burning stove and that the efficiency rating is 75 percent or greater.
Biomass burning units may or may not be fitted with a catalytic afterburn device to meet the 75 percent efficiency rating. Catalytic stoves have traditionally been manufactured with a ceramic collar where the smoke exits the unit. This ceramic honeycomb is coated with platinum, palladium, or other noble metal, which acts as a catalyst to combust the smoke at comparatively low temperatures as it exits the stove. Manufacturers can now meet efficiency standards without catalytic devices through smaller combustion chambers, baffles, and generally higher combustion temperatures. Pellet stoves generally meet high efficiency standards.