Economic Recovery Act of 2009 PlusState Incentives Make Renewable Energy Remodeling Affordable
Despite all of the recent bad economic news and all of the negative talk about the 2009 Economic Recovery Act ( the “American Recovery and Reinvestment Act of 2009”), the provisions of the bill actually offer American homeowners the best incentives ever offered to help them make their homes energy efficient and switch to renewable energy systems for space and water heating and air cooling. When combined with incentives and programs from the State governments, the Recovery Act presents a golden opportunity to take the environmentally friendly step of upgrading to renewable energy.
The benefits are clear to see:
· Federal government, State government, local government, and utility company incentives make this the most affordable time to upgrade,
· Some of these incentives pay you back for as much as twenty years,
· You, the homeowner, get to reap the rewards of upgrading in either little or no cost for electricity for as long as you own your home, and
· You can do your part to protect the environment.
The Economic Recovery Act offers homeowners sizeable federal income tax credits to help to offset the cost of renewable energy systems. In fact, unlike energy efficiency incentives for a tax credit equal to 30% of the cost of the upgrades, up to a total tax credit in a single year of $1,500, renewal energy systems qualify for what are being called “super tax credits.” These systems qualify for a tax credit of a full 30% of the cost of the system, with no cap on the amount of tax credit a homeowner can earn. In most cases, credits can also be earned for the cost of installation of renewable systems, and if the amount of the credit is greater than your tax liability in that tax year, the remainder can be carried over to the next year.
Qualifying Renewable Energy Systems are:
· Solar, Photovoltaic
· Solar Water Heaters
· Small Wind Turbine Systems
· Geothermal Systems
· Biomass/Biofuel
· Hydro-electric (in some cases).
On average, the cost of the various systems to provide electricity to operate residential heating, cooling, water heating, pool/spa heating, and other home electricity needs is reasonably comparable. The cost of any renewable energy system is still fairly high, making all incentives an important factor in the ability of most homeowners to make the investment in renewable energy. The costs of the main systems are:
· Solar/Photovoltaic System — $35,000 to 45,000
· Wind (Small Wind Turbine System) — $25,000 – 30,000
· Geo-Thermal System — $30,000 – $40,000
Fortunately, it is impossible to name any U.S. state that does not offer some incentive program to homeowners or businesses to make the move to renewable energy. According to the Database of State Incentives for Renewables & Efficiency, there are seven types of incentive programs offered by states:
Table 1
It is interesting to note that it is not always the most populous states which offer the largest or most comprehensive incentive programs. But almost all of the incentives offered by the states combine with the Federal Tax Credits to significantly reduce the cost of purchasing and installing the equipment to heat and cool a home with renewable energy. Table 2 shows programs offered by the twenty most populous states (based on figures from the 2000 U.S. Census).


If, for example, a homeowner in Wisconsin decided to install a Photovoltaic System (including a solar water heater) the available incentives make a very significant difference in the final cost of purchasing and installing the system.
System Cost (installed) $35,000.00
Federal Tax Credit (30%) -10,500.00
State Tax Credit (30%) – 7,350.00
Focus on Energy Rebate (25%) – 3,537.50 (if by 6/20/09)
We Energy Incentive
($0.75 per kWh of expected first year
AC output; assuming 5000 kWh) – 3,750.00
SUBTOTAL $ 6,862.50
Financing/Interest Costs (5 yr @5.0%) 747.00
TOTAL $ 7,609.50
Additional Exemptions/Savings
Sales Tax – 100% exemption (5.5%)
Property Tax Exemption of value of new system
Loan Rate Reduction Savings by using available low-interest financing options
Cost Recovery Average Utility Bill per year $3,000
New Utility Operating Cost per year 500
2,500 per year saved
Time to recover $7,609.50 = Amount to recover by $2,500 per year = 37 months
Without the Federal Tax Credit incentive, cost recovery would require an additional four years plus.
While upgrading to a renewable energy system offers the larges cost benefit, it should be noted that the Economic Recovery Act also offers incentives for energy efficiency home upgrades that include sealing the building envelope and incentives to upgrade to more energy efficient appliances, furnaces, boilers, air conditioners and more.