Guest Blog: Why PFI Farmers Should Go Solar, NOW!

Solar panels at One Step at a Time Gardens near Kanawha.

The Winneshiek Energy District has been working hard on a number of issues surrounding renewable energy, many of which are of big importance to farmers. I asked Kayla Koether, who works for Winneshiek Energy District and is also a PFI member and beginning farmer, to write a blog about why PFI members should install solar panels on their farm in the next year. She was generous enough to write so much information that we’ve split it into two posts. We’ll have the second one next week. Kayla will also be speaking at Dan and Bonnie Beard’s field day near Decorah on October 3 to talk about farm energy planning.

PFI Farmers and supporters… It’s time to go solar! I say this from my vantage point as the Agricultural Energy Program Coordinator at the Winneshiek Energy District (www.energydistrict.org) in Northeast Iowa, where I help farmers analyze their energy use and consider efficiency and renewable options. I have to say it loud, because it’s a time sensitive message. We currently have great incentives for solar, but they’re set to expire, and the next year and a half might be the best opportunity we’ll ever have to power (and empower) our farms and rural areas with locally owned, renewable energy.

Solar- good for the world and your bottom line

Those solar incentives have been around awhile, but in the last five years, the price of solar photovoltaics (PV) has gone from $8.00 per watt of solar installed to $3.00 or even less (depending on the size of your installation). As a long-time PFI member myself, I know many of those reading this have dreamt of installing renewables purely out of a commitment to environmental and social ethics, and technological advancement (which I applaud). Now, with the price decline in solar and the available incentives, solar is not only a commendable ethical decision, but also a very sound investment.

• Tax Incentives– The Federal and Iowa tax credit together currently cover 48% of the cost of an installation for those who have tax liability, and depreciation adds another significant tax incentive for farms (consult with your tax accountant). Note that the income tax credits drop off significantly after Dec. 31, 2016!
  • Federal Income Tax Credit– 30% of the total system cost. Systems installed and operating before Dec. 31, 2016 are eligible for this credit, which can be carried forward for multiple years. After 2016, this credit ‘sunsets’ and is reduced to 10% of the total system cost.[1]
  • Iowa State Income Tax Credit– 18% of the total system cost in 2015, 15% in 2016, to a maximum of $20,000. This can be carried forward for 10 years. The Iowa legislation creating this credit ties it to the federal credit- so, for systems installed and operating before Dec 31, 2015, the credit is 60% of the federal credit (60% of 30% =18%). The legislature lowered the credit for systems installed after Dec 31. 2015, to 50% of the federal credit. (50% of 30% = 15%), Once your system is in service, an application must be submitted to receive this credit. There is currently a state-wide cap on these funds; if the cap has been met for the year you applied, your application will roll into the next fiscal year.[2] After the federal tax credit is reduced, the Iowa credit will be worth effectively 5% unless our legislators change our policies.[3]
  • MACRS 5 year accelerated depreciation- This can add a substantial amount of value, which depends upon your tax bracket (25%? 35%). The depreciable basis is reduced by ½ of the federal tax credit you take. Thus if you take the full 30% federal tax credit, you can reduce the total cost of your solar install by 15% to calculate your depreciable basis.
• REAP grant– 25% of total eligible costs.[4] REAP or Rural Energy for America Program, is a competitive grant program. All farmers are eligible to apply, as are small businesses located in a USDA-defined rural area. Often professional grant-writers are hired to complete REAP applications, and while applications are accepted throughout the year, there are two annual ranking deadlines- April 30 and Oct 31. The grant reimburses the money that you’ve spent, and you can accrue reimbursable costs once you submit your application, even if you have not yet received a grant, which is useful for those whose plans are not contingent upon receiving a REAP grant.
• Alternate Energy Revolving Loan Program (AERLP)– 0% interest on 50% of your financing. Iowa’s AERLP is another competitive state program. All homes, farms, and businesses are eligible to apply. If awarded, it provides 0% interest on half of your loan, and your lending institution provides the other half at a negotiated interest rate.

Having worked with farmers of all sizes, I’ve seen great returns on investment and short paybacks for solar. I’ve analyzed farm-sized systems that will realize a 5-6 year payback utilizing only tax credits and depreciation (and accounting for electrical rate rises). If you could add a REAP grant the payback shortens, and if you can finance any of it with 0% interest, it looks like a real no-brainer. In light of this, many businesses are investing in efficiencies and then going solar, whether or not they are ethically so inclined. (Efficiency first! Efficiencies have better bang for your buck and allow you to lower your load, build out a smaller solar system, and save money all around!)

As an aspiring 5^th generation farmer, I have a vision that our rural areas will once again be vibrant centers of life and culture. Therefore I urge my PFI peers to consider solar an investment not only in your environmental values, but also in the financial health of your farm and community. You who have gone to great lengths for conservation and innovation are the most deserving of making a monetary return on your conservation investments. Scaled up, those investments can be a major form of rural economic development; as farmers install renewable energy and realize cost-savings, millions of dollars that would otherwise flow out of Iowa will be diverted back into our local economies. At this crucial juncture, we can answer the call for climate justice by building locally owned, clean energy resources, and strengthen our farms’ bottom lines.  For more information about solar, locally-owned energy, farm energy programs, Iowa energy policy, and the work of the Winneshiek Energy District, visit www.energydistrict.org, or feel free to contact me kayla@energydistrict.org, 563-382-4207.

Yours,

Kayla Koether, Decorah

[1] We hope that federal legislators will decide to extend the 30% credit, but we wouldn’t gamble the farm on them. Though you should write them to extend the credit and support renewable energy and local ownership.

[2] Note that the Iowa Income Tax credit could be oversubscribed. In this scenario, the legislature may raise the cap somewhat as they have done in the past, but this is a reason to get an application in sooner rather than later, and a reason to call your state legislators and ask for the cap to be raised!

[3]Our State legislature could unhinge our policy from the federal policy, and keep tax incentives strong. Call your reps!

[4] Note that REAP monies are considered taxable income