Are Solar-Powered Batteries the Answer to Power Outages?
Over the past few years, several wildfires have been blamed on power lines downed during periods of low humidity and gusty winds, which typically occur in the fall. The 2018 Camp fire, sparked by downed power lines, was the deadliest in California history, claiming 85 lives and causing more than an estimated $16 billion in damages.
Wind events can last for days, and the loss of power for extended periods can result in spoiled food and other inconveniences for homeowners who lack other power sources. Planned power outages are already being implemented by some utility companies and may become commonplace in the future, since gusty weather comes every year, and power companies must consider their financial liabilities if a downed line sparks a wildfire.
As a result, homeowners and businesses in fire-prone areas will need to be proactive in planning for these emergency power outages and decide whether they need to provide themselves alternate power sources during outages or just ride out the powerless periods. Of course, alternate power sources come with a price tag, which will play into that decision.
Even if you do not live in a wildfire-prone area, chances are you live in an area that is susceptible to other natural disasters, (tornadoes, floods, hurricanes, etc.) or just frequent power outages, and you may want to consider alternate power sources for periods of outages.
Solar-powered batteries and the solar tax credit
Businesses can, of course, write off the cost of providing themselves alternate power sources, but the tax law doesn’t allow homeowners to deduct the costs of a generator or other outage-mitigation measures. Since these measures often come with a high price tag, homeowners need to weigh their options and benefits, including tax-related benefits; another option for homeowners to consider is solar power. A tax credit applies to homeowners who install solar power property, and that credit extends to batteries that are charged solely by solar power. (1)
Even if you only have a standard solar power system without a battery back-up, you will still lose power during an outage because of how most panels are connected to the electric grid. However, if you have a battery incorporated into your solar system, your home can run off the solar energy stored in your battery when there is a power outage.
Homeowners who already have a solar installation can add a storage battery and qualify for the solar tax credit for the cost of the battery.(1) Those who do not already have a solar system may want to consider the cost of installing a solar system with a battery.
Installing a solar system with a battery or adding a battery to an existing system may be a convenience item for some and worth the cost. The costs can be substantial, however, and a household’s energy needs or the cost of power in your area may not justify the cost of a solar system, much less the cost of a battery. Carefully consider your needs before deciding whether to invest in a solar system. Although it will not qualify for a solar tax credit, a battery system attached to the electric grid may be another option. Your Fiducial advisor can sit down with you and weigh the pros and cons of alternate power sources, and the tax benefits (if applicable) of those sources.
The end is near for the solar tax credit
If you want to take full advantage of the solar tax credit, you need to act soon, as it is being phased out. Note that 2019 is the last year that the credit is equal to 30% of the cost of a solar system. The credit amount drops to 26% in 2020 and 22% in 2021, the final year of the credit. The credit is nonrefundable, which means it can only reduce your tax to zero, and any excess is carried over to the subsequent year. During periods of possible outages, keep your car’s gas tank filled, as service stations can’t pump gas without power. Keep some cash handy, since without power, your credit/debit cards are useless, and ATM machines won’t be able to pump out cash. External batteries to charge cell phones will come in handy as well.
If you have questions related to how the solar credit might apply to your particular circumstances, call Fiducial at 1-866-FIDUCIAL or make an appointment at one of our office locations to discuss the tax benefits of adding a solar system or a solar-powered battery to your current solar system.
(1) A battery attached to solar panels is qualified solar electric property if it’s charged only by solar energy. A software-management tool is qualified solar electric property where the software is necessary to monitor the charging and discharging of solar energy from a battery attached to solar panels. Earlier installations of qualifying property don’t affect the availability of the solar for qualifying property in later years. Thus, where a qualifying solar panel system was installed in Year 1, an additional solar credit could be claimed in Year 2 for the installation of a battery that was connected to the system and was qualified solar electric property. (IRS Letter Ruling 201809003)