Payment Incentives

To view the Payment Incentives page, click Payment Incentives in the main windows navigation menu.

The Payment Incentives page allows you to define the parameters of investment based incentives (IBI), capacity based incentives (CBI), or production based incentives (PBI) provided by either the federal or state government, an electric utility, or other institution.

An incentive payment is an amount paid to the project that contribute's to the projects annual income in one or more years of the cash flow. Solar Advisor displays payment incentives in the project cash flow and in graphs.

For each payment incentive that you define, you can specify whether the incentive payments are taxable, and how the payments affect the depreciation basis.

For a description of incentives available to solar and other renewable energy projects in the United States, see the Database of State Incentives for Renewables and Efficiency at http://www.dsireusa.org.

Contents

►	Input Variable Reference describes the input variables on the Tax Credit Incentives page.

►	Tax Credit Incentives Calculations describes how Solar Advisor uses the input variables to calculate the incentive amounts based on the input variables.

►	Impact of Tax Credits on Income Tax describes the "Taxable Incentive," "Reduces ITC Basis," and "Reduces Depreciation Basis" options.

►	Viewing Tax Credit Incentives in Results explains where to find results that show the effect of tax credits on the project metrics and cash flow.

To define a project's payment incentives:

1.	For each incentive that applies to the project, check the federal, state, utility, or other option that applies.

2.	For each checked incentive, enter values for parameters describing the incentive, including the amount, term, limits, and escalation rate as applicable.

Solar Advisor only applies incentives that are checked, regardless of the values assigned to each incentive. For example, the image below shows incentive options for a project that benefits from a 30% federal incentive, and does not benefit from the 10% state incentive.

SS_TaxCredit-CheckedOption

3.	Check the tax implication options that apply to each incentive. If you are unsure of an incentive's tax implication, use you can the default options from an appropriate project template.

Note. The payment incentives variables and options are designed to be as flexible as possible to accommodate the wide variety of existing incentive programs available to renewable energy projects in the U.S. and worldwide, and to allow for modeling of theoretical incentive structures. It is possible to define combinations of incentives and options that may be unrealistic, such as making a federal payment incentive subject to federal income tax.

Input Variable Reference

Investment Based Incentive (IBI)

An investment-based incentive reduces the project's annual expenditures in year one of the project cash flow. Solar Advisor allows the IBI to be expressed either as a fixed amount or as a percentage of the project's total installed cost with a maximum limit.

For each IBI that applies to the project, check an option and enter values to specify the credit amount and limit. Note that if you specify two incentives from the same source (federal, state, utility, other) as both a fixed amount and a percentage of the total installed cost, Solar Advisor includes both amounts in the total incentive amount.

Variable	Description	Units
Amount	The fixed dollar amount of the incentive.	$
Percentage	The amount of the investment tax credit expressed as a percentage of the total installed cost displayed on the system costs page.	%
Maximum	The upper limit of the incentive in dollars. For incentives with no limits, type the value 1e+099.	$

Capacity Based Incentive (CBI)

A capacity-based incentive reduces the project's annual expenditures in year one of the project cash flow. Solar Advisor allows the CBI to be expressed as a function of the system's rated capacity in watts. The system's rated capacity depends on the technology:

•	Photovoltaic systems: DC watts of array capacity.

•	Concentrating solar power systems: AC watts of power block nameplate capacity.

•	Generic fossil: AC watts of power block nameplate capacity.

Check an option for each capacity based incentive that applies to the project, and enter values to specify the credit amount, percentage, term, and annual escalation rate as applicable.

Variable	Description	Units
Amount	The amount of the incentive as a function of the system's nameplate electric capacity expressed in dollars per watt.	$/W
Maximum	The upper limit of the incentive in dollars. For incentives with no limits, type the value 1e+099.	$

Production Based Incentive (PBI)

A production-based incentive reduces the project's annual tax liability in year one of the cash flow and subsequent years up to and including the year specified in the term variable. The PBI is a dollar amount per kilowatt-hour of annual electric output. If you specify an escalation rate, Solar Advisor increases the annual incentive payment amount in years two and later in the cash flow by a percentage of the previous year's payment.

Check an option for each production based incentive that applies to the project, and enter values to specify the credit amount, term, and annual escalation rate.

Variable	Description	Units
Amount	The amount of the incentive as a function of the system's total electrical output in the first year expressed in dollars per kilowatt-hour of AC output.	$/kWh
Term	The number of years, beginning with year one of the project cash flow, that the incentive applies. For example, an incentive with a 10-year term would apply to years one through 10 of the project cash flow.	years
Escalation	The annual escalation rate that applies to the incentive. Solar Advisor applies the escalation rate to years two and later in the cash flow. For example, for an incentive with a ten year term and two percent escalation rate, the incentive in year two would be two percent greater than in year one, and in year three, two percent greater than in year two, and so on.	%/year

Tax Implications

The tax implication options determine how Solar Advisor treats the income from tax incentive payments. You can choose to make the payments taxable, reduce the basis used to calculate the investment tax credit, or reduce the basis used to calculate depreciation.

Check one or more options for each incentive.

Option	Description
Taxable Incentive	Determines whether the incentive payment is subject to federal or state income tax.
Reduces ITC Basis	Applies only to projects that benefit from an investment tax credit. Check an option if the basis used to calculate the investment tax credit from the federal or state government should be reduced by the amount of the incentive payment.
Reduces Depreciation Basis	Applies only to commercial and utility projects with one of the depreciation options active on the Financing page. Check an option if the basis used to calculate federal depreciation, state depreciation, or both should be reduced by the incentive payment amount.

Incentive Calculations

Solar Advisor provides three options for entering the incentive amounts: As a fixed amount, percentage of the total installed cost shown on the system costs page for investment-based incentives, cost per unit of installed capacity for capacity-based incentives, or as a cost per unit of the system's electricity output calculated by the performance model for production-based incentives.

The table below shows how Solar Advisor calculates the incentive amount for each option, and the cash flow year to which the incentive applies.

Table 10. Summary of incentive calculations.

Incentive Name	Type	Incentive Calculation	Applies in year
Investment-based incentive, IBI	Amount	Amount ($)	1
Investment-based incentive, IBI	Percentage	Total Installed Cost ($) × Percentage (%) Up to maximum value	1
Capacity-based incentive, CBI	Amount	System Rated Capacity (W) × Amount Up to maximum value	1
Production-based incentive (PBI)	Amount	Amount ($/kWh) × Annual Output in Year n (kWh) × [1 + Escalation (%)] ^ Year n	All, or Year 1 thru term

Note. The CBI is calculated based on the array's rated capacity in DC watts for phovoltaic systems, and on the power block's rated capacity in AC watts for concentrating solar power and generic fossil systems.

The PBI is calculated based on the system's annual output in AC kilowatt-hours.

Viewing Incentives in Results

The options you select on the Payment Incentives page affect the financial metrics displayed in the results, including the levelized cost of energy, net present value, and payback.

You can see the incentive amounts and their impact on income tax and depreciation in graphs and in the project cash flow.

To display incentive amounts in a graph:

1.	After running simulations, click the Graph button.

2.	On the Graphing tab, click Add.

3.	Choose the simulation for which you want to see investment amounts.

4.	For X Value, choose Single Value.

5.	For Y1 Values, check the name of each incentive you want to display in the graph.

6.	Clear the LCOE check boxes.

Solar Advisor displays the graph as you choose graphing options. You can adjust the properties of the graph as needed.

7.	Click Accept to return to return to the main window.

To display incentive amounts in the project cash flow:

1.	After running simulations, click the Graph button.

2.	Click Base Case Pro-Forma to display the cash flow in a table.

3.	Either drag the graph area border up or scroll down until the incentive payments are visible in the table.

You can also export the base case cash flow to a csv file or to Excel by clicking the Export button.