It’s no secret that the cost of electricity has been creeping upward for a long time: In July, the average commercial and industrial price in New York was 8.4 cents per kWh (which is a 15% year over year increase) and 15.6 cents in New Jersey, a 13% year over year increase. Ouch!
If you operate large facilities, you’re likely intimately familiar with the increasingly costly burden of reliable electricity: Your facility requires massive amounts of power to keep critical operations running and avoid the crippling financial losses that come with spoiled inventory and fulfillment delays. In fact, U.S. commercial buildings spend an average of $1.47 per square foot on electricity, with some reaching more than $5 per square foot. This means that if your building is 19,000 square feet, your annual utility bill could reach more than $190,000.
What can you do when you're stuck paying an arm and a leg for the large amounts of inflexible, continuous power needed to run your business? The answer: Think outside the utility box and invest in an onsite microgrid, a smart interconnected system of energy assets like solar and battery energy storage that increases your energy independence, provides reliable backup power, and optimizes your long-term operations with budget certainty. What’s more, NY and NJ businesses can maximize their return on investment by getting started now and getting first in line for a number of lucrative clean energy tax credits from the Inflation Reduction Act (IRA).
How microgrids future-proof your operations
The definition of a microgrid is intentionally broad because in reality, no two microgrids are identical. Each one can be made up of a wide range of energy resources, including clean energy supply, energy storage, and demand applications, that are customized to meet each business’s specific needs.
By producing and consuming your own energy on site, you directly reduce your need for grid power - which in turn shields your business from today’s utility costs and hedges against tomorrow’s even pricier rates. What’s more, a microgrid leverages multiple distributed energy resources (DERs) to deliver even deeper savings, greater energy resilience, and often even lower carbon emissions than solar can on its own.
While a diesel generator is essentially a one trick back-up power pony (and a polluting one at that), a microgrid plays double duty to generate low-carbon backup power when the grid goes down, as well as deliver energy savings during normal operations. And by utilizing multiple distributed resources, a microgrid can cost-effectively power far more of a facility’s operations than a traditional diesel generator can – and with much lower emissions to boot.
A microgrid also has smart controls that enable individual components to be called upon individually at different times, which creates a flexible, efficient ecosystem that can keep the lights on during a grid outage and save you money during normal operations. Plus, a microgrid’s advanced load metering and control provides you with key data that enables you to optimize operations and even add new revenue streams from demand response or a virtual power plant.
Get ahead of new IRA tax credits
Fortunately, the recently passed IRA contains a wide range of tax incentives that make the deployment of DERs and other clean energy assets much more affordable. Here’s a breakdown of what benefits the IRA provides for the components of a microgrid:
Investment Tax Credit: Save on solar, storage, and microgrid controllers
- The IRA provides a 30% investment tax credit (ITC) for clean energy technologies like solar, biogas, and energy storage. Storage systems can be standalone or paired with solar.
- Notably, microgrid controllers, which are essential components of every microgrid, also qualify for this tax credit.
Qualified Commercial Clean Vehicles Tax Credit: Cost-effectively transition to an electric commercial fleet
- Considering converting your commercial fleet from gas-powered to electric? While electric vehicles (EVs) reduce your consumption of polluting fossil fuels, charging them will add to your already burdensome utility costs. A microgrid helps you mitigate this by producing electricity on site for your EV charging and facility needs.
- The IRA provides a 15% tax credit for the cost of an EV, up to $7,500 for ones weighing up to 14,000 and $40,000 for heavier ones.
Get ahead of New York DER incentives
Given that today’s economic climate is fraught with uncertainty, it may feel daunting to consider making any new investments right now. Fortunately, New York has long been a leader in clean energy policy, providing a range of tax benefits, rebates, and other financial incentives that support cost-effective deployment of DERs and other clean energy assets. Here’s a breakdown of what you can take advantage of today and what is coming down the pike tomorrow:
- Funding for NYSERDA’s Retail Energy Storage Incentive has already been allocated in many regions through the first rounds of incentives, but there’s more to come in 2023 where Energy storage owners can earn around $175 per kilowatt-hour (kWh) for projects up to 5 megawatts (MW).
- In addition to the newly-expanded federal Investment Tax Credits (ITC) for solar, storage, and other energy technologies, New York businesses that install clean energy technologies qualify for a partial property tax exemption under Section 487 of the New York Real Property Tax Law. In NYC, building owners may also be eligible for a property tax abatement when they install solar or storage systems.
- New York’s SB 4321 bill, which was introduced last year, will establish a $100 million program aimed at accelerating the development of microgrids in the state. This will likely be a pivotal source of funding for businesses that install microgrids today.
Jumpstart your microgrid investment
It doesn’t look like utility rates are going to stop rising anytime soon. Given the State’s ambitious goals of achieving 70% renewably-sourced electricity and 6,000 MW of energy storage capacity by 2030, it’s very likely that electric utilities will continue to increase customer rates to meet their mandates. We’ve unfortunately seen this through utility communications to their customer bases warning of 30-50% price increases for the year ahead due to market factors raising energy prices from inflation to the Russian war in Ukraine. The good news: With a number of current and pending state clean energy policies that reduce the cost of DERs, there has never been a better time to invest in a microgrid that reduces operational costs and ensures long-term energy independence and resilience. We fix that rate for 20 years so you know exactly what your costs are, which ESCO’s are unable to do.
Ready to jumpstart your microgrid investment? Reach out to info@scalemicrogrids.com to get started.