The solar industry has its own unique vocabulary that can be confusing for folks that don't regulary involve themselves in the jargon. For this reason, many common words are defined below.
A type of tax-exempt nonprofit organization. A 501(c)3 organization is organized for certain purposes, for example, charitable, scientific, or educational purposes.
Alternating Current (AC)
The flow of electrical charge which periodically reverses directions. AC is the form of electricity which is delivered to businesses and homes via the utility grid. Direct current (DC) from solar photovoltaic cells can be converted into AC, which can then be used to run microwaves, televisions, and computers in your home.
Articles of Organization
A document similar to the Articles of Incorporation, used to outline the purpose and structure of and create an LLC.
Avoided Cost Rate
A rate that represents the value the utility receives by not having to generate electricity supplied to the grid. For example, the cost which is avoided by not having to build new coal fired power plants.
A decrease in the fair value of an asset or assets which, for tax purposes, can be treated as a business expense and deducted from taxable income.
Direct Current (DC)
The flow of electrical charge in one direction. Solar photovoltaic cells produce direct current when exposed to solar radiation. DC is commonly used to power automobiles. For DC to be used in a typical home it must first be converted into alternating current (AC).
A gas in the atmosphere that absorbs and emits radiation within the thermal infrared range. This process is the fundamental cause of the greenhouse effect and climate change. The primary greenhouse gases in the Earth's atmosphere are water vapor, carbon dioxide, methane, nitrous oxide, and ozone. Since the beginning of the Industrial Revolution, the burning of fossil fuels has contributed to the increase in carbon dioxide in the atmosphere from 280 ppm to 400 ppm, despite the uptake of a large portion of the emissions through various natural "sinks" involved in the carbon cycle. Anthropogenic carbon dioxide (CO2) emissions (i.e., emissions produced by human activities) come from combustion of carbonaceous fuels, principally wood, coal, oil, and natural gas. In addition to contributing to climate change, many of these gases are also carcinogenic pollutants.
The link between two power systems, in this case, the utility grid and the solar renewable energy system. This link allows the utility grid to draw electricity from the solar renewable energy system and also allows the solar renewable energy system host to draw electricity from the utility grid. Local utilities are involved in this process and will typically follow a standard interconnection process and agreement which is usually completed before construction.
Unit of power or rate of energy, or how fast energy is generated or consumed. The kilowatt-hour is comparable to the measure of distance (miles) whereas the kilowatt is much like the measure of speed (miles/hr).
Kilowatt-hour (kWh) -
Unit or quantity of energy, most commonly known as a billing unit for energy delivered to consumers by electric utilities. The kilowatt-hour is comparable to the measure of distance (miles) whereas the kilowatt is much like the measure of speed (miles/hr).
Limited Liability Company (LLC) -
A flexible form of enterprise that blends elements of partnership and corporate structures. It is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions.
A company which is run by some or all of its members/owners. This is compared to a manager-managed company in which managers are appointed, typically from outside parties.
Modified Accelerated Cost Recovery System (MACRS)
(pronounced may-kers) A programmed annual tax depreciation system that comes over the course of six years, and can offset up to 40% of the total cost of the system. The Internal Revenue Service publishes schedules, tables of lives by classes of assets. See IRS Publication 946 for more information.
An independent, nonprofit program that uses voluntary contributions to encourage the development of electricity generated from renewable energy sources and mitigate greenhouse gases. NC GreenPower pays a premium of $0.06/kWh for solar photovoltaic systems up to 5kW
Most on-site renewable energy systems use net metering to account for the value of the electricity produced when production is greater than demand. Net-metering allows customers to bank this excess electric generation on the grid, usually in the form of kilowatt-hour (kWh) credits that can be used as needed during a given period. Essentially, whenever the customer’s system is producing more energy than the customer is consuming, the excess energy flows to the grid and the customer’s meter runs backwards. This “netting of energy” results in the customer purchasing fewer kWhs from the utility.
North American Board of Certified Energy Practitioners (NABCEP)
A volunteer board of renewable energy stakeholder representatives that includes representatives of the solar industry, NABCEP certificants, renewable energy organizations, state policy makers, educational institutions, and the trades. Their focus is to develop and implement credentialing and certification programs for renewable energy practitioners.
As defined in IRS Publication 925 there are two types of passive income. First is income that is derived from trade or business activities in which you “do not materially participate”. The second is income derived from real estate properties, even if you do materially participate, unless you are a real estate professional. “Material participation” is thoroughly defined in the “Passive Activity Limits” section of IRS publication 925, pages 4-5.
A term which describes a period of time when the need for electrical power is higher than normal. Common seasonal peak demand periods occur during summer and winter, when the need for air conditioning and electrical heat increases.
Photovoltaics are a method of generating electrical power by converting solar radiation into direct current electricity using semiconductors that exhibit the photovoltaic effect. Photovoltaic power generation employs solar panels composed of a number of solar cells containing a photovoltaic material. Materials presently used for photovoltaics include monocrystalline silicon, polycrystalline silicon, amorphous silicon, cadmium telluride, and copper indium gallium selenide/sulfide. PV is a popular form of renewable energy.
Power Purchase Agreement (PPA)
An agreement between a wholesale energy producer and a utility under which the utility agrees to purchase power. The PPA includes details such as the rates paid for electricity and the time period during which it will be purchased.
A contract between two parties where one party promises to pay a determined sum to another party at a decided upon future date. Also known as a note payable in accounting.
Renewable energy offers economic, social, and environmental benefits that fossil fuels and nuclear generation do not. Renewable energy draws on non-polluting resources that are readily available, creating opportunity for local, regional, and domestic ownership of electricity generation, as well as job creation in research and development, manufacturing, installation, management, and maintenance. Renewable energy does not involve any toxic byproducts or harmful extraction practices, and is therefore a better option for both our natural and built environments. Additionally, many experts in the energy industry expect the cost of electricity to go up over time, making renewable energy a valuable investment.
Renewable Energy Credit (REC)
A renewable energy facility produces two distinct products. The first is electricity. The second is the package of environmental benefits resulting from not generating the same electricity– and emissions –from a conventional gas or coal-fired power plant. These environmental benefits can be packaged into a REC and sold separately from the electrical power. A REC represents the collective environmental benefits, such as avoided mercury, CO2 and other environmentally harmful pollutants, as a result of generating one megawatt-hour (MWh) of renewable energy.
Renewable Energy and Energy Efficiency Portfolio Standard (REPS)
North Carolina became the first state in the Southeast to adopt a Renewable Energy and Energy Efficiency Portfolio Standard (REPS) on August 20, 2007, with the signing of Session Law 2007-397 (Senate Bill 3). Under this law, investor-owned utilities in North Carolina will be required to meet up to 12.5% of their energy needs through renewable energy resources or energy efficiency measures by 2021. Rural electric cooperatives and municipal electric suppliers are subject to a 10% REPS requirement by 2018. By 2018, the bill requires solar energy to be a minimum of 0.2% of the total renewable energy portfolio.
Request for Proposal (RFP)
Issued at the beginning of the procurement process or, in this case, initial stages of selecting a solar renewable energy professional. An RFP should clarify the terms of the goods and/or services an issuer is interested in procuring, typically through a bidding process. The RFP process brings structure to the procurement decision and is meant to allow the risks and benefits to be identified up front.
U.S. Securities and Exchange Commission (SEC)
A federal agency which is responsible for enforcing the federal securities laws and regulating the securities industry, the nation's stock and options exchanges, and other electronic securities markets in the United States. The agency’s self-proclaimed mission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.
Solar Thermal (Water Heating)
A renewable energy technology which utilizes solar radiation to heat water. Solar water heating systems vary from unglazed plastic tube collectors to glazed copper pipe collectors with selective coatings. Solar water heating is used in several different ways, including, residential/commercial hot water, radiant floor heating, and swimming pool heating.
Individuals and businesses can reduce the amount of taxes owed by using tax credits. For a tax credit to have any value, though, the individual or business must actually owe taxes. If they are tax exempt or merely lacking sufficient income to need tax relief, the tax credits have no value. Individuals or businesses that can use tax credits to reduce the amount they owe in taxes are said to have a “tax appetite.” For example, public and non-profit organizations are tax-exempt and therefore do not have a tax appetite. In addition, tax-paying entities might be eligible to use tax-based incentives, but have insufficient tax appetite to make full use of them
Tax credits relevant to renewable energy systems are Federal and State investment tax credits. These credits represent a dollar-for-dollar reduction of your final tax bill, based on the amount of your investment in a renewable energy system. Under current law, the United States Federal government offers a 30% tax credit for renewable energy, meaning the taxpaying investor may reduce his or her final tax bill by 30% of the total cost of the renewable energy system. The State government of North Carolina offers a 35% tax credit, although it is broken into equal increments and taken progressively over 5 years.
A reduction of your taxable income, which reduces your final tax bill based on your highest tax rate for that year. Tax deductions are good, but tax credits are better.
Is the monetary benefit gained from receiving tax credits and tax deductions. For example, the reduction in the amount of taxes you pay at the end of the year from taking advantage of federal and state tax credits by investing in solar renewable energy.
Time of Use (TOU) Rates
A utility rate structure which charges a higher rate for electricity used during times of high or peak demand. Is designed to incentivize the use of electricity during low demand, or off-peak, periods.
Turnkey Solar Renewable Systems
A solar photovoltaic or solar thermal system which is developed, constructed, and handed over to the consumer ready to use.