Solar is the fastest-growing source of energy in the country, and Vermont’s solar industry is growing dramatically. The solar industry is booming nationwide because of multibillion-dollar federal tax breaks, and developers have their eyes on Vermont because of its additional cash incentives.

This is Part 1 of a two-part series. Read Part 2: Rural communities push back against solar.

In 2014, the state ranked at 22 out of 50 states for total solar capacity nationwide. Vermont’s industry employs about 1,500 people at 72 companies, and produces $76 million in output, making it the state with the most solar jobs per capita.

In just the past eight months, Vermont’s Public Service Board has approved 79 nonresidential solar projects across the state, including 11 commercial-scale installations. Last year, the board approved 138 nonresidential solar projects, including 23 commercial-scale installations.

Over the past 10 years, the total number of net-metered solar projects in Vermont has grown exponentially. The number and proposed size of commercial projects is also shooting up. The Public Service Department is now reacting to a handful of 20-megawatt commercial projects — which are 10 times larger than any of the existing projects in Vermont.

The growing size and amount of solar arrays is directly related to a 30 percent federal tax break for unlimited investments in solar projects. The tax breaks are designed to drive the nation away from fossil fuels, and supporters hope that solar energy use will help to combat climate change.

While state incentives pale in comparison, Vermont offers a tax structure that keeps solar developers rushing in, and a net-metering program that requires utilities to buy solar at a higher rate.

The federal government’s Business Investment Tax Credit, or ITC, which lets corporations write off 30 percent of construction costs, is set to drop to 10 percent at the end of 2016. That means if developers want to write off one-third of each solar project’s installation costs, they need to get their applications in as soon as possible and make sure their projects are built by Dec. 31, 2016.

The looming expiration date for the tax breaks has sparked a gold rush because developers know there is no guarantee that Congress will extend the federal Investment Tax Credit this year. U.S. Rep. Peter Welch, D-Vt., has signed on as a co-sponsor of a bill in the House that would extend the credit through 2022.

The plummeting cost of solar panels in the past decade is another contributing factor. The cheapest ones come from China, and while they’re slightly less efficient than the more expensive products from the U.S., Korea or Japan, developers can install inexpensive panels across a larger land area to produce the same amount of energy.

While solar arrays continue to sprout up across the Green Mountain State, the amount of energy from commercial and residential solar is rising, but in total remains only 2.3 percent of the energy portfolio of the state’s largest utility, Green Mountain Power. Canadian hydropower, in contrast, represents more than 40 percent.

Chris Recchia, commissioner of the Public Service Department, says that while the state offers incentives to solar developers, the Investment Tax Credit is the main driver of the nationwide solar boom.

“You’re going to see a lot of applications this year for construction next year because the thing has to be operational by Dec. 31 of next year to be eligible for tax credits,” Recchia says. “I think that’s probably the biggest interest in why we’re seeing those [solar projects] now.”

Sen. John Rodgers, D-Essex/Orleans, said subsidies on solar should end now that the industry has proven it can make money. Solar should be treated like any other business, he said, and developers should get the same level of subsidies as his masonry company, which is zero.

“The people who are putting up the projects are millionaires or corporations held by very wealthy people, and the tax dollars are paid by all of us,” Rodgers said. “These solar deals seem to be very lucrative for them, and it’s on the backs of the taxpayer and the ratepayer.”

Doug Tolles, a New Haven Selectboard member, also says the industry is dominated by people who are in it to make money. He opposes solar energy altogether, and his town has been at the forefront in land use debates.

“This is corporate welfare is all it is,” Tolles said. “It drives me crazy. The Legislature has changed the rules so that the solar industrial generating plants get tax breaks, and the towns that host them get screwed.”

What’s so great about Vermont?

Developers look for flat land near three-phase power infrastructure that gets virtually no shade. That’s what makes the South and the Midwest popular regions to install solar systems.

When developers come to Vermont, they usually steer clear of roof-mounted arrays that require expensive racking systems. Putting arrays in fields is more attractive because installation is cheaper and construction takes six weeks to three months.

“The solar boom is not equal across the country,” says Andrew Perchlik of the Public Service Department. “It’s a combination of federal policies and state policies. There are some other states where you can’t do net metering, for example.”

Vermont’s net-metering law, which passed in the 1990s and was updated in 2014, allows residents to build as much solar as they need and essentially sell unused energy to their utility company at a higher rate than what they pay for the energy they use. In exchange, they receive credits to lower future energy bills. Developers can build large net-metered projects up to 500 kilowatts and enter into contracts with institutions, such as schools, towns or businesses, which essentially invest in the project.

From 2004 to 2014, the Public Service Department gave cash incentives to Vermonters who wanted to install net-metered solar projects on their property. The department offered $2,500 per kilowatt in 2004; the number gradually decreased before disappearing at the end of 2014.

Vermont continues to offer solar developers a 7.2 percent personal income tax credit for construction costs. Piggy-backed on the federal government’s tax credit, the state tax break means solar developers can subtract up to 37.2 percent of the price of installing solar farms directly from their taxable income.

Vermont law says utilities like Green Mountain Power must pay 19 cents per kilowatt hour for energy from net-metered solar projects. In real terms, credits on a 150-kilowatt net-metered project add up to about $35,000 in revenue per year. Revenue on a 500-kilowatt net-metered project would be about $117,000 per year.

For commercial scale projects, those larger than 500 kilowatts, developers only get 11 cents per kilowatt hour. That’s an incentive for developers to build either 500-kilowatt net-metered projects or multi-megawatt commercial projects. In contrast, utilities could pay between 4 cents and 8 cents per kilowatt hour for hydropower.

“The savings to (utilities) is worth that (few) cents per kilowatt hour for renewable energy generation,” Recchia says, adding that it saves Green Mountain Power from having to buy energy from the rest of the Northeast electric grid.

The state has also set a special formula for the assessed value of nonresidential solar arrays. Property owners pay $4 per kilowatt directly to the state’s tax department, which deposits the money into the Education Fund.

In real terms, developers pay $600 per year in property taxes on a 150-kilowatt community solar farm sitting on roughly an acre of land or $8,000 for a 2-megawatt farm sitting on about 15 acres of land.