Master Thread: Energy products and Tax discussions

[sunwarriors]

I debated whether to even respond to this post or not, but since you quoted me and questioned my ethics I will.

There are no terms agreed to that state you cannot grid charge. There is no law that says you cannot grid charge. There is no IRS publication that says you cannot grid charge.

If you feel uncomfortable grid charging, then by all means feel free to refrain from doing so.

But there is absolutely nothing that states or even implies a lack of ethical or moral standards when it comes to this.

There is no law that you can't grid charge, but I think/am pretty sure there is law that IF YOU TOOK THE ITC tax credit for the batteries, you are required to charge only via solar for 5 years, not via grid.

That's the only thing. The IOUs probably can see if someone is exporting all during high peaks, grid charging at 12am, etc and if they wanted to go after this, homeowners doing this may have little recourse.

It's more of a tax issue vs. what's legal (don't need to add stuff like murder/etc). As for whether the IRS/IOU will check it, who knows. But if I was a person (or IRS) who wanted free $$, this may be easy pickings since that's the guidance pre IRA for most solar/ess systems.

After the IRA passed though, it's not clear for folks who order batteries now if they only had solar (I don't know the fine print there).

Sorta like how it was murky waters under NEM1.0/2.0 early on and how long grandfathering was if one updated their system (it's now not gray and it's the original PTO date from the docs I've seen posted here), this is and has been a grey area for me, but I don't think folks grid charging non-stop off-peak are scott free.

People will just do whatever they please so do whatever you want too, but I don't think it's tax legit until clear guidance comes out.

 

[Jeremy3292]

There is no law that you can't grid charge, but I think/am pretty sure there is law that IF YOU TOOK THE ITC tax credit for the batteries, you are required to charge only via solar for 5 years, not via grid.

There is no wording in the ITC tax credit that says that. Respectfully, if you have the source please provide and I will stand corrected and say I am wrong.

 

[wwhitney]

There is no wording in the ITC tax credit that says that. Respectfully, if you have the source please provide and I will stand corrected and say I am wrong.

I haven't tracked down the primary sources again to give you references, but if you do, my recollection is that this is what you will find:

Prior to the IRA, (the relevant part of) the ITC law wording was basically about PV systems. So the question was what is the status of an ESS that is charged all or partially from PV? Is it part of the PV system or not?

The IRS issued a private letter ruling that for the commercial ITC, the ESS can be considered part of the PV system if at least 75% of the energy used to charge it comes from PV. The ITC is pro-rated by that percentage, but if it dips below 75%, you lose it all (although maybe on a year by year basis?). There is also a 5 year "vesting" (?) period, where you'd be required to refund a pro-rated portion of the ITC claimed if you didn't maintain that behavior for the first 5 years of ownership; I think that might in the tax law language itself, not sure.

There were also one or two private letter rulings about the residential ITC. I don't believe any of them mentioned this 75% threshold, they all required that the ESS be 100% charged from PV. And I don't think the 5 year "vesting" period is written into the residential ITC, so I'm not sure how a change of behavior in the use of the ESS works under the residential ITC.

So yes, if you took an ITC for an ESS installed before the passage of the IRA, there are restrictions on how you can use that ESS. Sorry not to have all the specific details and references on hand. But hopefully this overview will let you know what to search for to find the relevant primary sources.

Cheers, Wayne

 

[SunIsSolar]

I had 8.4 kW system with 2 powerwalls installed September 2022. Tesla told me that they needed to upgrade my service entrance in order to proceed, which I agreed to. My question is: Do I use the total price on my invoice or do I have to subtract the price of the upgraded service entrance for my federal solar incentive tax adjustment?

 

[sunwarriors]

There is no wording in the ITC tax credit that says that. Respectfully, if you have the source please provide and I will stand corrected and say I am wrong.

I did a quick search and this article popped up:

Are Investment Tax Credit Changes in Store for Energy Storage?

The US energy storage industry is experiencing rapid growth, with approximately 3.5 gigawatt hours (GWh) of energy storage installed in 2020, which is greater than the aggregate 3.1 GWh of energy storage installed from 2013 through 2019. In 2021, the annual deployment of energy storage in the...

www.morganlewis.com

As wwhitney mentioned, maybe earlier notes were prior letter rulings, but they applied only to those specific folks in the case I think?

Here is an article from 2020 with various mentions of charging from the grid non-stop as in your case:

Battery energy storage systems integrated in solar facilities to receive tax incentives

Tax incentives spurring deployment of energy storage are limited in their application, as they require the system to paired with solar. On top of this, the requirements to receive the tax incentives do not always align with advancements in battery technology and/or system design.

pv-magazine-usa.com

I don't think it's an accident that Tesla and other ESS manufacturers have blurbs warning about charging from the grid. Whether they do anything about it is another thing. I have excess exports anyways so I don't need to bother with this, but here's the Enphase warning if one were to charge from grid.

I don't know about other folks here, but when I did my research/install, it was pretty common knowledge I thought that charging from the grid is a big no no to keep your ITC. The IRA made things more murky/complex since batteries added on or separate even (?) were allowed under the IRA now vs. not being allowed at all under the ITC unless solar panel tied.

 

[Jeremy3292]

My apologies - the old ITC differed than the new IRA so I think we are getting off track on that. The IRA amended the “law” or “wording” and there are now no restrictions on grid charging. See article below.

Solar and Battery Incentives: What Changed in January 2023?

The energy storage Investment Tax Credit was separated from the solar ITC in January 2023. Stand-alone batteries are now eligible for the 30% tax credit.

www.ny-engineers.com

 

[sunwarriors]

My apologies - the old ITC differed than the new IRA so I think we are getting off track on that. The IRA amended the “law” or “wording” and there are now no restrictions on grid charging. See article below.

Solar and Battery Incentives: What Changed in January 2023?

The energy storage Investment Tax Credit was separated from the solar ITC in January 2023. Stand-alone batteries are now eligible for the 30% tax credit.

www.ny-engineers.com

Yeah, I'm specifically referring to people (like me) who are under the old system. From your link, it's still not clear to me where folks like us stand...it's from an engineer's blog site so take tax advice from it as much as it's worth. It would be nice for some clarity from the IRS. No doubt, battery only is ok for IRA 30% credit. I don't recall seeing anything from IOUs or CPUC or IRA notes about grid charging fine print if one were to add solar+batteries/etc.

If one is under NEM2.0 and oversized, I don't think one needs to even grid charge for export since you'll still pay NBCs tapping any grid power and your NEM2.0 alone will zero our your bill anyways.

 

[RKCRLR]

I've mentioned this before but I wonder how they would look at it in my situation.

I have 2 Powerwalls that I didn't claim the ITC for. I added a 3rd Powerwall last year and am claiming the ITC for it. I can grid charge but there is no way to direct the grid charging just to the two older Powerwalls. So I'm assuming that as long as my grid charging doesn't exceed 66% I'm complying with the spirit of the rules. And that is assuming that the new rules aren't retroactive to last year.

But I suspect the IRS doesn't even really care.

 

[aesculus]

Keep in mind that every installation that turned on Storm Watch valuated the solar only rule.

If anyone was taken to court it would be a mess to "draw the line" from an acceptable violation of the rule to an unacceptable one, IMHO.

 

[sunwarriors]

Keep in mind that every installation that turned on Storm Watch valuated the solar only rule.

If anyone was taken to court it would be a mess to "draw the line" from an acceptable violation of the rule to an unacceptable one, IMHO.

I was looking at some of the old articles and there was a line about grid charging up to 25% or if over, ITC goes to 0. Storm Watch probably wouldn't violate that rule by itself since for most people, they aren't grid charging or on storm watch 'that' much (totally guessing here) compared to using normal sun.

Bottom line still boils down to no clear guidance, people can just do whatever they want since that's how people are (until they get caught).

 

[cwied]

I was looking at some of the old articles and there was a line about grid charging up to 25% or if over, ITC goes to 0. Storm Watch probably wouldn't violate that rule by itself since for most people, they aren't grid charging or on storm watch 'that' much (totally guessing here) compared to using normal sun.

This only applies to commercial installations, not residential. For residential, the reference is an IRS letter that says that in their opinion the law intended only to allow batteries 100% charged from solar. There is no mention of an ITC claw-back for residential projects either, so it's ambiguous what happens if an installation no longer complies.

 

[lensovet]

Found this with some trivial searching. Residential Solar Storage is Eligible for Tax Credit, Subject to a 100% Cliff

 

[lensovet]

Btw I’d love to know on what basis batteries would be eligible if they weren’t solar-charged. Like, you’re taking a solar credit on a storage system because…you just like getting free money? How is it a solar credit if the battery is charged via the grid?

 

[lensovet]

The IRA amended the “law”

I don’t know why you keep putting this in quotes. You were replying to a discussion about pre-2023 installations and were absolutely adamant about how it was totally legal to charge using grid power and there were no rules, agreements, or laws against it, turning it into some kind of bizarre morality or ethics argument.

This was just straight up wrong. “Apology” accepted I guess.

And yes, the rules around tax credits, and tax matters in general, are laws. That’s why the IRS can audit you, fine you, and put you in jail if you violate them. You know that’s how we got Al Capone right?

 

[lensovet]

Keep in mind that every installation that turned on Storm Watch valuated the solar only rule.

If anyone was taken to court it would be a mess to "draw the line" from an acceptable violation of the rule to an unacceptable one, IMHO.

I think the difference could be intent. Storm watch is automatic and on by default, plus in the grand scheme of things a drop in the bucket (it also wouldn’t violate anything if the battery is already fully charged). On the other hand, changing the default settings to something that intentionally primarily charges via the grid and not your solar might imply an intent to violate the original terms of the credit.

 

[aesculus]

I think the difference could be intent. Storm watch is automatic and on by default, plus in the grand scheme of things a drop in the bucket (it also wouldn’t violate anything if the battery is already fully charged). On the other hand, changing the default settings to something that intentionally primarily charges via the grid and not your solar might imply an intent to violate the original terms of the credit.

Storm Watch is not automatic. You have to select it and can both turn it off and also suspend it during an event. So the intent is clear. You have to personally take action to use it that would violate the 100% agreement. And the IRS ruling never allowed exceptions for storms, no sun, or other environmental/grid situations.

I agree (as I stated above) that the amount of use of Storm Watch overall is probably pretty small compared to normal "solar" charging, but my point above was that it is not 100%. Never knew the IRS to use approximations so ...

BTW before Tesla added Grid Charging on the options for many (most?), there was one TMC member from TX that got them to turn it on for them after they proved to Tesla that all their power was renewable. Now much of that was probably wind, but not fossil based.

 

[Jeremy3292]

I don’t know why you keep putting this in quotes. You were replying to a discussion about pre-2023 installations and were absolutely adamant about how it was totally legal to charge using grid power and there were no rules, agreements, or laws against it, turning it into some kind of bizarre morality or ethics argument.

This was just straight up wrong. “Apology” accepted I guess.

And yes, the rules around tax credits, and tax matters in general, are laws. That’s why the IRS can audit you, fine you, and put you in jail if you violate them. You know that’s how we got Al Capone right?

I think the difference could be intent. Storm watch is automatic and on by default, plus in the grand scheme of things a drop in the bucket (it also wouldn’t violate anything if the battery is already fully charged). On the other hand, changing the default settings to something that intentionally primarily charges via the grid and not your solar might imply an intent to violate the original terms of the credit.

Quite ironically, you said two completely different things in a matter of minutes. Intent or lack thereof has absolutely zero to do with law. If I run over someone with my car "without intent" does that matter? No, it doesn't; I am still liable. So can't quite figure out what your actual argument is as you are saying different things with every post lol.

You also linked an article regarding a PLR, so let me reiterate again:

There isn't an IRS ruling or Treasury regulation on grid charging, just a PLR which has no authority outside of the specific taxpayer who requested it for his/her specific case.

There is also no statute that states anything about where the battery power must be derived from in order to claim the tax credit.

My point this entire time is that there is no law/statute/code that says if you grid charge you can't take the full tax credit. Does that mean the IRS can't still come after you? No, it most certainly does not. The gov't generally does whatever they want.


Feel free to read the code yourself - before IRA, after IRA, whatever time frame you want:

26 U.S. Code § 25D - Residential clean energy credit

www.law.cornell.edu

(This is not tax advice)

 

[Redhill_qik]

BTW before Tesla added Grid Charging on the options for many (most?), there was one TMC member from TX that got them to turn it on for them after they proved to Tesla that all their power was renewable. Now much of that was probably wind, but not fossil based.

I have 0% interest in grid charging, I don't have it turned on nor do I have Storm Watch turned on. However, my tariff rate plan with SVCE includes the GreenPower option for an extra $0.008/kWh which is 100% renewable, so I guess I would be qualify.

 

[Redhill_qik]

Quite ironically, you said two completely different things in a matter of minutes. Intent or lack thereof has absolutely zero to do with law. If I run over someone with my car "without intent" does that matter? No, it doesn't; I am still liable. So can't quite figure out what your actual argument is as you are saying different things with every post lol.

Intent matters a great deal with the law. Intending to run over someone with your car will get you a murder charge, whereas accidently running over someone would be a much lower manslaughter charge or maybe no charge if it was beyond your control.

 

[Jeremy3292]

Intent matters a great deal with the law. Intending to run over someone with your car will get you a murder charge, whereas accidently running over someone would be a much lower manslaughter charge or maybe no charge if it was beyond your control.

Yes, I thought that went without saying. But you are still liable in both cases like I said.

We were discussing in the context of the IRS where ignorance is not a real defense though.