Green Building Services GBS - Simple, Smart, Sustaining Solutions

Americans may be dismayed to see their tax dollars bail out the banking industry, but the passage of the Emergency Economic Stabilization Act of 2008 (H.R. 1424) had at least one positive outcome – the Act included tax credits extensions for renewable energy.

The largest impact for commercial building owners interested in on-site clean energy production is an eight-year extension of the investment tax credit (ITC. The ITC is a 30 percent tax credit based on capital investment to help offset the higher upfront costs associated with the development of solar and fuel cell energy technologies.

Projects that had been put on hold pending extension can now move forward, and the ITC’s current expiration date allows new solar projects ample time to be placed in service within the requirements. Combined with other incentive packages at the state and local level, the tax credits can make solar technology installations more financially feasible.

For example, for-profit business owners in Oregon can combine the ITC, State Business Energy Tax Credit (50% of installed cost), and the Energy Trust of Oregon incentive for renewable energy to lower drastically lower their return on investment for photovoltaic systems.

Each state has varying rules regarding combining state and federal tax credits, so business owners should review the database at http://www.dsireusa.org for a list of state-by-state renewable energy and energy efficiency incentives and regulations.

Not-for-profit enterprises and private companies that don’t want to make the initial investment but are interested in producing their electricity from a renewable on-site resource can partner with a third-party provider. The provider will create a power purchase agreement to design, build and own the system, and sell the generated electricity at a fixed rate to the building owner. Andy Noel, Manager of Oregon Operations at the third-party provider REC Solar, says that the approved ITC extension is already having a tremendous impact on his company’s business nationally.

“We’re moving into new states that have incentives in place,” he says. “The federal tax credit alone is generally not enough to counter the investment in a major solar facility, but when combined with other incentives, it becomes very viable. Areas with high electricity costs also impact the initial capital outlay because of the long-term benefits.”

A significant change in the solar ITC now allows utilities to take advantage of the tax credit, which Noel believes will inspire utilities to seriously look at the option of owning and operating large scale solar installations.

In addition to the ITC extension, the Act extends the production tax credit (PTC) for one year on wind projects and two years for geothermal facilities. But be advised, even if a business is interested is pursuing multiple clean energy technologies, companies cannot claim both the PTC and ITC. Funding for the extensions will be partially derived from a change in the tax code for the oil and gas industry.

In addition to maintaining renewable energy incentives for business owners, the extensions will promote research and development in renewable technology and generate new jobs along with clean energy.

Without doubt, the most profound result from the extensions would be a new surge of renewable energy options that reduce our dependence on fossil fuels and help alleviate the effects of climate change.

Ralph DiNola, Principal, Green Buildings Servics, Inc