Incentives

Incentives overview
Federal incentives
State incentives
Incentives future
Energy Policy Act of 2005

Federal incentives

Production tax credit

The Federal Production Tax Credit provides a tax credit – currently at 1.8 cents per kWh – for qualifying renewable producers. This credit is for private developers; public entities are not eligible. As of August 2002, this credit was available for wind, closed-loop biomass, and poultry waste-based electricity generation; however legislation under consideration by Congress would extend it to geothermal as well. The PTC is currently set to expire December 31, 2003, but may be extended. It applies to all new wind generation installed by that date, and provides 10 years of tax credits, proportional to actual output. Check the AWEA Web site for the current status of the credit.

Clean Renewable Energy Bonds (CREBs)

As part of the Energy Policy Act of 2005, the CREBs program provides electric cooperatives and other not-for-profit utilities incentives to invest in renewable generation resources. Comparable to production tax credits available to investor-owned utilities, CREBs provide low-cost capital for renewable energy facilities because the government provides tax credits to the purchasers of the bonds. See the latest CREBS issued by the National Rural Utilities Cooperative Finance Corporation.

Renewable energy production incentive

The public-sector analogue to the PTC is the Renewable Energy Production Incentive. Renewable generation owned by state and local government entities (including municipal utilities) and not-for-profit electric cooperatives are eligible for the incentive. Unlike the PTC, REPI can be used for most types of renewable generation including solar, wind, geothermal, and biomass. REPI has the same value as the PTC – currently 1.8 cents per kWh. Like the PTC, REPI provides 10 years of financial support. REPI expired Sept. 30, 2003. An extension of REPI was in the 2003 Energy Bill that failed to pass the Congress. It’s likely, but not assured, that future energy legislation will revive REPI..REPI has been limited by its appropriations. Historically it has fully funded requests from solar, wind, geothermal, and closed-loop biomass facilities; while other technologies such as landfill methane have received partial funding due to appropriation shortfalls. See the DOE-prepared REPI summary for contacts and further information.

Business tax credit

Other significant Federal incentives for renewables include tax credits and accelerated depreciation. The business 10 percent tax credit allows businesses that invest in solar or geothermal energy systems to take a 10 percent tax credit to offset the first costs of these systems. There are also several provisions in Federal tax code that promote renewable energy through accelerated depreciation. The "Modified Accelerated Cost Recovery System" sets timelines over which renewable generation equipment can be depreciated. Most such equipment can be depreciated over five years, but check the IRS regulations for specifics. The Job Creation and Worker Assistance Act of 2000 speeds up the allowed depreciation for some technologies, again it's wise to check the specific IRS regulations.