Tax credits for green investing by insurers — we’ll pass
The availability of appropriate insurance coverage is a key risk issue that affects the overall value of green buildings and their financing. Without proper coverage tailored to a green building’s technical features, green building owners might be exposed to losses on sustainability-related systems that can’t be recouped via an insurance claim.
At the end of the day, that leaves lenders and investors exposed to losses on those features, which inherently reduces their value and presents a barrier to advancing green building. So appropriate “green” insurance coverage is key to assuring the proper financing and valuation of green buildings.
Skip Rawstron of InterWest Insurance Services of Sacramento, sent around an article detailing efforts to require the California insurance commission to study various sustainability risk issues tied to insurance coverages. The article (request it from us here) shares a laundry list of hearings that the insurance commissioner would be required to hold if the legislation passes.
The following snippets from the proposed legislation reveal the lawmakers focus on trying to attach advantages to green finance and investing as well as levy costs on those insurers continuing business as usual. Specifically the law, if passed, would:
- Require the insurance commissioner to hold hearings on the risk, costs and claims associated with green buildings.
- Require the insurance commissioner to conduct hearings regarding the health impacts on workers in green buildings, and use the information in establishing the Workers’ Compensation Claims Cost Benchmark. [our note: wow!]
- Offer state tax credits to insurance companies that invest in financial institutions that provide products designed to protect the environment and support renewable energy.
Now here’s the rub:
The concept of encouraging insurer investments in banks offering green products is a novel pass at trying to influence market forces in favor of both ecologically-friendly insurance and green banking products. Lots of folks have been talking about similar moves.
But despite being a big fan of incentives and novel financial mechanisms, I don’t think that using already strapped state funding sources to effectively pay insurance companies with tax credits to make those investments in banks is the way to go. Actually its surprisingly cheap.
Insurance companies are not hurting for cash in any respect, so there is no need to bribe them into green investing with tax credits. Everyone knows that tax credits are really a short-term play and we’re at a place where longer term financial mechanisms are needed to advance sustainability. And banks are not reluctant to offer green credit products due to lack of investment by insurers. They haven’t made that leap for other reasons that we’ve covered in other posts.
On top of all of that, the increasing availability of insurance products, well ahead of the banking industry, only convinces me that the insurance industry already sees green insurance products as being both necessary and profitable.
Please email us to request the article, since Skip sent it to me personally.
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- Photo credit: NYArchitecture.
Friday Quiz: Is the tough real estate market affecting solar PV installations?
You already know all the bad news from the real estate sector, but what about the solar power flowing through the real estate?
Quiz yourself (or an unsuspecting colleague…) on this factoid, reported in the latest issue of SolarToday magazine.
Question 1: Solar photovoltaic installations across the US grew 65% last year. But, which real estate sector has more installed solar PV systems?
a. Residential?
b. Or, commercial?
Question 2: Why?
(Don’t cheat)
Answer:
Nearly 19,000 homes and businesses connected to the grid in 2008. But, while residential installations grew by 34 percent, non-residential installations more than doubled.
Why?
Incentives shaped market growth.
2008 US P.V. installations grew 65 percent over 2007 to nearly 340 megawatts (!). Since 2005, the installed capacity of solar PV has more than tripled.
During 2008, the federal ITC was capped at $2,000 for residential installations, but uncapped for commercial. So the overall incentives for commercial PV systems was significantly higher than residential. The average size of a residential PV system increased 7 percent to 4,9 kilowatts (kW) while the average size of a commercial system increased by 67 percent to 114 kW.
Have a good Friday!
Source credit: Can Incentives Sustain the Solar Boom? Article by Larry Sherwood, appearing in July/August SolarToday Magazine
Photocredit: Flickr/photonenergy picture of Saint Christopher Solar Installation
Federal Energy Efficiency and Renewable Energy Incentives: How They Boost Your Green Business Case (Special Update for GEC Clients)
This is a special update for Galley Eco Capital clients concerning the extension of sunset dates for both federal energy efficiency and renewable energy tax credits. Specifically, these provisions provide significant benefits to investors and developers of sustainable real estate and our incentive and tax benefit studies can help you plan to maximize your use of these strategies.
Want a printable version of this update? Click here for the [PDF].
As you may know, on 3 October 2008, the House of Representatives approved the Energy Economic Stabilization Act of 2008 (HR 1424). This Act contains significant financial benefits for sustainable real estate investors and property owners implementing energy efficiency retrofits to their existing properties.
Galley Eco Capital provides property owners with incentive and tax benefit studies that include specific IRS-approved strategies that can assist the green real estate investor in boosting the returns on their investments. They are an essential part of an integrated finance approach, which we recommend for developers and investors.
Last week’s passage of HR 1424 means that, in our work with you, incentive and tax benefit studies that we prepare will analyze the potential benefits to your investment strategy that will come from these federal incentives:
- The Commercial Building Tax Deduction, which will remain in effect until December 31, 2013. This will benefit those clients wanting to apply for the available energy tax deductions for their project(s) with occupancy in 2008 and beyond to 2013.
- Energy Tax Credits will remain. The tax credits are valued at $1.80 per square foot, and are in addition to any state, local and utility incentives. Energy Tax Credit Certification from Galley Eco Capital includes the required certification of a third-party qualified and licensed engineering firm, as well as energy tax deductions from the state and local utility companies.
- The Energy Policy Act (EPACT), which in cases of building and retrofitting government property, can be taken by your architect/contractor. This particular approach is one of the most overlooked tax strategies for professionals involved in the construction of public buildings.
Note that the above information is a summary and does not represent the scope of the incentives in their entirety.
For those of you who follow our blog, Our Green Journey, we also published a short overview on the extension of valuable renewable energy tax credits within HR 1424, as well. Here are the highlights:
- The Investment Tax Credit (ITC) provisions extend the sunset for solar, fuel cell and microturbine property until December 31, 2016, and have been expanded to include combined heat and power system property, qualified small wind energy property, and geothermal heat pump system property. Additionally, the ITC has become increasingly valuable to residential developers who include solar property within their green homes. The $2,000 federal cap on residential solar incentives has been raised to $4,000.
- The Production Tax Credit (PTC) provisions extend the sunset for placed-in-service wind facilities until 31 December 2009.
Our estimates indicate that these latest provisions can provide for a nearly 75% offset to the cost solar property alone — a significant benefit.
You can also access additional examples of the application of some of these incentives within our educational and training materials, located within the Green Building Resources section of our website.
We have talked with some of you, who have been reluctant to incorporate an incentive strategy within your green real estate equity investment and development strategies, mainly due to the uncertainty surrounding the extension of these provisions.
Please contact us at Galley Eco Capital to discuss how you can put the federal government to work for you within your future sustainable investment and capital expense funding plans. Any initial review of your particular investment case is complimentary.
