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.
Sunny Day for Renewable Energy and Green Finance
If you see someone walking around singing “O, Happy Day” or saying they’ve just witnessed a biblical miracle, chances are good that they work in renewable energy or clean-tech.
While commercial real estate readjusts to a much slower economy, renewable energy — and green finance overall — finally got a hard fought boost, buried within the $700 billion bailout package passed by Congress last Friday, October 3rd. Here’s a ‘hot off the press’ explainer from Stoel & Rives, describing the extension of the Production Tax Credit and Investment Tax Credit:
“Today the House passed, and President Bush signed into law, H.R. 1424, which includes the Energy Improvement and Extension Act of 2008 (the Act). The Act contains the much-anticipated extension of the production tax credit (PTC) and investment tax credit (ITC) sunset dates.
The Act extends the PTC placed-in-service sunset date for certain wind and refined coal facilities until December 31, 2009, and extends the PTC placed-in-service sunset date for certain other qualifying facilities until December 31, 2010. The Act also expands the PTC to include certain marine and hydrokinetic renewable energy facilities placed in service on or before December 31, 2011.
The Act extends the ITC placed-in-service sunset date for solar, fuel cell and microturbine property until December 31, 2016 and expands the ITC to include combined heat and power system property, qualified small wind energy property, and geothermal heat pump system property.
In addition, H.R. 1424 contains a variety of other renewable energy tax provisions, including provisions allowing the energy credit to offset alternative minimum tax liability; increasing the amount of the biodiesel and renewable diesel fuel credits and extending the sunset dates until December 31, 2009; authorizing new clean renewable energy bonds and qualified energy conservation bonds; and extending the energy efficient commercial buildings deduction and the new energy efficient home credit.”
So, that’s the good news for alternative energy — and for green real estate , too. The extension of the tax credits help to make the cost of adding renewable energy to a commercial real estate project a bit more competitive. Market transformation continues!
But not so fast, there are still some open issues for renewable energy companies and green real estate investors to navigate. For example:
- Can they get product? There has been a serious shortage of solar supplies and materials for the better part of this year. Now that the question of government subsidies has been cleared up, many of the solar companies out there do not have the product to sell to real estate owners in any event. So we’ll be looking to see who actually has locked up the supplier contracts that allow them to deliver on their orders to landlords.
- Do either they or the real estate landlord have access to sufficient capital, at the right price? Look at the capital markets environment that the renewable energy industry has to ramp up in: see all those dying investment banks? That could have been the primary source of funding for large scale financing of alternative energy within real estate. A good portion of that capital has dried up over the past few months. And other healthier institutions are sitting quiet for now, till the market weather calms. Also bear in mind that commercial real estate landlords themselves are wading through troubled financial waters, with lots of great green projects getting sidelined till real estate fundamentals strengthen.
In spite of these tough issues, its still good in the green finance world to see alternative energy having a hard-won sunny day.
Economic Stimulus vs Renewable Energy
Strange, but true. With all the focus on the gloomy credit markets and national politics, there has been surprisingly little media attention on federal lawmakers quietly killing the renewable energy tax credit extension last December in order to use the funds for the economic stimulus package.
At least that is the accusation being made by the renewable energy industry. The wildly popular $5.5 billion in federal tax incentives for renewable energy - officially called the federal Production Tax Credit - was reportedly used to fund the economic stimulus package instead.
To get a sense of how surprising this is, keep in mind that most people in the renewable energy industry have been high-fivin’ themselves over presumed passage of the tax credit extension for over a year. Actually, a lot of us in the green building industry had been high-fivin’ each other, too. Its passage was deemed to be virtually certain. One comment to the news echoed the cynical disbelief of many:
“Can you imagine what the renewables industry could do with 10% of the $500 billion we just spent trying to steal Iraq’s oil?” - Commenter, RenewableEnergyAccess.com
However, the renewable energy industry is not taking this one sitting down. Cleantech Revolution co-author Clint Wilder went on a lengthy tirade about federal clean-tech policy, calling it the ‘Theater of the Absurd’. Read it for yourself.
As of last Friday, the Senate Finance Committee announced that it had included the Production Tax Credit extensions in its own version of an economic stimulus package.
The word is that the vote for this updated version of the economic stimulus package has been delayed until after Super Tuesday. It will happen next week. Everyone in green building should keep their fingers crossed.
