Investing in renewable energies can be a great way to reduce your carbon footprint and save money on your taxes. The federal government offers several tax credits to incentivize investments in renewable energy sources, such as the Investment Tax Credit (ITC) and the Production Tax Credit (PTC). The Advanced Energy Manufacturing Tax Credit (MTC) also provides tax credits to new, expanded, or reequipped domestic manufacturing facilities that support clean energy development. The PTC reduces federal income taxes for owners of qualifying renewable energy projects that pay taxes based on the electricity production (measured in kilowatt-hours or kWh) of renewable energy installations connected to the grid.
Community solar or small-scale solar projects of moderate size that are jointly owned or subscribed to by several individuals or organizations are a great example of cooperative renewable energy production. The Inflation Reduction Act (IRA) is a green energy bill that focuses on boosting investment in renewable energy projects. It provides additional incentives through the IRA for investments in solar and wind energy in places that used to be centers of the fossil fuel industry. The federal production tax credit program, which is mainly used for wind power projects, was first applied to installations put into service starting in 1994. Over the past decade, cooperatives have been investing more and more in renewable energy to replace fossil fuel infrastructure, as clean energy prices have fallen.
This “direct payment” option is a game changer because it will allow non-profit organizations to access the same financial incentives that for-profit companies receive when they invest in renewable energy. Novogradac does not provide investment advice and the information that appears on the Novogradac website should not be interpreted as a recommendation to enter into a transaction with a particular party. Eric Hurlocker is the co-founder of GreeneHurlocker, PLC, a Richmond based firm specializing in business, energy and regulatory law. In general, large scale photovoltaic projects will receive more value if they opt for PTC in sunny locations, while projects located in less sunny areas, that incur high installation costs or that qualify for tax rebates, are more likely to benefit from ITC.
