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Alternative Energy and Energy Tax Incentives


Residential Alternative Energy Credit. The credit is equal to 30% of the cost of eligible: ... Residential Alternative Energy Credit, Cont'd. Break-even ... – PowerPoint PPT presentation

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Title: Alternative Energy and Energy Tax Incentives

Alternative Energy and Energy Tax Incentives
  • Anthony DiGiacinto
  • Senior Tax Manager
  • June 11, 2009

  • Non-business tax incentives
  • Business tax incentives
  • New Jersey energy incentive program
  • Cap and Trade
  • Stimulus Grant Opportunities

Residential Energy Property Credit
  • The credit is equal to 30 (up to 1,500) for
  • Qualified energy efficiency improvements
    (building envelope components)
  • any insulation material or system specifically
    and primarily designed to reduce the dwelling
    unit's heat loss or gain when installed in or on
    the dwelling unit.
  • exterior windows, skylights and, doors.
  • any metal roof or asphalt roof installed on a
    dwelling unit, but only if the roof has
    appropriate pigmented coatings or cooling
    granules that are specifically and primarily
    designed to reduce the dwelling unit's heat gain.
  • Qualified energy property
  • Electric heat pumps.
  • Natural gas, propane, or oil hot water boilers
    and furnaces.
  • Central A/C.
  • Stoves using biomass
  • Advanced main circulating fans.

Residential Energy Property Credit, continued
  • Credit is for property placed in service in 2009
    and 2010.
  • Each type of property must equal or exceed
    certain energy efficiency standards.
  • The use of subsidized energy financing no longer
    disqualifies the expenditure from the credit.

Residential Alternative Energy Credit
  • The credit is equal to 30 of the cost of
  • Solar water heaters
  • Solar electricity equipment
  • Fuel cell plants
  • Wind energy property
  • Qualified geothermal heat pumps
  • Installed on or in connection with the taxpayers
  • Fuel cell property is limited to 500 per half
    kilowatt and must be installed on the taxpayers
    principal residence.

Residential Alternative Energy Credit, Contd
  • Break-even analysis
  • Variables zip code, utility, average monthly
    electric bill (used 175).
  • Estimated system cost 52,300
  • NJ SREC (over life of program) 58,339
  • NJ Renewable Energy Incentive 8,835
  • Federal Credit 15,390
  • Cash break even point near the end of year 4.

Automobile Credits
  • Plug-in Electric Drive Motor Vehicle Credit
  • 2,500 plus 417 per kilowatt hour of battery
    capacity up to max of 7500 in total after 2009.
  • Max credit in 2009 7,500 to 15,000 depending on
    weight of vehicle.
  • Phased out after a manufacturer sells 200K cars
    in the U.S. after 2009
  • Plug-in Electric Vehicle Credit

Automobile Credits, Contd
  • Plug-in Electric Vehicle Credit
  • 10 credit (capped at 2,500) for the purchase of
    2 or 3 wheeled electric vehicles and low speed
  • For vehicles purchased after February 17, 2009
    and December 31, 2011

Alternative Fuel Refueling Station Credit
  • Credit of 50 (up to 50,000) for the
    construction of an alternative fuel refueling
  • Credit if for property placed in service in 2009
    and 2010.
  • Hydrogen related property remains at 30 up to
    max of 60,000.

Business Energy Tax Incentives
  • Energy Investment Tax Credit (the ITC).
  • Grant in lieu of ITC.
  • Energy Production Tax Credit (the PTC).
  • Election to take ITC in lieu of PTC.
  • Credit for Investment in Advanced Energy

Energy ITC
  • The credit is equal to 30 of the cost of
  • Qualified fuel cell property.
  • Equipment using solar energy to produce
    electricity, to heat or cool water, or to provide
    solar process heat, except for heating a swimming
  • Equipment that uses solar energy to illuminate
    the inside of a structure using fiber-optic
    distributed sunlight.
  • Qualified small wind energy property
  • 10 for geothermal property, qualified
    microturbine, and property placed in service
    after 2016.

Grant in Lieu of ITC
  • The ARRA turned the Energy ITC from income tax
    credits into a grant at the election of the
  • Not available to governmental agencies,
    501(c)(3) entities, issuers of clean renewable
    energy bond issuers, or a partnership (or LLC)
    that has one of the above as a partner.
  • The grant is available for projects that are
    placed in service in 2009 and 2010. Certain
    projects placed in service after 2010 will
    qualify if construction begins before 2011.
  • The Secretary of the Treasury must receive the
    grant application by October 1, 2011 for the
    grant to be made

Grant in Lieu of ITC, Contd
  • The grant works the same way as the ITC (i.e. it
    is equal to 30 of the qualifying cost of the
    property) but it will be paid in dollars 60 days
    after the later of the date the project is
    completed or the application for the grant is
  • Accordingly, the investors tax position becomes
    less relevant to the decision making process.

Energy PTC
  • The PTC is an income tax credit based upon the
    amount of electricity sold from qualified
    facilities. The credit is generally claimed over
    a 10 year period for electricity produced from
    renewable resources. These include trash,
    biomass, wind, wave, geothermal, and hydropower

Claiming the PTC in lieu of the ITC
  • Another change under the ARRA may enhance the tax
    benefits is an election that a taxpayer may make
    to take the ITC instead of the PTC for qualified
  • This election will be attractive to the owners of
    such facilities if they do not expect to be
    profitable over the 10 year credit period.
  • Additionally, many of these projects are capital
    intensive and short on output making the PTC
    economically more attractive.
  • Also, see above for the grant in lieu of credit

Credit for Investment in Advanced Energy Projects
  • The Credit for Investment in Advanced Energy
    Projects enacted as part of the ARRA adds a new
    tax credit designed to keep manufacturing jobs in
    the U.S.
  • The credit is equal to 30 of the taxpayers
    investment in any qualified advanced energy
  • The projects must be certified by the U.S.
    Treasury in conjunction with the Department of
    Energy by a process yet to be announced.
  • The total amount of credits awarded cannot exceed
    2.3 billion.
  • Once the project is certified the taxpayer will
    have 3 years to place the project in service.  

Credit for Investment in Advanced Energy
Projects, Contd
  • These projects include the establishment,
    expansion, or the re-quip of a manufacturing
    facility for the production of
  • Property designed to be used to produce energy
    from the sun, wind, geothermal deposits, or other
    renewable resources,
  • Fuel cells, microturbines, or an energy storage
    system for use with electric or hybrid motor
  • Electric grids to support the transmission of
    intermittent sources of renewable energy,
    including storage of that energy,
  • Property designed to capture and sequester carbon
    dioxide emissions,
  • Property designed to refine or blend renewable
    fuels, other than fossil fuels, to produce energy
    conservation technologies (including
    energy-conserving lighting technologies and smart
    grid technologies),
  • New qualified plug-in electric drive motor,
    qualified plug-in electric vehicles or components
    which are designed specifically for use with
    those vehicles, including electric motors,
    generators, and power control units, or
  • Other advanced energy property designed to reduce
    greenhouse gas emissions as may be determined by

New Jersey Incentives SRECs
  • SREC stands for Solar Renewable Energy
    Certificate and is a tradable certificate that
    represents all the clean energy benefits of
    electricity generated from a solar electric
    system. Each time a solar electric system
    generates 1000kWh (1MWh) of electricity, an SREC
    is issued which can then be sold or traded
    separately from the power.
  • A market for SRECS is driven primarily by New
    Jersey's electricity suppliers who are required
    to purchase SRECs annually under New Jersey's
    Renewable Portfolio Standard (RPS).This
    requirement increases each year, so that SRECs
    from the equivalent of a total of 90MW of solar
    generation capacity will be required by 2009. 
    Enough electricity to power approximately 8,000
  • All solar system owners in New Jersey with
    grid-connected generators can participate in New
    Jersey's SREC Program. 

New Jerseys Renewable Energy Incentive Program
  • The Renewable Energy Incentive Program offers
    upfront incentives to customers of utilities
    regulated by the BPU who invest in eligible
    electricity-producing equipment for use in
    offsetting onsite electric consumption. REIP
    incentives improve the financial returns of
    renewable energy investments by offsetting the
    cost of system installation

New Jerseys Renewable Energy Incentive Program,
  • Customer-Sited Renewable Energy
  • Technology Type
  • Upfront Incentives RECs
  • Solar Electric Small (up to 50 kW DC) X X
  • Solar Electric Large (gt50 kW DC) X
  • Sustainable Biomass X X
  • Wind Terrestrial1 X X
  • Fuel Cell (if powered from a renewable resource)
    X X

New Jerseys Renewable Energy Incentive Program,
  • REIP Solar Upfront Incentive Schedule (Effective
    February 3, 2009)
  •   A B
  • System Type Residential
  • Up to 10,000 watts w/ Energy Audit 1.75 per
    watt N/A
  • Up to 10,000 watts w/out Energy Audit 1.55 per
    watt N/A
  • Up to 50,000 watts N/A 1.00 per watt
  • gt 50,000 Watts N/A N/A
  • Example A home-owner wants to install a 4,000
    watt system at their residence. To calculate the
    incentive, use column A in the table above for
    Residential Solar installations. The customer
    elects to have an energy audit performed by a
    certified performance contractor. The system is
    below 10,000 watts so the grant is 7,000 or
    4,000 x 1.75.

Cap Trade
  • The government or other body sets a limit or cap
    on the amount of a pollutant that can be emitted.
    Companies or other groups are issued emission
    permits and are required to hold an equivalent
    number of allowances or credits which represent
    the right to emit a specific amount. The total
    amount of allowances and credits cannot exceed
    the cap, limiting total emissions to that level.
    Companies that need to increase their emission
    allowance must buy credits from those who pollute
    less. The transfer of allowances is referred to
    as a trade. In effect, the buyer is paying a
    charge for polluting, while the seller is being
    rewarded for having reduced emissions by more
    than was needed. Thus, in theory, those that can
    easily reduce emissions most cheaply will do so,
    achieving the pollution reduction at the lowest
    possible cost to society.
  • There are active trading programs in several
    pollutants. For greenhouse gases the largest is
    the European Union Emission Trading Scheme. In
    the United States there is a national market to
    reduce acid rain and several regional markets in
    nitrogen oxides. Markets for other pollutants
    tend to be smaller and more localized.

ARRA Stimulus Grants
  • NJs share of the stimulus 3.1 billion allocated
    to energy related projects is 73,643,000.
  • Energy Efficiency and Conservation Block Grants
    provide funds that will help the State and local
    governments in New Jersey reduce total energy
    use, cut fossil fuel emissions, and improve
    energy efficiency in their vehicle fleets and
    facilities. As the State awaits further guidance
    from the U.S. Department of Energy on program
    details, it is considering various approaches to
    allocating the funds that will achieve the goals
    of American Recovery and Reinvestment Act. The
    State is also considering matching programs, loan
    programs and other ways that it can help the
    counties and municipalities make the funds they
    receive directly achieve the highest possible
    energy efficiency and conservation benefits.
  • Go to NJs ARRA website for more information