UPDATE: U.S. Tax Credit Impacts on the Financial Advantages of Renewables in 2017

Author: Jason Wykoff contracts for green power with some of the largest companies in the world

Starting in 2017, the U.S. Production Tax Credit (PTC) begins its step-down, reducing the financial incentive provided to new wind projects to 80% of the full credit previously available in 2015/2016.

The good news for commercial, industrial, and institutional (C&I) buyers, however, is that developers were busy preparing for the tax credit step-down by commencing construction on projects prior to the end of 2016.  A significant amount of these “safe harbored” assets will qualify for 100% of the PTC so long as projects are completed within four years of their start date.

Now is an opportune time for C&I buyers to pursue offtake of these projects via a power purchase agreement (PPA).  By definition, there are a finite number of projects available with the full PTC; once those safe harbored assets are fully utilized, all new projects will be subject to the PTC step-down.  As it can take anywhere from 9-18 months to complete a PPA, and an additional 12-18 months to finish building the project once the PPA is signed. Given this timeline— and that competition for these projects is increasing thanks to new sustainable development goals and global carbon reduction targets—it is not too early to start a PPA now.

Solar is also a great option in 2017.  The current Investment Tax Credit (ITC) allows for 30% of the capital cost to be claimed against the tax liability of a project owner that finances a solar project that commences construction by 2019, after which time the credit begins to step down.

Additionally, solar projects are still eligible for 50% bonus depreciation under the Protecting Americans from Tax Hikes Act of 2015.  This accelerated depreciation allows developers to recover eligible capital costs related to solar projects earlier in the project life, and savings are passed through to C&I buyers. The bonus depreciation begins to step down by 10% annually in 2018.

To learn more about the effect of tax credits on project pricing, and the other economic advantages of renewables for C&I buyers, we invite you to download our new white paper.

Here’s to a bright 2017!

By | 2017-02-13T14:54:32+00:00 January 11th, 2017|News, Policy|

About the Author:

Jason has championed clean tech at Renewable Choice for nearly a decade, helping organizations evaluate and implement effective renewable energy and carbon management strategies.