Funding and Incentives for Renewable Energy

Monday, May 25th, 2009

The cost of investing in wind energy is now in a range that is competitive with power from new conventional power plants. Even though the up-front, capital cost of wind energy is more expensive than that of some traditional power technologies such as natural gas, combined short and long-term costs (including cost of capital, cost of fuel, and cost of operations and maintenanceover the lifetime of the plant) of wind energy can now be very competitive with that of other energy sources.

Federal and State governments offer several tax incentives and funding opportunities to assist
with the development of wind power and to help alleviate the up-front, capital cost.

Small Wind Systems Tax Credit

Under present law, a federal-level investment tax credit (ITC) is available to help consumers purchase small wind turbines for home, farm, or business use. Owners of small wind systems with 100 kilowatts (kW) of capacity or less can receive a credit for 30% of the total installed cost of the system. The ITC, written into law through the Emergency Economic Stabilization Act of 2008, is available for equipment installed from October 3, 2008 through December 31, 2016. The value of the credit is now uncapped, through the American Recovery and Reinvestment Act of 2009.

The Production Tax Credit (PTC) Extension

In October 2008, Congress acted to provide a one-year extension of the Production Tax Credit (PTC) through December 31, 2009. Under present law, an income tax credit of 2.1 cents/kilowatt-hour is allowed for the production of electricity from utility-scale wind turbines. This incentive, the renewable energy PTC, was created under the Energy Policy Act of 1992 (at the value of 1.5 cents/kilowatt-hour, which has since been adjusted annually for inflation).

Rapid Depreciation

Double-declining balance, five-year depreciation schedule (I.R.C. Subtitle A, Ch. 1, Subch. B, Part VI, Sec. 168 (1994) (accelerated cost recovery system)) is another federal policy that encourages wind development by allowing the cost of wind equipment to be depreciated faster. States also offer their own incentives and grant programs.

 

Visit www.dsireusa.org to learn more.