Full Title: Tax Credits, Tax Equity and Alternatives To Spur Clean Energy Financing
Author(s): Scott Fisher, Steve Corneli, and Steve Taub
Publisher(s): U.S Partnership for Renewable Energy Finance
Publication Date: June 1, 2012
Full Text: Download Resource
Description (excerpt):
Federal clean energy policies have made tax equity a critical component in the private-sector financing of clean energy projects. This is because federal tax credits and other tax benefits are among the government’s main incentives to help drive the adoption of domestic clean energy technologies. Examples of such tax benefits include the 30% investment tax credit (available for solar through 2016 and for wind through 2012); the 2.2 cent production tax credit (available through 2012 for wind projects that do not elect the ITC); and accelerated depreciation (including bonus depreciation) that can be used to offset taxable income from other sources.
Tax credits and other tax benefits, however, can only be used by clean energy developers who are profitable enough to actually pay income taxes. Because of this, many developers, whether they are start-ups that have not yet reached profitability or are established power companies that earn most of their income in currently depressed energy markets, have little or no ability to use tax benefits themselves. Hence, they must find investment partners with enough income to benefit from tax credits, accelerated depreciation and similar policies. Investment by such tax equity partners is, in fact, one of the few financing mechanisms currently available to fund renewable energy projects.