The renewable energy industry is fast paced and ever-changing. Depending on the technology used and when it is placed in service, there are tax credits available to aid in the development process.
According to the Internal Revenue Service (IRS), the Section 45 Production Tax Credit (PTC) is a per-kilowatt-hour tax credit for electricity generated by qualified energy resources and sold by the taxpayer to an unrelated person during the taxable year. The period of the credit is generally for a 10-year period beginning on the date the facility was originally placed in service.
The PTC has been a major driver of renewable energy development. The table below identifies qualifying technologies and the two most important aspects of the credit; begin construction deadline and estimated credit amount. Facilities that qualify for PTC may opt to take advantage of the Section 48 Investment Tax Credit (ITC) instead of PTC.
|Resource type||Begin construction deadline||Estimated credit amount*|
|Wind||Dec. 31, 2016||2.3 ¢/kWh|
|Dec. 31, 2017||Reduced by 20%|
|Dec. 31, 2018||Reduced by 40%|
|Dec. 31, 2019||Reduced by 60%|
|Closed-loop biomass||Dec. 31, 2016||2.3¢/kWh|
|Open-loop biomass||Dec. 31, 2016||1.2 ¢/kWh|
|Geothermal energy||Dec. 31, 2016||2.3 ¢/kWh|
|Landfill gas||Dec. 31, 2016||1.2 ¢/kWh|
Municipal solid waste
|Dec. 31, 2016||1.2 ¢/kWh|
|Qualified hydroelectric||Dec. 31, 2016||1.2 ¢/kWh|
|Marine and hydrokinetic (150 kW or larger)**||Dec. 31, 2016||1.2 ¢/kWh|
*Estimated credit amounts for 2015
**included small irrigation
The PTC is based on an inflation-adjusted rate of $0.015/kWh in 1993 dollars. In 2018, the rate was $0.0237/kWh. For projects that began construction in 2017 or later, only a portion of the PTC will be realized, per the schedule below:
|Begin construction deadline||PTC Adjustment|
|Dec. 31, 2016||100%|
|Dec. 31, 2017||80%|
|Wind > 100kW||Dec. 31, 2018||60%|
|Dec. 31, 2019||40%|
The Renewable Energy Development Support team at Baker Tilly has substantial experience leveraging PTC and ITC to drive renewable energy projects through their lifecycle. By utilizing the available credits and incentives, our team is able to work with stakeholders to identify and implement financial structures that foster private and public development of renewable energy projects.