Electricity

Renewable Energy Financing Mechanisms and Incentives: What Can We Expect?

While much attention has rightly been given to the expiration of the Section 1603 cash grant program at the end of 2011, there are other tax incentives for renewable energy that are also set to expire in the upcoming years. The decisions as to whether to renew these incentives will have a major impact on the future of renewable energy in the U.S. as these existing and new programs have been instrumental in sustaining investor and lender interest in the renewable energy sector, particularly in the wind and solar markets.

The main mechanism employed to finance renewable energy has long been to lower the cost of capital through the use of tax credits. The production tax credit (PTC) and the investment tax credit (ITC) are both given to eligible companies who either start certain renewable energy projects or invest in renewable energy equipment. Eligible companies with insufficient profit to utilize these credits typically then sell them as tax-equity to investors in order to finance their projects. Eligible companies or tax-equity investors receive a tax credit equal to 30 percent of the eligible costs associated with the renewable energy project.

via Renewable Energy Financing Mechanisms and Incentives: What Can We Expect? | Renewable Energy News Article.

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