By Derek Newberry, Advocacy Fellow
Great news for the green building industry: Congress just passed a budget deal that supports continued growth and competition in renewables market by extending tax credits for developers before phasing them out.
Renewable Choice Energy, an environmental consultancy, summarized the key takeaways of these federal tax incentives:
- Production Tax Credit (PTC) extended for new wind power development projects with construction start by December 2016. Projects starting construction during 2017 would get 80% of the PTC, during 2018 would get 60%, and during 2019 would get 40%.
- Investment Tax Credit (ITC) stays in place as a 30% tax credit through 2019. Credit winds down to 10% over the following four years.
The year-end fiscal passage passed by Congress this morning supports the renewable energy market by providing developers and buyers with a predictable regulatory environment in which to develop and price new wind and solar power projects.
For wind developments, the newly extended PTC allows all projects with a start of construction date prior to December 31, 2016 to take advantage of 100% of the tax credit. This maintains the current favorable pricing environment for buyers of large scale renewables through Power Purchase Agreements (PPAs). Going forward, the tax credit will be phased out on the following schedule: Projects starting construction during 2017 are eligible for 80% of the tax credit; eligible for 60% during 2018; and eligible for 40% during 2019. The PTC is currently worth $23 per megawatt-hour of electricity produced in the first 10 years.
For solar developments, the news is even better. The newly extended ITC stays in place as a 30% tax credit for all projects with a start of construction date prior to December 31, 2019. The credit ramps down over time. Projects that start in 2020 are eligible for a 26% credit and those that start in 2021 are eligible for 22%. Projects that start after 2021, or that are started sooner but not placed in service until after 2023, are only eligible for a 10% ITC.