Energy companies depending on tax incentives

Renewable energy companies across the U.S. expect government tax incentives to continue to be a key driver for the industry in 2011.

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Gretchen Metz of Pennsylvania newspaper, The Reporter, discusses the current tax incentives available to renewable energy companies.

Renewable energy companies across the country expect government tax incentives to continue to be the key driver for the industry in 2011.

President Barack Obama signed the tax package legislation which includes a one-year extension in the deadline for beginning construction of new renewable energy projects in order to qualify for the 30% tax credit which can be converted to U.S. Treasury cash grants. The incentive is for commercial and industrial installations.

The bill also allows a 100% depreciation bonus on new equipment placed into service after Sept. 8, 2010, and through the end of December 2011 for qualified projects. That means, instead of depreciating a project over the normal depreciation period, the entire cost could be deducted in the year the project goes into service.

In addition, states like Pennsylvania have their own solar funding programs. For companies such as Main Line Solar, the government incentives will be a huge help. Main Line installs residential solar systems from Harrisburg to Philadelphia and commercial systems throughout the Northeast. The company was founded in 2008 to take advantage of residential business driven by the newly enacted Pennsylvania Sunshine program. The program, managed by the Pennsylvania Department of Environmental Protection, offers rebates to residential and small commercial residents that install photovoltaic (PV) and solar thermal.

Another motivator for renewable energy is the fear of higher electric rates that will arrive as rate caps, imposed on the power utilities a decade ago, are ending. For PECO customers, that will happen Jan. 1. PECO is saying its rates for residential customers will increase 5%  in January while rates for large industrial businesses will go up 7%. Small businesses — those that use less than 500 kW hours per month — will actually see a decrease in PECO rates of about 5%, PECO said.

American Wind Energy Assn., likewise, said the continuation of the investment tax credit for renewable energy opens the door for a new wave of wind power and other renewable energy projects, while saving the jobs of tens of thousands of Americans.

The Geothermal Energy Assn. is predicting new surge in geothermal power projects in 2011. The geothermal sector is also growing in diversity, with almost half of federal awards going to non-industry entities such as colleges and universities; cities, counties, and other state and local institutions; tribal entities; and The Department of Energy’s National Labs. In addition, in the past year the Department of Energy funded geothermal research, development, and demonstration projects in 50 states, including DOE’s Geothermal Technologies Program which received over $50 million in support, the association said.