Federal Financial Incentives
Listings reflect information collected via public listings of federal incentive programs for commercial, government, and residential energy efficiency and renewable power projects.
Modified Accelerated Cost-Recovery System (MACRS)
This incentive program is open to commercial, industrial, and agricultural projects. Applicable technologies include: solar water heat, space heat, thermal electric, hybrid lighting, thermal process heat and photovoltaics; landfill gas and municipal solid waste; small wind (100kW or less); biomass; geothermal electric, heat pumps, and direct-use; fuel cells and fuel cells using renewable fuels; CHP/cogeneration; anaerobic digestion; and microturbines. The program expires on 12/31/2012 (50% bonus depreciation).
Under the federal MACRS, businesses may recover investments in certain property through depreciation deductions. The MACRS establishes a set of class lives for various types of property, ranging from three to 50 years, over which the property may be depreciated. A number of renewable energy technologies are classified as five-year property (26 USC § 168(e)(3)(B)(vi)) under the MACRS, which refers to 26 USC § 48(a)(3)(A), often known as the energy investment tax credit or ITC to define eligible property. The provision which defines ITC technologies as eligible also adds the general term "wind" as an eligible technology, extending the five-year schedule to large wind facilities as well.
Residential Energy Conservation Subsidy Exclusion
This incentive program is open to residential and multi-family residential projects. Applicable technologies include: solar water heat, solar space heat, and photovoltaics. The program does not have a set expiration date.
According to Section 136 of the U.S. Code, energy conservation subsidies provided to customers by public utilities,* either directly or indirectly, are non-taxable. This exclusion does not apply to electricity-generating systems registered as "qualifying facilities" under the Public Utility Regulatory Policies Act of 1978. If a taxpayer claims federal tax credits or deductions for the energy conservation property, the investment basis for the purpose of claiming the deduction or tax credit must be reduced by the value of the energy conservation subsidy (i.e., a taxpayer may not claim a tax credit for an expense that the taxpayer ultimately did not pay).
Business Energy Investment Tax Credit (ITC)
This incentive program is open to commercial, industrial, utility, and agricultural projects. Applicable technologies include: solar water heat, space heat, thermal electric, hybrid lighting, thermal process heat, and photovoltaics; wind; biomass; geothermal electric, heat pumps, and direct-use; fuel cells and fuel cells using renewable fuels; CHP/cogeneration; and microturbines.
The federal business energy investment tax credit available under 26 USC § 48 was expanded significantly by the Energy Improvement and Extension Act of 2008 (H.R. 1424), enacted in October 2008. This law extended the duration -- by eight years -- of the existing credits for solar energy, fuel cells and microturbines; increased the credit amount for fuel cells; established new credits for small wind-energy systems, geothermal heat pumps, and combined heat and power (CHP) systems; allowed utilities to use the credits; and allowed taxpayers to take the credit against the alternative minimum tax (AMT), subject to certain limitations. The credit was further expanded by The American Recovery and Reinvestment Act of 2009, enacted in February 2009.
Credits vary by technology: 30 percent for solar, fuel cells and small wind (Small wind turbines placed in service 10/4/08 - 12/31/08: $4,000, Small wind turbines placed in service after 12/31/08: no limit), 10 percent for geothermal, microturbines and CHP, $1,500 per fuel cell 0.5 kW, and $200 per microturbine kW.
U.S. Department of Treasury - Renewable Energy Grants
This incentive program is open to commercial, industrial, and agricultural projects. Applicable technologies include: solar water heat, space heat, thermal electric, hybrid lighting, thermal process heat, and photovoltaics; wind; biomass; geothermal electric, heat pumps, and direct-use; fuel cells and fuel cells using renewable fuels; municipal solid waste, landfill gas; CHP/cogeneration; hydroelectric, tidal energy, wave energy, and ocean thermal; and microturbines. Construction must have begun by 12/31/2011.
The U.S. Department of Treasury-administered renewable energy grant program provides cash grants to be taken in lieu of the federal business energy investment tax credit (ITC). Grants are available to eligible property placed in service in 2009, 2010 or 2011 or placed in service by the specified credit termination date, if construction began in 2009, 2010 or 2011. The guidelines include a "safe harbor" provision that sets the beginning of construction at the point where the applicant has incurred or paid at least 5 percent of the total cost of the property, excluding land and certain preliminary planning activities. Generally, construction begins when "physical work of a significant nature" begins.
Grants vary by technology: 30 percent of property that is part of a qualified facility, qualified fuel cell property, solar property, or qualified small wind property, 10 percent of all other property; $1,500 per 0.5 kW for qualified fuel cell property; $200 per kW for qualified microturbine property; and 50 MW for CHP property, with limitations for large systems
USDA - High Energy Cost Grant Program
This incentive program is open to commercial, residential, nonprofit, local government, state government, and tribal government projects. Applicable technologies include: electric generation, transmission, and distribution facilities; natural gas or petroleum storage or distribution facilities; renewable energy facilities used for on-grid or off-grid electric power generation, water or space heating, or process heating and power; backup up or emergency power generation or energy storage equipment; and weatherization of residential and community property, or other energy efficiency or conservation programs.
The program is offered by the U.S. Department of Agriculture on an ongoing basis for the improvement of energy generation, transmission, and distribution facilities in rural communities. Eligibility is limited to projects in communities that have energy costs at least 275% above the national average. Individuals, non-profits, commercial entities, state and local governments, and tribal governments are eligible for this grant. Individuals must work on a project that will benefit the community in order to qualify. Grant values range from $75,000 to $5 million.
USDA - Rural Energy for America Program (REAP) Grants
This incentive program is open to commercial, school, state/local/tribal government, rural electric cooperative, agricultural, institutional, and public power entity projects.
The program is offered by the U.S. Department of Agriculture and promotes energy efficiency and renewable energy for agricultural producers and rural small businesses through the use of (1) grants and loan guarantees for energy efficiency improvements and renewable energy systems, and (2) grants for energy audits and renewable energy development assistance.
Grant amounts vary but cannot exceed 25 percent of total project cost. $70 million total has been allocated for this program in FY 2012. In addition to mandatory funding levels, there may also be discretionary funding issued each year.
This incentive program is open to residential projects. Applicable technologies include: passive and active solar space heat, solar water heat, photovoltaics, and daylighting.
Homeowners can take advantage of energy efficient mortgages (EEM) to either finance energy efficiency improvements to existing homes, including renewable energy technologies, or to increase their home buying power with the purchase of a new energy efficient home. The U.S. federal government supports these loans by insuring them through Federal Housing Authority (FHA) or Veterans Affairs (VA) programs. This allows borrowers who might otherwise be denied loans to pursue energy efficiency, and it secures lenders against loan default.
Qualified Energy Conservation Bonds (QECBs)
This incentive program is open to state, local, and tribal governments. Applicable technologies include: solar thermal electric and photovoltaics; wind; biomass; geothermal electric; municipal solid waste, anaerobic digestion, and landfill gas; CHP/cogeneration; and hydroelectric, hydrokinetic, tidal energy, wave energy, and ocean thermal.
QECBs are issued by the federal government and may be used by state, local and tribal governments to finance certain types of energy projects. QECBs are qualified tax credit bonds, and in this respect are similar to new Clean Renewable Energy Bonds or CREBs. February 2009 legislation set a limit of $3.2 billion on the volume of energy conservation tax credit bonds that may be issued by state and local governments. In April 2009, the IRS issued Notice 2009-29 providing interim guidance on how the program will operate and how the bond volume will be allocated. Subsequently, H.R. 2847 enacted in March 2010 introduced an option allowing issuers of QECBs and New CREBs to recoup part of the interest they pay on a qualified bond through a direct subsidy from the Department of Treasury. Guidance from the IRS on this option was issued in April 2010 under Notice 2010-35.
U.S. Department of Energy - Loan Guarantee Program
This incentive program is open to commercial, industrial, nonprofit, school, state and local government, agricultural, institutional, non-federal entity, and manufacturing facility projects. Applicable technologies include: solar thermal electric, thermal process heat, daylighting, and photovoltaics; wind; geothermal electric; hydroelectric, tidal energy, wave energy, and ocean thermal; fuel cells and fuel cells using renewable fuels; and biodiesel.
The U.S. DOE is authorized to issue loan guarantees for projects that "avoid, reduce or sequester air pollutants or anthropogenic emissions of greenhouse gases; and employ new or significantly improved technologies as compared to commercial technologies in service in the United States at the time the guarantee is issued." The loan guarantee program has been authorized to offer more than $10 billion in loan guarantees for energy efficiency, renewable energy and advanced transmission and distribution projects.
Loan amounts vary, but the program focuses on projects with total project costs over $25 million.
Residential Energy Conservation Subsidy Exclusion (Personal)
This incentive program is open to residential and multi-family residential projects. Applicable technologies include: solar water heat, solar space heat, and photovoltaics
According to Section 136 of the U.S. Code, energy conservation subsidies provided to customers by public utilities, either directly or indirectly, are non-taxable. This exclusion does not apply to electricity-generating systems registered as "qualifying facilities" under the Public Utility Regulatory Policies Act of 1978. If a taxpayer claims federal tax credits or deductions for the energy conservation property, the investment basis for the purpose of claiming the deduction or tax credit must be reduced by the value of the energy conservation subsidy (i.e., a taxpayer may not claim a tax credit for an expense that the taxpayer ultimately did not pay).
Residential Renewable Energy Tax Credit
This incentive program is open to residential projects. Applicable technologies include: solar water heat, photovoltaics, and other solar electric technologies; wind; fuel cells and fuel cells using renewable fuels; and geothermal heat pumps. The program expires on 12/31/16.
Established by the Energy Policy Act of 2005, the federal tax credit for residential energy property initially applied to solar-electric systems, solar water heating systems and fuel cells. The Energy Improvement and Extension Act of 2008 (H.R. 1424) extended the tax credit to small wind-energy systems and geothermal heat pumps, effective January 1, 2008. Other key revisions included an eight-year extension of the credit to December 31, 2016; the ability to take the credit against the alternative minimum tax; and the removal of the $2,000 credit limit for solar-electric systems beginning in 2009. The credit was further enhanced in February 2009 by The American Recovery and Reinvestment Act of 2009 (H.R. 1: Div. B, Sec. 1122, p. 46), which removed the maximum credit amount for all eligible technologies (except fuel cells) placed in service after 2008.
Tax credits are 30 percent of the total project cost, with the following maximums: $2,000 for solar-electric systems placed in service before 1/1/2009; $2,000 for solar water heaters placed in service before 1/1/2009; $4,000 for wind turbines placed in service in 2008; $2,000 for geothermal heat pumps placed in service in 2008; $500 per 0.5 kW for fuel cells.