THE COSTS AND BENEFITS OF NEW ENERGY INCENTIVES

New LBNL Report: An Analysis of the Costs, Benefits, and Implications of Different Approaches to Capturing the Value of Renewable Energy Tax Incentives

May 12, 2014 (Lawrence Berkeley National Laboratory)

“In the United States, incentives for the deployment of utility-scale wind and solar power projects are delivered primarily through the tax code, in the form of accelerated tax depreciation and tax credits that are based on either investment or production…[P]roject sponsors, said to have ‘tax appetite,’ are able to efficiently (i.e., in the [five] years in which they are generated) apply any excess deductions and credits against other sources of taxable income…This is the best possible outcome for the sponsor. Other project sponsors that lack tax appetite may carry forward excess tax benefits…but this strategy sacrifices some of the incentives’ value, due to the time value of money. A third option is to bring in – at a cost – a third-party ‘tax equity’ investor who is able to efficiently use the project’s tax benefits, and who invests in the project in exchange for being allocated most or all of its tax benefits; this is known as ‘monetizing’ the tax benefits…This report analyzes and compares the relative costs, benefits, and implications of capturing the value of renewable energy tax benefits in these three different ways…” click here for more

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