• Renewable Energy Tax Incentives Extended
  • January 19, 2016
  • Law Firm: Duane Morris LLP - Philadelphia Office
  • On December 18, 2015, the Consolidated Appropriations Act was signed by President Obama and became law, extending a number of key renewable energy tax incentives. Of keen interest to many investors and developers, the law extends the PTC (the Section 45 Production Tax Credit) and the ITC (the Section 48 Investment Tax Credit) for solar and wind projects. The extensions are for longer periods of time (up to six years for the ITC) than under prior extension legislation (one or two years), thereby providing greater certainty in the marketplace. However, credit phase-outs are built into the new law.

    For solar projects, the ITC is initially equal to 30 percent of qualifying costs, but drops incrementally to 26 percent for projects started in 2020, and to 22 percent for projects started in 2021. The ITC extends to projects for which construction has begun before January 1, 2022, but if a project is not placed in service before 2024, the credit drops to 10 percent. For wind projects, the PTC (2.3 cents-per-kilowatt hour) has been extended through 2019 (project construction commencement prior to December 31, 2019). However, the PTC for wind projects drops incrementally for projects started in 2017, 2018 and 2019. The option to take the ITC in lieu of the PTC remains. For other renewable projects, such as biomass and geothermal projects, the ITC/PTC extension period is much shorter, ending on December 31, 2016. All of the credit extensions are retroactive to January 1, 2015.

    As the EPA Clean Power Plan deadlines approach—even with litigation raising questions about the viability of those deadlines—these extended tax credits will provide real incentives for accelerated investment in renewables.