As the world moves to address climate change, being more energy efficient and using cleaner sources is being encouraged by both utilities and governments. Only 37% of respondents to PwC’s 2022 Annual Global CEO Survey said they factored greenhouse gas emissions into their long-term strategy at all. GHG emissions can be reduced by energy efficiency or clean fuels. One way to encourage such changes is with money; incentives and “green” tax credits. Such incentives have and will increase more in 2023 because of programs spurred on by the recent Inflation Reduction Act. Not only are such efficiency and clean energy projects cash positive because of the cost savings and reduction in O&M costs, but tax credits and rebates improve the economics even more.
Therefore, take the time to research the utility and government programs to enhance such potential projects. Some people or companies practically feel guilty taking money from these programs. No. The institutions have the funds budgeted and want to give out the credits or rebates, as long as one qualifies. Thus, the programs should stand out within their websites. Work with your Financial colleagues to ensure that the incentives will help your firm and not trigger other issues. But do research and take advantage in order to make the best business case for your proposed change.
Green incentives and taxes are offered all over the world. In Europe, taxes on excess fuel or water use and plastics and waste materials exist. In the US, there are few such taxes, but more tax credits for doing the right thing. And other incentives in the form of rebates abound in the US. Once the new technology is installed or strategy implemented, an appropriate check is sent to the business owner.
In many parts of the US, utilities or governments offer incentives that range from 30 to 70% of the upfront cost of the change. For a large capital cost item, such as heat pumps, boilers or rooftop units, that can be “game-changing”. Here are 3 items to be aware of as you consider energy upgrade incentives:
• You can’t “double-dip”. In many cases, the utility and the government offer similar incentive programs for the same item, such as upgrading to LED lights. But don’t think you can simply get rebates from both the government and utility. In most, if not all, areas, the two entities share data to prevent businesses from such “double-dipping”. And such an attempt may disqualify you from both programs.
• Don’t hesitate! Get youe incentive while you can. Some business owners think that although an incentive program is good, if they wait a year or more, it will be better. This is not sound thinking. Incentive programs generally last 1-2 years before the agency or utility evaluates it to continue, change, or end it. In some cases, businesses jump on the bandwagon such that little budgeted money is left in the program – for you. In some cases, even a good program is underutilized, and the entity decides to discontinue it. Even some successful programs are ended because the agency feels a change is needed. So for these reasons, when you come across a good incentive program and you were planning to make the changes anyway, go for it. Don’t delay; the program or the money may be gone or reduced, not to mention that you lose a year in savings not realized.
• Be aware of trends. Remember, incentives are just for that – an incentive to get businesses and buildings to procure and install an energy-efficient item. If over time, that item becomes more accepted, cheaper and beneficial, then incentives are not needed. For example, many utilities are cutting their LED incentive programs. LEDs are more accepted, their prices have come down lately, and the financials are so good (paybacks in many cases in under a year) that utilities have realized that incentives are no longer needed. Many are cutting back on the rebates. So be aware of where incentive trends are heading and pick smartly.
And here is a critical point: what if no incentives exist? What if you a very beneficial potential project comes up but your local government or utility does not offer a tax credit or rebate? Do you not do the project because no outside financial incentives exist? I hope not! If the project will pay for itself in a reasonable time and benefit the company in other ways, it is important for you to go forward with it, even if there is no payback from an outside entity. I have seen businesses pick a project or a vendor, not on the basis of how good the equipment is and its payback, but on how much the incentive will be. Even if an outside tax credit or incentive is not available, go forward if all the other benefits exist.
CCES has the experts to help you decide on the best energy upgrades to be more energy efficient, reduce your carbon footprint, and be more sustainable. We can research and prepare for you the forms to earn government or utility rebates, if you qualify, as well as manage implementation of the project. Contact us today at karell@CCESworld.com or at 914-584-6720.