Direct Incentives for Smart Energy and Sustainability Projects
Becoming more sustainable or “going green” has been shown to be economically beneficial in a number of ways (see my article on the 9 Purely Business Reasons to Go Green). One pitfall that holds back some companies is the upfront costs. Although a smart sustainability program will provide ROI over time, many companies are hard-pressed in these tough times to find funds available to make the initial investment. The good news is that there is a growing number of governmental and non-governmental funds which will pay subsidize part or even all of the upfront costs of some sustainability and energy-reducing programs. These incentives are in the form of:
- Income tax deductions or credits
- Exemptions from sales tax
- Accelerated depreciation
Your company may qualify for a number of these programs. In some cases, the credits or grants derive from funds that you have already contributed to (i.e., taxes or a charge by your local utility). Therefore, you may be getting back your own money. So there is no reason not to pursue multiple incentives if you qualify for activities that will also be beneficial. But don’t wait, as some expire.
Sustainability and Energy Incentive Programs
What types of activities are covered by incentives?
- Lighting upgrades;
- Upgrading your boilers or installing cogeneration;
- Adding more insulation;
- Installing alternative energy sources;
- Using recycled products in your manufacturing; and
- Installation of equipment to reduce air emissions or wastewater discharges.
Be sure that you have the need for any of these upgrades and make sure your design qualifies for an applicable incentive.
There are a wide variety of incentive programs offered by the IRS and by state and local governments. Thorough research into what is available is important. Not all states offer programs. Many states offer tax benefits, such as credits or treatment of equipment as an expense (and not dealing with depreciation). Many state programs provide direct grant money to a company for investing in an energy upgrade. The company still has to front the funds for the upgrade, but they know that if the installation is successful they will receive a percentage of the investment or a lump sum. It is critical to totally understand the program and what is expected to qualify. Forms need to be completed. In addition, it is preferable to hold meetings to ensure that the expectations of all sides are understood.
Some states offer tax credits and/or sales tax exemptions for the purchase of certain equipment containing a high content of recycled materials. Some offer credits for purchasing advanced pollution control equipment. Some programs offer incentives in the form of tax credits or direct grants for brownfield remediation and development. Such activities, however, must be overseen and approved by the USEPA and/or the state agency.
There are also private companies or NGOs that offer incentive programs, as well. One example is energy service companies (ESCOs) which offer to pay the entire upfront, capital cost of a solar system for your roof (if it qualifies) and will maintenance the unit and supply your building the electricity you need at a discounted price to enable them to sell back electricity to the utility or to others.
Preparing for Incentives
Take the next steps on securing available incentives. Planning is the key and is more likely to succeed compared to “shoehorning” an unplanned project into a program. Be sure you understand the requirements of an incentive program by reading the literature or website. Contact CCES, as we can help evaluate potential programs, too. Given the complexities of some of these programs, it is important to involve your Legal and Financial Departments in these reviews and discussions, as well. A joint understanding and joint decision are necessary to gain maximum benefits.
Remember, the best laid plans for energy or other environmental programs do not always succeed. Despite planning, you may not actually achieve the goal you intended. For example, in the UNFCCC CDM program of GHG emission reductions, 30% of projects do not reach their GHG emission reduction goals. So do manage expectations, but also to heighten the chances of success, bring in a qualified outside technical consultant to assist. CCES has the expertise to help.
Finally, in evaluating the costs of a project, remember to focus on all of the requirements of the incentive programs. Many require intensive paperwork, as well as monitoring and other “proof” that goals are met. In some cases, goals must be maintained in the longer term, too. Make sure that your calculations of costs include long-term recordkeeping and reporting of key data.
But the incentives are there and there is great opportunity for “free”, outside money to perform sustainability and energy projects that will provide long-term benefits you’re your company. CCES can assist you in evaluating programs to benefit you and to perform the necessary oversight to see it through and heighten the chances of success and maximize financial gains.