The U.S. Partnership for Renewable Energy Finance (US PREF) yesterday released a study that says that the investment tax credit (ITC) for solar energy projects is more than offset by the tax revenues generated in leases and power purchase agreements (PPA). US PREF’s “Paid in Full” reports that a $300,000 commercial solar credit can create for the federal government a $677,627 nominal benefit in lease and PPA scenarios during a 30-year period. Additionally, the report said that the ITC provides a 10 percent internal rate of return to the federal government and has enabled financing mechanisms that generate a positive return for the government.
* The investment tax credit (ITC) for solar photovoltaic (PV) projects, expanded under the
George W. Bush administration as a part of the Energy Policy Act of 2005 and modified
as a grant-in-lieu of tax credit program under the Obama Administration, has enabled
financing mechanisms that generate a positive return for the federal government.
* Over the life of a solar photovoltaic (PV) asset, the initial cost of federal expenditures
associated with the ITC can be more than offset by the tax revenues generated in lease and
Power Purchase Agreement (PPA) scenarios, both of which create fixed payment structures
and provide a positive financial return on investment to the federal taxpayer.
*This paper demonstrates that, over the life of solar assets, lease and PPA financing
structures can deliver a nominal 10% internal rate of return (IRR) to the federal government
on the federal investment tax credit (ITC) for residential and commercial solar projects.
* Based on this analysis, a $10,500 residential solar credit can deliver a $22,882 nominal
benefit to the government and a $300,000 commercial solar credit can create a $677,627
nominal benefit in lease and PPA scenarios over a 30-year period (the minimum expected
life of the assets).
* The fiscal return demonstrated in this model is independent of, and additive to the
numerous other benefits of solar projects, including job creation, energy independence,
the preservation of natural resources and the health benefits of cleaner air.For questions about the ITC, contact Stephen Tracy at (415) 356-8000 or at stephen.tracy@novoco.com.
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