Transcript Energy Project Development Incentives

Energy Project Development
A Discussion on State and Federal Incentives
Presented By Dennis Plaster, General Manager
Introduction
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Renewable Energy Projects Development
Incentives
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Production Tax Credits
Renewable Portfolio Standards
Renewable Energy Credits
Carbon Credits
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Certified Emission Reduction Credits
Voluntary Emission Reduction Credits
Production Tax Credits
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The Production Tax Credit (PTC) under Section 45 of the Internal
Revenue Code is an incentive used to encourage the
development of alternative energy sources
This corporate tax credit is used to reduce the amount of taxes a
business owes making renewable energy producers more
competitive with traditional coal-fired or gas-fired electricity
generators.
This credit is given to companies that engage in the production
and sales of electricity through the use of renewable energy
technologies.
The amount of tax credits is based on the amount of electricity
generated.
 The credit ranges from 1 cent to 2 cents per kilowatt hour of
power produced.
Energy Project Development Incentives
Production Tax Credits
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Businesses and/or individuals can take the
credit by completing IRS forms:
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8835 Renewable Electricity Production Credit or
3800 General Business Credit
Currently, PTCs are available through 2008.
Energy Project Development Incentives
Renewable Energy Credits
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For every megawatt hour of electricity a renewable
generator generates, it also generates a onemegawatt hour renewable energy credit. The
generator can sell both commodities together as
"renewable electricity" or sell the electricity as
"generic" electricity to one buyer and the RECs to
other buyers (bundled or unbundled).
RECs are tradable environmental commodities in
the United States
RECs give the exclusive legal right to claim that a
unit of electricity is renewable, and to claim
responsibility for the environmental benefits it
produces.
Energy Project Development Incentives
Renewable Energy Credits
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A certifying agency gives each REC a unique
identification number to make sure it doesn’t
get double counted.
The green energy is then fed into the
electrical grid and the accompanying REC
can be sold on the open market.
Energy Project Development Incentives
Renewable Energy Credits
Renewable
Energy Facility
REC Payment
RECs Sold
REC Provider
Generic Power
Power Payment
Utility
Electricity Grid
Generic Power
becomes
Alternative Power
Power Payment
Energy Project Development Incentives
RECs
REC Payment
Renewable Energy Credits - Prices
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Prices for the RECs can fluctuate greatly, in
2006 prices ranged from $5-$90 with a
median of $20.
Prices depend on many factors such as
locations of the facilities producing the RECs,
whether there is a tight supply and demand
situation, whether a REC is required for RPS
compliance, and type of power produced.
Energy Project Development Incentives
Renewable Energy Portfolio Standard
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The Renewable Energy Portfolio Standard (RPS)
mechanism generally places an obligation on
electric power supply companies to produce a
specified fraction of their electricity from renewable
energy sources.
Certified renewable energy generators earn
certificates for every unit of electricity they produce
and can sell these along with their electricity to
supply companies.
Supply companies then pass the certificates to
some form of regulatory body to demonstrate their
compliance with their regulatory obligations.
Energy Project Development Incentives
Renewable Energy Portfolio Standard
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Currently, states with RPS requirements mandate
that between 4 and 27 percent of electricity be
generated from renewable sources by a specified
date. While RPS requirements differ across states,
there are generally three ways that electric power
suppliers can comply with the RPS:
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Owning a renewable energy facility and its output
generation.
Purchasing Renewable Energy Certificates (RECs).
Purchasing electricity from a renewable facility inclusive of
all renewable attributes (sometimes called "bundled
renewable electricity").
Energy Project Development Incentives
States with RPS Requirements
Examples of State RPS
Requirements
MA - 4% by 2009 and 1%
added per year after 2009
NY - 24% by 2013
CT – 27% by 2020
RI – 16% by 2020
States with RPS
States with RPS Goals
Energy Project Development Incentives
Eligible Technologies Under the RPS
Requirements
Energy Project Development Incentives
Carbon Credits
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Carbon credits are a key component of national and
international emissions trading schemes that have
been implemented to mitigate global warming.
They provide a way to reduce greenhouse effect
emissions on an industrial scale by capping total
annual emissions and letting the market assign a
monetary value to any shortfall through trading.
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Credits can be exchanged between businesses or bought
and sold in international markets at the prevailing market
price.
Credits can be used to finance carbon reduction schemes
between trading partners and around the world.
Energy Project Development Incentives
Carbon Credits
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Companies can sell carbon credits to commercial and
individual customers who are interested in lowering their
carbon footprint on a voluntary basis.
These carbon offsetters purchase the credits from an
investment fund or a carbon development company that
has aggregated the credits from individual projects.
The quality of the credits is based in part on the
validation process and sophistication of the fund or
development company that acted as the sponsor to the
carbon project.
This is reflected in their price; voluntary units typically
have less value than the units sold through the
rigorously-validated Clean Development Mechanism
(CDM).
Energy Project Development Incentives
Certified Emission Reductions
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Certified Emission Reduction (CERs) are the global
standard in carbon credits, certified audited and
verified by the United Nations through the Kyoto
Protocol’s Clean Development Mechanism (CDM)
regulatory process and traded in the international
carbon market.
Each CER credit guarantees the buyer that it has
reduced or sequestrated one ton of carbon or
equivalent greenhouse gas.
Energy Project Development Incentives
Voluntary Emission Reductions or
Verified Emission Reductions
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Voluntary Emission Reduction or Verified Emission
Reductions both known as VERs are not currently
regulated the same way that the CER market is. VERs
are carbon credits developed by carbon offset
providers that are not certified.
High quality VERs are developed according to the
principles of the CDM (Clean Development
Mechanism) or a recognized standard such as
emerging the Voluntary Carbon Standard (VCS),
which promote sustainable development alongside
greenhouse gas emission reduction objectives.
A VER credit will do the same as a CER credit – it has
just not necessarily gone through the same UN
approved process.
Energy Project Development Incentives
Closing
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Energy development projects have the potential to
receive a wide variety of state and federal incentives
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Example - Landfill Gas to Energy Projects
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Production Tax Credits, $.01/KWH
RECs for producing energy from a renewable resource and
offsetting the use of fossil fuels
Renewable Energy Portfolio Standards
Carbon credits (CERs or VERs) for destroying methane,
which is 23 times stronger than carbon dioxide as a
greenhouse gas.
Energy Project Development Incentives
2999 Judge Road
Oakfield, New York 14125
www.ieslfge.com
Innovative Energy Systems, Inc
“The Leaders in Landfill Gas to Energy”