The renewable energy market relies on tax credits to help
generate competitive returns. Under current law, the primary
credits available are the production tax credit ("PTC"),
which is principally used for wind, biomass, geothermal and
specified other renewable energy projects, and the investment tax
credit ("ITC"), which is principally used for solar
projects.
The production tax credit is claimed over a ten year period and
is based on the number of qualified kilowatt hours of electricity
produced and sold during the tax year. The amount of the credit
increases each year for inflation and currently equals 2.1 cents
per kilowatt hour (1 cent per kilowatt hour for most biomass
facilities). The investment tax credit for energy property equals
30% of the cost of qualified energy property (primarily solar
property) placed in service during the year.
